You’re a good writer – should you start a freelancing service? But you’ve also had a great idea for an app – would it be better to invest your time and money there? Or maybe you’ve been frustrated with Dropbox and see the opportunity to disrupt the marketplace with a cloud storage competitor. Should you pursue this idea, even if it means leaving your job and exposing yourself to a tremendous amount of risk with no certain rewards?
Having too many business ideas might seem like a great problem to have, but in reality, it can be just as challenging as having no ideas to work on at all. When you have too many ideas, you run the very real risk of “analysis paralysis” preventing you from moving forward with any of them.
The key then becomes how you evaluate and validate each of your ideas. If you find yourself struggling with more good ideas than you know what to do with, the following framework will help you clarify your personal mission and find the business idea that best suits this purpose.
Conducting an Initial Analysis
If you’re having trouble deciding how to move forward, start by creating a list of all your ideas. Then, answer all of the following questions for each idea, making a note of your responses within the same document:
What investments are required?
Begin your initial analysis by estimating what it’ll take to bring each idea to life. “Investments” means more than money, though, so the questions below should help you to form a fuller understanding of what it’ll take for each idea to be successful:
- How much money will your idea require to be successful? Don’t just think about your costs to create the product. Your lost earnings (if your idea requires that you work on it full-time), business overhead expenses (like an office space or office supplies) and professional costs (including licenses and fees, advertising and more) should all be taken into account as well.
- How will you get this money? Do you have savings you can draw on? Or will you need to tap into the “bank of mom and dad,” seek business loans or pursue angel or VC fundraising rounds to get the capital you need?
- Do you have the skills needed to realize your vision? If you’re dreaming of creating an app, but don’t know the first thing about coding, you’re going to need to invest more to hire a developer than somebody who can handle the tech side of things on his own. Even if you have the basic skills to create your product, running a successful business requires administrative skills, marketing knowledge, financial management expertise and more. While you can bootstrap many of these needs, don’t underestimate the amount of time or money you’ll spend on them as you explore different business ideas.
- What other demands exist in your life? If you’re single, with no children and lucky enough to have the financial support of your family, you’re in a much different position than a married father with two children who must provide for his family at the same time as he pursues his business aspirations. It’s not necessarily a worse position, but your business investments have to come from somewhere. If your chosen idea requires 20 hours of work a week and your day-to-day schedule is full of kids, errands or work, get ready for some early mornings or late nights!
Really dig into this analysis. Remember, your time, money and potential success are all on the line, so don’t skimp when estimating your investments. Think you’re going to need to hire a developer? Don’t just guess at how much time and money it’ll take – post a description of your product on a site like Guru or Elance and get actual estimates for your analysis. Certainly, you wouldn’t want to give away your entire idea in your job posting, but you should be able to share enough details to get a reasonable quote without opening you up to IP theft.
How long will it take the project to come to fruition?
Unfortunately, there’s no hard and fast rule that will tell you how long it will take to be successful with a particular idea. So for this step, it may be more helpful for you to compare different ideas against each other, rather than trying to assess them according to some objective scale. Let’s look at our initial example to see how this might play out…
Suppose you’re thinking about starting a freelance service, building an app or creating a cloud storage solution to rival Dropbox. Based on your assessment of the investments required, you determine the following:
- Your freelance service will take less than a month to get up and running. All you need to do is put together a portfolio featuring your past work, build a simple contractor website and start reaching out to clients. Once these three steps are done, you can begin making money immediately.
- Your app, on the other hand, will take longer to get off the ground. Based on the quotes you received from Guru, you estimate that it’ll take your developer three months to complete your app, at a cost of $10,000. Because you plan to outsource your development – and because app development is a relatively low overhead business – you’ll be able to keep working full-time while your project is being finished. To be on the safe side, though, you estimate that it will take at least another three months after development for your program to gain traction and start earning back the money you’ve invested.
- Building a storage solution to compete with Dropbox is a project of a much different scope. While you might be able to outsource the initial creation of your system, you’ll need to hire a full-time developer to support your customers. You’ll also need legal advice to structure your user agreements, marketing support to help your company get noticed and a bookkeeper to keep your finances on track. Since you estimate that it will be at least a year or two before you’re profitable – during which you won’t be able to work another full-time job – you’ll need to pursue either financing or fundraising to get your fledgling company off the ground.
Note that the descriptions above don’t necessarily make one idea better than another. The fact that you can start making money right away as a freelancer doesn’t mean that it’s a better choice for you than going all-in on a Dropbox competitor. In addition to considering these requirements in light of the investment needs described above, you’ll want to take one final factor into consideration – your long-term goals.
What are your long-term goals?
When you think about your ideal life, what do you see? How do you define success? Do you see yourself rolling through a pile of money like Scrooge McDuck, or does success, to you, look more like having the time to travel with family instead of going to the office every day?
This question might seem overly-simplistic – after all, doesn’t everybody want to be rich? But as Tim Ferriss so famously posited in his Four Hour Work Week book, success, to some people, might be better defined as the freedom to pursue interests, activities or hobbies. Success to you might be having just enough money to cover your daily living expenses, freeing up your time to learn a new language, visit a new country or explore even more business ideas.
Think about how each of your business ideas supports your long-term goals. If you want to be luxury yacht style rich, freelancing probably won’t get you there, but taking down Dropbox might. Alternatively, if flexibility is a greater priority for you, freelancing or app development can provide you with enough income to support your lifestyle, without requiring the 24/7 grind of investing fully in a SaaS startup.
Taking all of these considerations into mind, prioritize your business ideas according to the likelihood that they’ll support your long-term goals in an achievable, sustainable way. But before you begin moving forward, you’ve got another big step to take…
Validating Your Ideas
Let’s say that your ultimate goal is to be wealthy, and that your lifestyle and available resources make startup entrepreneurship possible. Knowing this, you put creating a cloud storage company at the top of your list. But what happens if your subsequent research uncovers an unfortunate reality – that people like Dropbox and aren’t looking for an alternative.
Obviously, you’d want to find this out before you took out a second mortgage on your home, and not after you’ve signed the lease on your expensive SOMA office space. This is why validating your idea is so important. While you can’t prove with 100% certainty that a business idea will be successful before you pursue it, there are a number of steps you can take to increase your odds of getting a win.
Conduct preliminary market research
When validating business ideas, you have a few different options. The first is to conduct preliminary market research using the following strategies:
- Ask your acquaintances – Start by asking everybody you know (that you trust not to run off with your ideas) about your proposed business. Note peoples’ initial reactions, and keep in mind that response bias exists. People who want you to succeed, for example, may give you the answers they think you want to hear, rather than their true feelings. Take general trends into consideration, rather than individual responses. If you hear consistently wishy-washy feedback, consider that there may be an issue with your idea.
- Look for pain points – Instead of asking for feedback directly, browse around online to the places where your target customers are hanging out or where they’re giving feedback on the products they’re already using. Continuing with our example, if you wanted to build a Dropbox competitor, spend some time on Dropbox’s user support forums to see what problems are coming up again and again. If you see trends in potential customers’ pain points – and are certain that you’re able to build a product that fixes them – you might be on to something.
- Consult trend and sentiment research – Tons of organizations publish research on consumer sentiment and industry trends, and much of this information can be accessed for free online. Run a few Google searches looking for research on the industry you’d be entering or the customers you’d be targeting and see if the information you find supports or contradicts your idea. In this example, finding a study indicating that consumer comfort with cloud-based services is increasing could represent a mark in your idea’s favor.
The thing about market research is that, while it’s generally free or cheap to acquire, it can’t give you an answer on your idea’s validity with 100% certainty. Family members might lie to your face, the consumer pain points you encounter might not be strong enough to provoke change and the research you find may not accurately predict your target customers’ behavior.
Of course, these challenges might not matter to you. If the investment required by your business idea is relatively small, you might decide to do whatever market research you can and then dive in, letting your experiences validate your idea. But if your idea would have you putting significant time, money and effort on the line, you may want a bit more certainty before fully committing to your proposed business.
Run a test ad campaign
The best way to validate a business idea is to make customers put their money where their mouths are by running a test ad campaign. The specific way you do this will depend on your comfort with minor deception, but the major steps remain the same:
- Create a landing page that describes your product or service – This can be done relatively cheaply with a small hosting plan, a domain name registration and a WordPress install. Don’t overcomplicate things. You don’t need to build out a full website – a single page that explains what your product is, what makes it different and what you’ll charge for it will do.
- Run an ad campaign that sends traffic to the page – Once your page is up, get eyeballs on it with paid ad campaigns. Adwords is a great choice for creating these campaigns; although Google’s click costs tend to be higher than competitors, their traffic quality is the best overall.
- Measure your results – Use your landing page to get visitors to take some action, whether it’s filling out a lead generation form requesting more information when the product is released or a complete order form with a payment processing system that’s capturing sales before your product is even live.
Now, a word on ethics… Some people are comfortable taking orders for products that aren’t ready yet, perhaps by including fine print that suggests that the product will ship or be available in 6-8 weeks. Certainly, taking actual sales is the best way to prove interest in your business idea, and can even give you the working capital needed to get your company started.
That said, selling something you don’t actually have isn’t entirely ethical, and it can get you in hot water if you aren’t able to deliver your product in the time frame you initially specified. If you’d rather not risk it, you can still generate valuable validation data by getting visitors to fill out your opt-in form. This demonstrated interest can help you determine whether or not to move forward with an idea, and can help you build a list of potential buyers who will help form your customer base once your product or service is ready.
If you’re struggling to decide which of your many business ideas to pursue, taking the steps above will help you to figure out how to move forward with the concept that will best meet your needs. But if I could offer you one final piece of advice, it would be to not let the validation process take up too much of your time. Yes, it’s important to determine your likelihood of success before diving in. Spending too much time on validation, on the other hand, prevents any forward motion, leaving you in the same place as if you’d never begun investigating your ideas in the first place!
So evaluate your situation, do your market research and test your idea with a small ad campaign. If you see indications that your idea could be successful, run with it! You can always pivot or switch to a different idea later on, but if you never get started, you’ll never reach your long-term goals or create the lifestyle you want for yourself.
Have you ever found yourself with too many good ideas? Share your own recommendations for validating potential businesses in the comments section below!