Coming up with a Business Idea
Everyone wants to be in business, but the hardest part is coming up with an idea. Most people don’t know what it takes to be in business. This guide will go over the different types of businesses and different types of innovations that you can do to create the best business in your industry.
The four different types of businesses are:
- Product — This is the type that everyone thinks about when they think of a business. This includes creating new software for customers, creating a service for clients, or inventing a new toy (fidget spinners anyone?). This is the most common type of business and are usually B2C (business to consumer).
- Procurement — Ever wonder how the product guys get their supplies? This type of business is usually B2B (business to business). For every fidget spinner, there needs to be a factory that creates the toy, there needs to be a middleman who can connect you to the factory, and there needs to be someone who supplies the raw materials to the factory. In companies, people hire contracting companies to help them find new employees. All of these are considered procurement businesses.
- Delivery — UPS and FedEx are delivery companies. How do we get our product to the customer? We usually hire a middle man to ship our cargo or deliver our packages. New companies such as Postmates deliver anything to anyone using their app. Doordash delivers food. Delivery businesses can be both B2B or B2C.
- Promotion — Finally the last business type is promotion. Have you ever tried to get a t-shirt printed for your group or get a flyer made for your club? These are promotion businesses. Anyone who works in advertising is part of the promotion business. Heck, I would say even Google and Facebook are promotion businesses because their main source of income is through selling ads. These are usually B2B.
Once you decide what kind of business you are interested in, the next step is to find out how you can innovate it so that you stand out among the competition.
Here are the five ways that you can be innovative:
- Price — You can differentiate yourself by having a lower price. It’s not as simple as dropping your price and getting into an attrition battle with your competitors, but rather, it’s finding ways to cut costs so that you can reduce your prices without giving away too much profit margin. Some industries actually do better if you price it high, since that gives off a sense that your product is high quality. This works best with obscure products, where you can’t really know how good it is until you paid for it, or with fashion, where the value is subjective ($100,000 for a Hermes bag…really?).
- Convenience — How easy is it for your customer to pay you. This is about reducing friction. Think about taking an Uber vs taking a taxi. With a taxi, you have to wait in line, flag them down, or make a long reservation. Then you have to sit in their car and pay them with cash. You also have to think about how much you want to tip them. Instead of all that, you can just open an app and summon a random driver to pick you up and go. Uber already has your credit card, so you don’t need to worry about payments! Lower friction, and customers will come to you.
- Speed — How fast can you perform? Amazon prime is one of the main reasons why I shop on Amazon religiously. Domino’s pizza used to deliver my pizza in 30 minutes or less! Some advertisement agencies can create and print flyers in 1 day. Jimmy McGill can make an advertisement for you in 6 hours! What can you do to make your service faster.
- Quality — How is your product better? Do you have more features, is the product easier to use, or does it look more beautiful? Your product can be made with better materials, you can use better ingredients, or you can have better service. All of these things make your quality of your business better.
- Self-expression — How strong is your brand. Can you really tell the difference between a Coke and a Shasta-cola? I can’t, but I pay a 100% markup on Coke whenever I buy one ($2 vs $1 for the Shasta knock-off). This will typically be irrelevant if you’re starting off unless you’re trying to get into an industry where there is already a large leader. i.e. good luck trying to create a mobile app store for iPhones when the iTunes store already exists.
Hopefully with these tips you’ll be able to think of an idea to start a business. Looking forward to the future, the possibilities are endless.