How to find problems with profit potential – Part 1
This is the 4th installment of the NON-MBA series.
It used to be the safest option available…
Get a good job.
Get promoted a couple of times.
Show up to work early and occasionally stay late for 30–40 years.
Retire and collect a pension.
Those days are gone. The world has changed.
Very few employees stay with a single company for more than a few years. It has nothing to do with the employees, it’s because everyone is being fired. Nearly every company in the world is hiring freelancers and contractors where they used to hire full-time employees. The number of temporary workers in the US has been increasing by nearly 10% year over year for the last several years.
Relying on your company or your boss to never replace you is becoming far riskier today than it was ten years ago. This is precisely why I’m urging everyone I know who isn’t already a freelancer, contractor, sole proprietor or entrepreneur to start taking the steps to becoming one.
Even if you’re in a full-time job right now, you’re an entrepreneur. You’re a business that’s staffing out its only employee – you.
Figure out how to grow that business.
So far in this blog series, we’ve established much of the framework for entrepreneurial success.
- We’ve talked about sales – the baseline of all business.
- We’ve talked about productivity and the entrepreneurial mindset.
- Today I’m going to start talking about our customers’ problems. Finding them and, eventually, solving them.
All of business, trade, economics and entrepreneurship boils down to solving problems. It’s an exchange of value. I give you money and you give me a product that I value at that amount of money. You pay me money and I perform a task that you value at that amount of money.
The point is that everything boils down to the problem being solved and the job that needs to be done. If I buy a television, I’m hiring that television to entertain me. If I buy a backpack, I’m hiring that backpack to carry stuff around for me. I hire my iPhone for a variety of jobs: to stay connected, to entertain me, to help me stay organized, etc.
Understanding exactly why you or your product is being hired is crucially important and not always as clear as it may seem.
I’m going to show you how to pinpoint it.
It’s vitally important to know why your customer hires your solution. This requires that you intimately understand the exact burning pain that you’re solving.
I’m going to outline the steps to identify an audience with a profitable pain point that you can solve.
Notice the word profitable here. It’s important because unfortunately some problems aren’t profitable to solve.
What I mean by this is that it’s important to identify how acute the problem is to your customer. Where does this problem fall on the totem pole of the various other problems plaguing them? If you solve this problem for them, are they going to be willing to open their wallets and pay you?
The process of identifying profitable pain points is roughly broken down into three steps:
- Self-Inventory: Figure out what you’re good at, what your interests are, skills, etc. This will give you an idea of the audiences you’re already connected to so you have a starting point of where to find problems that might be profitable to solve.
- Audience Selection: Go through everything from the self-inventory to identify the top few audiences that most resonate with you. If you’re having trouble choosing, rate your audiences on two metrics: (1) how big is the gap between what you know about the topic and what the general public knows and (2) how many products are currently catering to this audience.
- Finding Profitable Pains: Taking the top 3–5 audiences from step #2, start researching. Find blogs, forums, websites, etc. and get a general feel for them. Keep notes on what questions get consistently asked, products that are currently catering to them, special lingo, common phrases, frustrations, motivations, fears, etc.
In today’s post, we’ll cover the first step.
Step 1: Self-Inventory
This section assumes that you don’t already have an idea for a business or product. If you do, feel free to skip this section and move on to audience selection. (Although, I recommend completing it regardless as it’s a beneficial exercise.)
Instead of randomly looking for problems in the universe, it makes sense that we try tofocus in on the areas that you already have some knowledge. To do this, I’m going to give you a list of questions that I want you to answer.
When conducting this exercise, go for quantity over quality. Even if something sounds stupid, write it down. Don’t make any judgement calls about what can or can’t be a business. If you really enjoy spending your free time going to night clubs with friends, write it down.
Get something to write or type with and answer each of these questions:
Question #1: List your top 3–5 favorite startups (or businesses) and ask yourself why you like them.
SpaceX: The ultimate goal is to make humans an inter-planetary species. 15 year goal is to put people on mars.
Tesla: Beautiful engineering. Elon Musk’s ability to think big is inspiring. Never paying for fuel is also nice.
Palantir: Super smart people who remain humble. The product saves lives.
Kaggle: Crowd-sourcing statisticians. My inner-geek smiles.
Makers Academy: Strong social mission. Serious, but they also know how to have fun. The founders are clearly the coolest people on the planet. (Note: It’s a joke as it’s my business)
Question #2: What skills do you have? (Things that you’ve been paid to do, skills that you’ve developed on your own, University degrees or certifications, etc.)
Question #3: What groups do you belong to? (Trade organizations, industries you’ve worked in, professional organizations, clubs, societies, meetup groups, online forums, chat groups, email lists, subreddits, Facebook groups, Linkedin Groups, Quora topics, etc.)
Lean Startup Meetup
Inbound Marketing Linkedin Group
Question #4: What do you do in your free time? (Hobbies, sports, social activities, things you would do if you had a free Saturday, etc.)
Going to night clubs
Question #5: What challenges have you overcome? (physical, psychological, social, etc.)
Lost 50 pounds
Overcame substance abuse
Overcame social awkwardness
Question #6: What have you paid to learn? (college courses you’ve taken, info products you’ve bought, etc.)
Creative writing course
Programming language reference book
Question #7: What do you read / consume? (blogs, books, movies, TV shows, etc.)
50 shades of gray
House of Cards
Question #8: In what areas are you a local expert? (What do your friends come to you for?, What do your friends compliment you on?, etc.)
Applying eye shadow
Personal finance management
Question #9: What do you see other people struggling with that comes naturally to you?
Doing math quickly in your head
Finding great vacation deals
Come up with a minimum of five answers for each of the questions above. If you really want to flex your idea muscle then shoot for ten. All of these answers will serve as our audiences when we get to part two.
In an upcoming post, I’ll show you how to sift through these various audiences to identify the ones that are most likely to lead you to finding a profitable pain point to solve.