Why Your Business Idea Is the Most Important Thing in Your Startup
If it is unique or offers something better, you might have a winner
There can be many different aspects that contribute to the success of your startup, but none are more important than your business idea. In this article, I am going to explain why that’s the case.
You see, I’ve just come from a failed startup. I’m told that these things happen. But, to me, they shouldn’t happen. A startup shouldn’t fail, not if it’s done right.
So, how do you do it right? What is the secret to success? What does it take to make a startup a sustainable business? Well, I don’t know, otherwise I wouldn’t be writing this.
But, what I do know is where it all starts and that is with your business idea. Nothing is more important than that.
Why Is the Idea for Your Business So Crucial?
The mere definition of the word business brings to the fore the importance of the idea.
“An organization or economic system where goods and services are exchanged for one another or for money.”
At the heart of every business is a product or service. This is the lever to persuade others to give you money in exchange for them. It is easy to say that behind every product or service ever sold was an idea.
Now, some ideas are better than others and I will get to that shortly. But, the essence of the idea drives everything forward. The business idea creates a reason to invest and it also creates sales and profit.
With sales and profits come the scope to invest in more products and services, enabling the business to grow. It is the pure essence of capitalism.
All that said, if you have a bad idea, you are more likely to face competition. In turn, this will lead to reduced sales and profits, meaning the business is less likely to grow and may struggle to survive.
What Makes a Great Business Idea?
It is the ultimate question and one that is pretty straightforward to answer.
You see, we have thousands of examples all around us. Whether it be a product in your home or service you’ve used. All those products and services started life as an idea.
Whatever the product, the idea inspired you to make a purchase. Consider that for a second. The inspiration I refer to might be a solution to a problem or a means to make your life easier. In the end, you spent money on it.
Now, your head might be spinning with ideas and that’s great. Sadly, the business world is much tougher than you might think. Customers are much more fickle than you care to appreciate. You can’t just do what every other company does, life doesn’t work like that.
To get past this issue, there are some other factors that come into play that can confirm the quality of your idea.
Monopoly product or service
A monopoly product or service comes from an idea that no one else has thought of. Ideally, it should be a product or service that’s difficult or impossible for others to copy. Competition from other businesses only does one thing, reduce profit.
That said, monopoly businesses don’t have to be another Google or Facebook. Far from it. If you love DIY and visit a town that doesn’t have one, then you have the perfect opportunity for a monopoly business!
But, a word of caution. Don’t forget that, if a market has a low barrier to entry, then others will surely follow. By low barriers to entry, I mean low cost or shared knowledge.
Is there demand?
Many inspiration ideas become bad business ideas because of our bias to the idea. After all, if it was my idea it must be a great idea. People will love and pay lots of money for it. Haha, if only.
Don’t be consumed by confirmation bias, do your market research. You might have a great idea but if you can’t find potential customers then, as a business, it’s a dead duck. Knowing if there is demand is crucial to validating your idea.
Can you offer value way better than anyone else?
In Safi Bahcall’s book, Loonshots, he talks about the early-stage investors of Facebook. At the time, there was already a social network in place, Myspace.
Myspace had a bad vibe with lots of service issues and it looked like the model couldn’t work. With Facebook looking for investment, those investors went and looked at Myspace. They wanted to see if they were missing something.
What they found was that, even though the experience was poor, people were spending hours on the site. This was a powerful insight with engagement on the site another level to anything else. Maybe there was something in social media after all.
Facebook didn’t have the service issues of Myspace, the code working much better. As a result, Facebook got its investment. Facebook could give users a much better service and do. As a result, Myspace pretty much disappeared within a few years.
I can’t give you that one seed of an idea to get your business up and running. But I can give you a framework to assess the quality of that idea. There are other factors to consider as well, such as your experience and knowledge.
The Downside of Getting It Wrong
I’ve just experienced the pain of working in a startup with a bad idea. The pain doesn’t just come at the end when you close the doors. No, you will suffer pain all the way through.
For starters, make no mistake, you will need capital to get your startup up and running. To convince investors you are worthy of investment, you need a good idea. A bad idea equals no, or very limited, investment.
From that point onward you are trying to run up an escalator as its moving against you. It becomes really hard work.
Other things will go against you. The company will struggle to recruit staff and then keep them. Customers are harder to convince, which leads to price discounting and a loss of margin.
It is a downward spiral, like a flywheel spinning the wrong way and it’s hard to stop it, let alone make it turn the other way. That’s the pain that comes from getting it wrong.
Start With the Right Idea
If you take one thing from reading this, it is to start with the right idea. I wish the startup I was in had. We didn’t have enough demand for the service we were offering.
Take the time to confirm your idea, get some feedback from potential customers. This is the true test as to whether your idea is a good one or a bad one.
Understand what or who your competition is. In an ideal world, avoid any competition with a monopoly idea, it’s much easier then. If you have some competition, what makes you different? Why should I buy from you instead of the other guy?
These questions are good to ask. They are a good way to test your assumptions and to try and overcome your biases. You will certainly have them. For then, you might just have a good business idea for your startup.