Creating a Business Idea that Will Make You Money
Have you been sitting on a business idea because you’re not sure how to start, or because you’re not sure if it will work? Have you been dreaming about being your own boss, but you’re just not sure how to develop an idea that will actually make money?
Let this be the year that you stop daydreaming, and start moving forward. Launching a successful new business essentially boils down to three big steps:
- Define your business concept through market research.
- Create a thorough budget.
- Get funding.
There is a lot involved in each of those steps, of course, but breaking them down will help you accomplish each one in turn.
How to Define a Business Idea
Many successful business ideas are birthed from the entrepreneur’s personal passion, or from a pain point that needs a new solution. You can’t build business plans on vague ideas, though, so the first step is bringing razor-sharp clarity to your great idea. There are two questions that will help you focus:
Question 1: What’s My Motivation?
Start defining your business idea by really analyzing why you want to turn this idea into a business. If it’s just because you think it will work, reconsider. More work is not a sufficient motivator for the long road ahead of a new entrepreneur.
It's always important to remember your purpose for starting a business. You don't want to create a business that is more "work” for you and then end up dreading it. Get clear on your motivations.- Anna Runyan, Classy Career Girl
Entrepreneurship is never a quick win, and you will have to remind yourself of your purpose and passion more than once as you launch.
Before you start counting the cash in your head, or set out to develop a business plan, ask yourself if you have a sincere passion for the product or service. The entrepreneurial journey is a marathon, not an overnight success. It often requires long hours and sacrifice with little to no pay while pursing your proof of concept and building the initial customer base.- Dustin Ray, Incfile.com
If you are sincerely passionate about your craft or your solution, you’re on the right track. If you’re unsure, take some time to reevaluate—no matter how successful you think your business could be. Even the most successful startups require long, hard hours up front. Make sure you have the drive to get through them.
Step 1: Ask yourself this question: if you had to spend 60 hours per week, plus most weekends, doing one thing for which you received no financial reward, what would it be? If it’s not your business idea, reconsider.
Question 2: Do People Want/Need My Product?
Every entrepreneur who types up a business plan thinks his or her idea is a good one. Most of them probably have family members and friends who told them the same thing. But most startups don’t last, because they don’t consider whether there is an actual need for their product or service on the market.
The top reason why startups fail, at 42%, is because there is no market need. This can happen when: the founders have a technology solution, but are not as familiar with the customers problems; or the problem does exist, but it's not a big enough pain; or it's a big pain, but only for small number of customers- Rebecca Xiong, GrowEpic
If there is a need for your solution, you also have to consider the degree of that need, and the measurable improvement your solution offers. Your target market might agree that your solution is a good one, but are they willing to invest in it?
You may come up with a great idea as an entrepreneur, but if the market isn't willing to pay for your solution to their need, problem, or desire, then you've got to go back to the drawing board.- Mike Kawula, Social Quant
If your business idea started with a product or service concept, stop and ask if people really need this. If your idea stemmed from a need you observed in the market, or once you’re sure there is a need, figure out how much people need it and if they’re willing to spend resources on it.
Step 2: Talk to a few trusted contacts in your target market about your idea. Get their honest feedback on how much demand there is for your product, and what it might be worth. Then browse some community forums or social media hashtags related to your target industry, and see what people are talking about. Do they need what you want to offer?
Bonus Question: Am I Flexible?
It may seem like a contradiction to say that a business idea needs to be defined and flexible, but business is never as black-and-white in the real world as it is on paper.
Know that even though you feel like your idea is defined now, it will pivot and change throughout the course of your business launching. Be open to that, and stay flexible- Shannon Ware, TheCollective
As you prepare to launch, you might notice a new variation of the problem you’re trying to solve, get fresh insight from a prototype, realize that something isn’t working the way you thought it would, etc. For better or worse, plans might change.
Being successful doesn’t mean forcing Plan A onto the market in spite of the challenges. Rather, success happens as a unique product or solution continues to evolve to meet the changing demands of the market.
Do I Have to do Market Research?
You have a great idea, and you know the market is hungry for it, so why spend more time on research? Three main reasons:
Reason 1: Learn About Your Specific Audience
You know a little about your audience already, in order to be confident in your business idea, but knowing about one pain point isn’t enough. Once the business is launched, you will have to market that product, and that requires knowing much more about your audience.
Unless you're Coke, you don't appeal to the majority of the world. You'll only be concerned about a fraction of it, but finding which fraction is imperative. Where are they located? What are their hobbies and habits? What media channels reach them? The more you know about your potential customer, the more efficient you'll be at marketing to them and converting them into sales.- Mike Kappel, Patriot Software
“If you build it, they will come,” doesn’t really work. You have to know about your audience so you can effectively communicate with them.
Marketing has been shifting over the past couple of years. Today, it’s so content- and user-experience-heavy that you need these conversations, and you need to know how people are describing your product, so that you’re able to create quality content that actually engages with your customer- Shannon Ware, TheCollective
Market Research Tip 1: Start creating buyer personas before you even launch your brand, and you’ll never waste time or precious dollars on off-target marketing efforts.
Reason 2: Discover Your Market Value
What your mom says your idea is worth, and what your target market is willing to pay, might be vastly different. The only way to find out is market research.
Once you’ve identified who you think your target market is, it is critical to find out if they have the desire, need, and means to pay your asking price for what you’re selling.- Adam Torren, Kidpreneurs
You might find out that your mother over-bid your services, but you also might find out that people are willing to pay much more than you thought. The skills and abilities that often seem like second nature to entrepreneurs are completely foreign to people with different backgrounds, experiences, and strengths.
Use your research to ask who is your audience. Who are you selling to? Do people need it? @shan_collectv #frsdchat— Karen Swim, APR (@KarenSwim) February 10, 2016
Market Research Tip 2: Start by checking out your competitors’ pricing tables. If your idea is brand new to the market, use niche forums or social media to talk to your target market about the problem you are addressing. How are they solving it now? What would they invest in a good solution? Bring all those numbers together to help determine your true market value.
Reason 3: Differentiate Yourself from the Competition
One question you will have to answer over and over again—for investors as well as customers—is how you are different from the competition. That means knowing your strengths, but also knowing your competitors’ weaknesses.
The market research is to find out who is doing what you’re doing, how are they doing it, and what can you do to create a better value proposition. It’s to help you craft a value proposition that differentiates you from your competitors.- Steve Feinman,SCORE
The research you conduct about your customer base will tell you what it is they're looking for and what they're not getting from your competitors, so you can create a space for yourself and create value for your own business.- Shannon Ware, TheCollective
Researching your competitors is where flexibility often comes into play. You may realize you have nothing new to offer, or you may see a new gap in the services being offered that you can fill in.
Market Research Tip 3: Type competitor names into Google or social media search functions and see what people are saying away from the brand’s testimonials page. People are more likely to take to social media to complain about a brand than to praise it, so take some notes about common complaints or shortcomings where you can differentiate your brand.
How to Conduct Market Research
There are two kinds of data you will gather as you dive into market research: primary and secondary. Primary research data is information you get directly from your target market. Secondary research includes statistics, studies, and reports from big data sources and government agencies.
Secondary Research: Start with the Data at Your Fingertips
Secondary research is where many entrepreneurs start because it’s already out there, and many times it is accessible for free—either at your local library or online.
There are many databases that you can use. There’s one called Reference USA, which is available at libraries and Google buys a lot of their data from Reference USA. Business Decisions is another database that we refer clients to. You can also do things in the neighborhood with your Chamber of Commerce.- Steve Feinman,SCORE
If you want to start with some good data you can access online, check out:
- Office of Entrepreneurship Education Resources—The U.S. Small Business Association has compiled a list of online resources that provide general business data, demographics, consumer statistics, and more.
- U.S. Census Bureau—The Census Bureau website is home to more data than you’ll probably ever need. A great way to get started is to type your city and state into the search box at the top of the homepage.
- SBA Office of Advocacy—If you’re looking for info on the state of small businesses in general, the SBA’s Office of Advocacy is a great resource. Get statistics, news, and more about small business in the U.S.
- Bureau of Economic Analysis—The U.S. Department of Commerce makes all kinds of industry data available on the BEA website. Information is conveniently sorted by both region and industry.
Secondary research will help you understand the market and, to an extent, your competitors. This is a good starting point, but the really granular insights will come from primary market research.
Secondary Research Tip: If you are a brick-and-mortar business, or if your product/service is targeting specific location, start by gathering data about the economic condition of that geographic area. If your audience is nation-wide, gather some data on your industry—figure out who is leading the charge, and then research that brand so you can create some clear delineations between your business and theirs.
Primary Research: Go to the Source (of Your Income)
The best products and services are those that address real needs for real people. The best marketing speaks to its audience in their own language, on their own terms.
Primary market research is about getting to know your target audience so your business can have real impact. Conducting primary research means talking to people in your target market: in person and online. Start asking questions.
Make sure that the questions you’re asking are not necessarily pushing your idea on them, but pulling information out of them. What problems are they facing in this general area? Why do they feel like they have that problem? Why aren’t they able to fix it themselves? What do they feel like is missing? There’s a lot of value in questionnaires and forms, etc., but the most value comes from actual conversations with people.- Shannon Ware, TheCollective
Those conversations will help you refine your product for the market as well. As you learn about the lives and business of your target audience, you learn to see the problem—and your solution—from their point of view. New information about their industry can help you make any necessary adjustments so your solutions fits into their model as seamlessly as possible.
As you develop your product, primary market research can also include some test drives.
The best method is to talk to a lot of your potential customers, really understand their pain, then show them a prototype and get validation. The best would be to get a commitment they'd pay for a beta.- Rebecca Xiong, GrowEpic
Primary research helps turn the big data numbers into specific, actionable insights. This is where you will find the information you need to perfect your product and launch a truly engaging marketing strategy.
Primary Research Tip: Start scheduling business lunches with people in your target industry as often as your schedule (and your budget) will allow. Prepare a list of open-ended questions in advance that will encourage them to discuss their industry, their business, and their frustrations. Take notes!
Top 4 Tips for Creating a Small Business Budget
Creating a business budget is no one’s favorite part of entrepreneurship, but you can’t skip it. A lot has been written about why and how to create a budget for your small business.
Return on investment! RT @Grasshopper: Q6 What are the top 3 things you need to consider when creating your budget? #frsdchat— BordenTeam (@BordenTeam) February 10, 2016
As you dive into the numbers, here are four tips to keep in mind.
Budget Tip 1: Separate Fixed and Variable Costs
As you’re creating (or refining) a budget, make sure to separate fixed costs from variable costs. Fixed costs are those that remain consistent no matter how business is going: rent, utilities, software licensing, etc. Variable costs are those that changes depending on production: raw materials, commissions, fuel, etc.
A4. Differentiate between your fixed & variable costs. And plan for how you'll recapture your investments. - Steve #FRSDCHAT— Grasshopper (@Grasshopper) February 10, 2016
Making this distinction in your budget will help create a more accurate cash flow model, and will enable you to accurately analyze month-to-month fluctuations.
Fixed vs Variable Costs Resource: Vertex42 offers a Small Business Startup Costs worksheet that breaks down fixed and variable costs.
Budget Tip 2: Project Your Cash Flow
Projecting cash flow can seem like an impossible task, especially if you’re not a mathlete, but it’s important to remember that 100% accuracy is not the goal. The goal is to set up a model of when you can reasonably expect income (and how much at any given time), so you know when it’s okay to spend.
You also have to start to look at your cash flow. A lot of people don’t start with a chart of accounts. What are the accounts that are necessary to your business? Which of those are monthly, and which are going to vary with the level of service you provide?- Steve Feinman,SCORE
Many good businesses have been sunk because income and spending weren’t aligned on a good cash flow schedule.
Cash Flow Resource: SCORE offers a free 12 Month Cash Flow Statement template you can download to help you get started.
Budget Tip 3: Add Buffers
Timelines and budgets, as complicated as they can be to set up, are always more simple on paper than they are in real life. Once you have a budget established, go back and pad it, because there are always surprises.
You'll always spend more, so double or triple your assumptions. Lack of capital is one of the top reasons startup fail, and you don't want that to happen.- Mike Kawula, Social Quant
Even if things go well at the outset, keep those extra buffers in place for your first year. Every business has seasonal cycles, and market fluctuations can happen at any time.
Don’t let any early cash flow convince you that you don’t need to be careful. People have a tendency to believe that any current success is going to be lasting, and cash flow is just going to keep increasing. I love that kind of optimism, but you have to be smart too. Expect the best and plan for the worst. That way, if your revenue takes a downturn for any reason, you’ll be prepared to stick it out until you recover.- Adam Torren, Kidpreneurs
You really can’t lose by inflating your cost estimates. If you end up needing those extra dollars, they will be there. If you don’t, you will close your first year with extra cash. Win-win.
Budget Tip 4: Don’t Do the Budget
There are a lot of elements of entrepreneurship that you can (and will) learn as you go. There are some business processes that you can Google or call customer support for help with, but the budget is not one of them.
Get an accountant to help you out. Early on, accountants are crucial business consultants. You may know what your product is and have a great idea on how to market it, but if you're not a natural bean-counter, find someone who is. He/she will help you keep tabs on things like loans, insurance, payroll, and financing—stuff that feels dry and boring but is otherwise detrimental to the success of your business.- Mike Kappel, Patriot Software
A2: The entrepreneur doesn't have to DO the financials, but you have to know and understand the financials #FRSDCHAT— Ivana Taylor (@DIYMarketers) February 10, 2016
Even if you could figure out all the financial details on your own, how much time will it take? An entrepreneur has enough to do without adding, “Become An Accountant” to the list.
A lot of times the entrepreneur gets trapped because he/she wants to do everything. You have to have the basic concept of the budget, but somebody else can do the details. You can always hire somebody. The entrepreneur’s business is to sell, to make things.- Steve Feinman,SCORE
Entrepreneurs business is to sell and make things, don't get caught in trap believing you have to do it all - Steve Feiman #frsdchat— Karen Swim, APR (@KarenSwim) February 10, 2016
The time (and frustration) you save by letting someone else take care of the budget will come back to you as you grow the business faster than you otherwise could have.
Accountant Resource: Entrepreneur published an excerpt from Start Your Own Business: The Only Startup Book You’ll Ever Need that outlines how to find and hire the perfect accountant for your business.
Pitching Your Business for Funding
Once you have a clearly defined business idea and a thorough budget, it’s time to find funding. As you prepare a pitch and start setting up appointments with investors, remember that this is business—but it’s also very, very personal.
You’re pitching yourself just as much as you’re pitching your idea. Be authentic. This is something you’re passionate about, that you know is solving a problem. Make sure that you show that passion.- Shannon Ware, TheCollective
Don’t let nerves or too many rounds of reciting your pitch turn you into a robot. Investors know that a startup is resting on the shoulders of the entrepreneur, and they want to see that you care.
Pitching Tip 1: The Details Matter
There is no such thing as a “little detail” when it comes to pitching your business to investors. They see dozens of entrepreneurs every week, but they invest in the ones who will take good care of every detail of their investments.
It all matters. You’re creating your brand. Your brand starts with what you look like coming in, with your body language. Your brand starts with the problem you’re solving, how you’re solving it, and whether you seem to believe what you’re saying.- Steve Feinman,SCORE
"Trustworthiness is part of your brand and you have to convey that in your pitch" - Steve #frsdchat— Stephanie Carls (@stephelisecarls) February 10, 2016
You’re pitching your idea, yourself, and your brand. Show investors that you will pay attention to every dollar in the future by paying attention to every detail now.
Pitching Tip 1: Ask a fashionable friend to help you put together the right outfit. Practice your pitch in front of a camera and in front of a business friend or mentor who will be brutally honest about things like eye contact, body language, etc.
Pitching Tip 2: Create Your First Brand Experience
As you prepare your pitch—and yourself—consider that you are, essentially, creating your first brand experience. Think about what you want future customers to take away from your marketing and your product: Is your brand formal or casual? Do you want to make your customers feel empowered or at ease? Are you excited about an opportunity or enraged at an injustice?
Create an experience for investors, from the minute that they sit down until that conversation is over. Be passionate. Make sure that all your visual elements are in place and that you are representing your brand, yourself, and your product in the best possible way.- Shannon Ware, TheCollective
So many entrepreneurs present the same black-and-white business plan and startup budget in the same suit and tie. Don’t waste the investor’s time by going overboard, but consider how every element of your pitch can convey your brand.
Pitching Tip 2: Pitch your solution, your brand, and yourself all together by telling the investor your brand’s story. Set the scene by introducing the problem or gap. Explain why it needs to be addressed, present how your solution will change things, and then invite him/her to be part of that solution.
Best Types of Funding for Startups and Small Businesses
There are many different types of funding available, and it can be difficult for a new entrepreneur to know which to go after, or which to turn to first. During our live chat, Steve Feinman provided the following prioritized list:
- Personal savings
- Friends and family
- Credit cards
- Venture capitalists
Your savings is your first option because it doesn’t put you in anyone else’s debt, but personal savings is generally not enough for most entrepreneurs. It can be difficult to ask family and friends for help, but interest rates are sometimes lower than with other options. Banks are at the bottom of the list because they tend to avoid risk, which makes them less than helpful to most entrepreneurs.
Best funding - 1. savings 2. Friends and family 3. Credit #FRSDCHAT— Ivana Taylor (@DIYMarketers) February 10, 2016
As you seek funding from any source, especially venture capitalists or angel investors, make sure that you pursue those individuals and establishments that line up with your overall vision and brand.
You just have to make sure that the person that you are seeking funding from is going to align with your desires and your vision for where your brand and your product is going.- Shannon Ware, TheCollective
That alignment might mean that the investor doesn’t want any more stake in the company than you want to give up. It might also mean that the company or VC you work with understands your vision and is interested in your solution apart from just making a good ROI.
Make sure your funding sources align with the vision for your brand - @shan_collectv #frsdchat— Karen Swim, APR (@KarenSwim) February 10, 2016
3 Tips for Growing Your New Business
With a clear plan, a thorough budget, and startup funding, you’re ready to launch. As your product or service hits the market and your business starts to grow, nurture that growth by keeping up with your industry, your customers, and your product’s evolution.
Growth Tip 1: Focus on Your Strengths
Initial success can make some entrepreneurs overconfident. As your business grows, don’t lose focus. Expansion is the next step, but trying to expand before your whole brand is ready can be a disaster.
Keep your organization as a whole moving in the same direction, and refrain from jumping into new line extensions before becoming the market leader with your core product/service. This also holds true for expanding territories without determining the speed at which you can properly develop the infrastructure to support the expansion plans. Sales are great, but growing too fast can also expose any of your internal issues exponentially.- Dustin Ray, Incfile.com
If your business is growing, keep doing what’s working until what’s working stops causing growth. Then, take some of that time to iron out all of your internal processes. Then, and only then, look to expanding your business.
Growth Tip 1: A short, concise vision and/or mission statement will help keep your entire team focused on your core strengths. Make it memorable, refer to it often, and consider displaying it if you have common physical space with your team.
Growth Tip 2: Broaden Your Appeal
The size of your market will determine, to a large degree, the size of your business. Getting bigger might mean getting broader.
If you have a very niche business, there will likely be a cap on how large you can grow. That cap might be pretty high, and you could still grow into a big company, but it’s less likely than a business with very wide appeal.- Adam Torren, Kidpreneurs
Broadening your appeal doesn’t mean starting over, however. The more you work with your clients and target audience, the more you will continue to learn about their needs. Think about where it might make sense to expand your offerings.
Build on your initial success and continue to address your customer’s pain. See what natural extension of your products are. For example, we initially had a successful Twitter marketing product, then added Instagram marketing product as we realized many of our customers are on multiple social networks.- Rebecca Xiong, GrowEpic
The first McDonald’s restaurant, for example, was a successful carhop drive-in, called “McDonald’s Bar-B-Que,” that served 25 items—mostly barbecue. They broadened their appeal, however, with some menu and architecture changes, and grew much larger than the barbecue drive-in probably ever would have.
Growth Tip 2: If it’s time to expand your product or service offering, start by talking to your team. What conversations have they had with current clients. What services or products have people asked for that you do not offer? Check out what extended services your competitors are and are not offering. Figure out where needs and opportunities overlap—is there something your customers are asking for that competitors are not providing?
Growth Tip 3: Hire Well
Hiring any employee—from your first to your 50th—is a big deal. The team you build will determine so much about your product and your brand, that it’s worth the time it takes to do it well.
[Hiring] is probably the single most important thing you'll do as a business owner. Nothing has a bigger impact on your business or your life in that business than the people you bring into it. If you want to grow, you have to hire good people. Understand what your business’ values and beliefs are, and find people who are passionate about the same things.- Mike Kappel, Patriot Software
A good employee will relieve a lot of the burden from you and any existing employees, and help push the brand further in your target market.
Growth Tip 3: For more on how to hire the right employee, see:
Other Resources to Help You Grow Your Business
Meet the Panelists
Shannon Ware – Owner, TheCollective
Shannon Ware realized that businesses need a virtual team specialist to understand their projects and products and to hand-pick certified and talented contractors to get the job done. At the same time, she understands the importance of supporting freelancers who need a little extra help getting organized and taking their skill set to the next level.
By offering training, certification and a community of fellow freelancers, Shannon is now able to provide a home for the new face of business development through TheCollective.
Question: What are the top 3 things you need to consider when creating your budget?
Answer: It’s important to be realistic and conservative when planning a budget. Think about: What is absolutely critical to create a viable, saleable product or service? Where can you trade or barter to obtain your second-tier needs? Is your sales process tight, repeatable, and easily deployed?
Hear a tip from Shannon
Steve Feinman – District Director, SCORE District 515
Steve is the District Director for SCORE District 515 which serves Michigan and Northwest Ohio. His 10 chapters include more than 300 volunteers who provide mentoring and coaching for small business owners. Steve also develops and conducts workshops. His areas of interest include fine art marketing, strategic marketing and sales, and business model canvases.
Question: What is the importance of conducting market research?
Answer: Knowledge is power. And market research is one method for accumulating knowledge so your decisions are well-informed. It doesn’t have to be elaborate and deeply extensive to be useful. It’s beneficial to spend time gathering customer and market feedback and insights frequently to help spot trends, identify opportunities, and make any adjustments needed to maximize sales
Connect with Steve Steve's Website
Hear a tip from Steve
Lisa Coots-Schooley – Owner, SPLURGE Boutique
Lisa Coots-Schooley's life’s mission is to change the way the world and women think of beauty. Resonating from the inside out, Lisa wants every woman in America to have a feeling of self-worth and confidence.
Lisa’s love of people and passion for creativity came full circle in 1994 when she purchased a highly-reputable photography studio in Eastern Iowa. She ran her full-service studio until 2010, when she relocated her business to Cedar Rapids, the second largest city in Iowa. At that time, she expanded her service offerings and added a high-style clothing boutique. This allowed her to combine her skills in photography with styling woman of all ages and sizes.
Connect with Lisa Lisa's Website
Hear a tip from Lisa
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