August 6, 2016

How To Recognise A Bad Business Idea

Business and Entrepreneurship, Daily Writing Blog

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How To Recognise A Bad Business Idea

One of the first problems people have with going into business for themselves is that they don’t have any ideas. A common second problem people have is that they latch on to the first idea they have, or they fall in love with a bad business idea before really testing it in any meaningful sense.

Chances are, you’ve had some bad business ideas. Maybe you’re chasing a bad business idea right now and you don’t even know it. Let me tell you, it’s better to say, “No, I’m going to move on to another idea” than it is to keep beating a dead horse.

By the end of this article, you’ll probably have the knowledge to avoid bad business ideas. At the very least, you’ll have a list of possible red flags that you can either use to call an idea off or at least look into more carefully before you go ahead.

Story Time

I wasted this morning and some of this afternoon. Sometimes, I’ll have a great idea and it’ll turn out to be a pretty terrible idea. This time, a reader of another site of mine sent me a message saying, “Hey… could you do this?”

Now, naturally, the first thing to recognise when you’re looking for business opportunities is to say, “Where’s a problem that needs solving?” So when somebody comes to you and says, “Solve my problem!” You might think you’ve won the jackpot.

That’s not always true.

Sometimes, you’ll have an insight or a solution to a problem that you really want to share with the world in the form of a business or service. That does not mean that it’s a good business idea. Lots of bad business ideas solve problems. That doesn’t mean they’ll pay the bills or not be a time/effort sink.

This used to be something that would detour me for months. Like pretty much everyone, I think of my ideas as brilliant masterpieces that are beyond criticism. Or at least I used to. I’ve talked before about trying to start businesses from bad business ideas: It never works. Whether it’s the skills, the personality or the scale, if you’ve got a bad business idea, then there’ll always be something wrong with it.

Back to today: I thought to myself, “I could provide this service.”

I looked into it. I wrote out a little plan. I thought about a simple marketing strategy and the places I could sell it to. I thought about how to make money from the service.

But every time I thought of something, there were more questions. Every time I tried to simplify the plan, it got more complicated. This was a bad business idea, and I knew that.

Luckily, at 3pm I decided to relegate the idea to a few bits of paper that’ll sit in a drawer forever unless my subconscious gives me some answers.

Let’s get on with the topic at hand: How did I recognise this bad business idea, and how can you do the same?

Is Your Business Plan Simple?

I’ve written a guideline for a simple business plan before. You should follow it.

Realistically, you need to answer the following questions:

  • What is your service?
  • Will it be profitable?
  • How are you going to get the service in front of your customers?

Follow the link above for a further break down of what I suggest.

If your plan is too complicated for this simple process, then you’re in one of two states. The first is that you don’t know what it is you’re trying to accomplish. Things like, “I’m going to offer this service, that product and this other thing which is kind of a service and kind of a product,” mean that you need to get to grips with your idea more. The second is that you’re in denial. There is nothing powerful about complexity in terms of providing a service. If your business is too complicated for you to summarise on a sheet of paper, chances are it’s too complicated.

Does Your Business Require Tremendous Financial Sacrifice?

People always think they need a ton of money to start something simple. Maybe if they’re after millions in funding for the next great venture capital start-up, they do.

However, most services are cheap to start. Aside from a course telling me what to do, my writing service cost absolutely nothing to start up. I didn’t even have a website for the first year of doing it. Most services are the same, or the cost to start up is minimal.

All you need to mow lawns is a lawnmower.

All you need to start writing is a laptop.

All you need to start a taxi/delivery service is a vehicle.

Now, there’ll be ongoing costs. If you’re a builder, then you’ll need materials before you can build something. If you’re a painter, you’ll need paint and materials. But those things occur after you’ve tested the business and started taking on clients. This brings me to my next point.

 

Is There An Easy Version Of Your Product/Service You Can Test Out?

I had an original idea for a business once. It was brilliant – and it’d still be brilliant today. Yet nobody was doing it; nor are they now.

You might have ideas that have the same “wow” factor.

The problem is you’ll never know if there’s a business there until you try doing it.

Again though, you don’t want to pour a ton of money, time and effort into something that’s got nothing to give you back in return.

Therefore, my advice is to start by trying something on a smaller scale.

Fiverr makes this easy to do. For offline businesses, try doing something similar to the scale of a Fiverr job – before you try and start a cooking school, see if you can sell a $5 recipe book or get people to turn up at your place for a one-hour cookery lesson.

This is important because you’ll never learn as much by studying, dreaming or business planning as you will by doing.

Final Thoughts: It’s Better To Have an OK Idea Than A Bad Business Idea

I’ve no doubt that people have amazing ideas all the time. For some, that’s great. Look at Elon Musk.

However, for far more people, it’s a really bad thing; they think, “Build a business” means “Build the next SpaceX” and they’re constantly looking for the next best business idea. This leads to a lot of bad business ideas wasting peoples’ time, money and effort.

If you’re seeking out the next big world-changing idea, read this article again and then remember this: It is absolutely better to have a pretty mediocre or unexciting service that works and gives you income than a bad business idea that sees you constantly planning but never doing. You aren’t going to stop having a bad business idea every now and then, but once you accept this, you’ll be able to recognise a bad idea from a good one, and you’ll be able to put it aside and concentrate more on better uses of your time.

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