Have a great idea? Cool! But think carefully before investing your life savings trying to turn it into a business.
They say that ideas are a dime a dozen, and it’s true – there’s certainly no shortage of people with good business ideas out there. But having an idea – and then having an idea that will enable you to build a great business – these are two completely different matters. Just ask anyone who’s tried to start a business! The two most common traps that new entrepreneurs fall into is that they either:
- Invest everything they’ve got into the first idea they have (because they are only just learning how to come up with them) – rather than being patient and waiting for a better opportunity; or:
- They get so excited about their new found ability to come up with ideas that they try and run with every idea they have!
Both of these traps can be a recipe for disaster, and help to explain why many successful entrepreneurs fail again and again before they achieve real success. But as time goes by, and they learn from their mistakes, they get better and better at choosing (and executing) the right ideas to act on.
So where do the best ideas for new businesses come from?
The first step is to understand where money comes from. Money follows value. We earn money by exchanging something of value for money. In your job you are exchanging your time, sweat, brainpower or other skills for money. For example, if you’re only providing $20 worth of value per hour to the market, you will earn $20 per hour. On the other hand, if you want to earn $200 per hour, then you will need to learn how to provide $200 worth of value per hour. The more value you can provide to the market, the more you earn, and it’s exactly the same when you’re running your own business.
So, first things first. Your idea must provide something of value to the market. If it doesn’t, you’ll have a hard time getting people to give you money for it.
How do you do this? Well, I’ve found that the best ideas come from finding a problem and solving it, or by finding a need and filling it. By coming up with a solution to a problem that people want to solve, you will be ensuring that your solution is valuable. The bigger the problem you’re solving, the more valuable the solution.
For example, in my second business, a sales training and recruitment firm, we identified that sales managers are expected to recruit great salespeople, but aren’t being given any training or instruction on how to do it in the first place.
As a consequence they are left to fumble along, learning solely by trial and error, costing the companies they work for millions of dollars in lost sales opportunities, recruitment costs and staff turnover. To solve this problem, we created a day-long sales recruitment workshop, which managers could attend for less than the cost of a situations vacant ad in the newspaper. The mistake many people make is that they do it backwards. They create or invent something and then try and figure out what problems it will solve, rather than finding a problem to solve and then coming up with a way to solve it.
So, how do you find a problem to solve?
Many people start businesses after being spurred into action by something that annoys them, or to fill a need they’ve experienced in their own lives. Hamish Acland of Mons Royale is a great example of this. As a professional skier, he travelled the world living out of a ski bag and noticed that he wouldn’t want to wear his merino base layer off the mountain, as they all made him look like he was about to climb Everest. He set about designing thermal underlayers that were fashionable as well as functional. Mons Royale is now stocked in over 400 retail outlets worldwide and is even worn by the NZ Olympic team.
But what if you can’t think of any problems that really annoy you?
Well, the next best way to find problems (what I call ‘spotting a gap’) is to simply throw yourself into doing something you’re passionate about and ask yourself how you might be able to improve it.
The thing with ‘gaps’ is that in order to spot them, you need to be close enough to see them. Think of your standard Kiwi wooden fence – the kind separating hundreds of thousands of backyards up and down the country. Looking at the fence up close it’s easy to see the 4mm gaps between planks. Look at a fence from a few hundred metres away and spotting the gaps is a lot harder.
For example, I have absolutely no interest and know nothing about the industrial robotics industry. Therefore, it’s almost impossible for me to identify what might be missing, or what might need improving in that space – I’m simply too far away from the industry to spot any gaps.
On the other hand, I have invested a lot of time, energy and passion into the sales profession, and because of my involvement in the industry, I still see opportunities to add value to the sales profession everywhere.
Another good example is Wellington refrigeration engineer Jude Benedict, the mastermind behind Kiwi Klips. The idea for this came from doing the task itself; having back trouble, and living in wet, windy Wellington, hanging out the washing was difficult when he had to bend down all the time. He designed a clip that attaches to your washing pole, a post, wall, fence, gate – nearly anything that doesn’t move – to hold your washing basket off the ground. Such a simple solution, but so effective. Jude is now helping people with back problems, the elderly, pregnant women, or anyone that would just like to take the pain out of hanging out the washing.
This is one of the reasons they say you need to find out what your passion is and do it. If you do this, and you commit yourself to being the best in your field, you’ll soon spot plenty of areas for improvement.
If you try and spot problems and gaps in a field you’re not passionate about: a) you won’t be able to see as many opportunities because you’re too far away from it; and b) you certainly won’t care enough to build a business to solve it.
This method of spotting gaps may take you a bit longer than simply sitting down one day and trying to come up with a list of things to invent, but when you listen to the stories of many successful entrepreneurs, you find that their business ideas were born out of personal frustration at a lack of products or services, or noticing what was missing in an industry. The saying ‘necessity is the mother of invention’ encapsulates this concept nicely.
So there’s two clues about where great business ideas come from. You’ll notice that these methods are quite different from simply coming up with ideas for the sake of having ideas. By starting with a problem people want to solve, you’ll ensure that your solution is creating value.