This post is not meant to show you how to build a successful business- you’ll find a lot of that online, some of which works and some of which does not. Instead, this post will walk you through a number of specific steps that you can use to go from “wouldn’t it be great if XYZ?” to actually pursuing the business idea, if you choose to do so. In addition, I’ve also listed some great tools that may help you along the way
Take a step back from your idea and ask yourself what problem you’re solving for your customers.
For example, my best friend is looking to start a group home for seniors (basically an independent assisted living center, run out of a large residential property rather than a giant complex). This is a great idea (gigantic market and growing, economics of it look good, and there are some pretty good real estate aspects to the business model that you can leverage), but what is the problem he’s solving?
In short, there are a large number of seniors in many areas (and growing day by day).
- His home is going to provide a comfortable place to live that’s not institutionalized and “big” like many assisted living centers.
- In addition, he will have expert staff such as nurses and doctors as needed for various medical care, although his particular home isn’t for serious medical treatment.
- Finally, residents will have the general comforts of home while their loved ones will have peace of mind knowing they’re safe.
- What pain, problem, or inconvenience am I solving?
- Who experiences this pain?
Step 2- How Will You Solve the Problem?
Now that you’ve defined what the problem is, it’s time to think through how you’re actually going to solve the problem. Don’t worry about the financial side of things yet- just think through how you’re going to solve the problem you defined above.
Sticking with the small group home for seniors idea mentioned above:
- He’ll need to have the property where residents can live. The property will probably need to be able to fit 4-6 residents comfortably, so we’re probably looking at a 4-5 bedroom place. In addition, it needs to be in a nice neighborhood that feels comfortable to the residents.
- He’ll most likely need some sort of certification or license to operate the business. Since he’s not providing extensive medical care, he may not need in-depth certifications. But odds are, there is some sort of certification process involved. This can be researched via a few quick Google searches, although I usually just jot dot everything related to the business and then start researching each one at a later time.
- He’ll need to have staff available to provide the care and operate the business. This is a common step that many people forget to think through at the start of researching a business. While you may run the business solely on your own at the start (or even forever), it should be structured in a way to allow others to run it at some point if you want…otherwise, you’ve just got a “job”, with a lot more liability. In our example, he may need a registered nurse on staff or some other level of medically experienced staff that’s not a doctor. In addition, he may need to contract with various service providers that can come to the property periodically to add to the great experience of living at the home. For example, specialized group personal trainers for the elderly, musicians, etc.
There’s bound to be more to your idea as well as the group home idea above. However, my purpose with listing the above details is to help you see that you need to get granular and think through how exactly you’re going to solve the problem for person who experiences that problem.
Step 3- Basic Economics of the Business
At this stage, it’s time to start thinking through the financial side of the business. By no means am I saying that you should build out a detailed cash flow forecast, a 5 year revenue and profitability forecast, or anything along those lines.
Instead, you should jot down answers to the basic questions below:
- How much will someone pay to have their problem solved, as you’re proposing? In the senior group home example, this would be the monthly fee that residents would pay. In other examples, it could be an hourly rate for a service, a price for a product, etc.
- How much will it cost you to solve these problems on an ongoing basis- by “ongoing basis”, I mean what are your typical expenses directly related to serving customers over time and not the upfront expenses or overhead expenses. In the senior group home example, this would be the mortgage / lease on the property and other property-related expenses (utilities, electricity, etc.), cost of staff, food, insurance / licenses if ongoing fees are involved, etc. Note that I put the property expenses in for this particular example since it’s an ongoing predictable expense and a pretty big part of the businesses’ service offering (i.e. residents are paying for a place to live). I realize in other businesses these might be considered up-front expenses or overhead.
- How much will it cost you to acquire customers? Note that this doesn’t mean, “how much will my website, brochures, business cards, etc.’ cost?”. Instead, you should get as close as possible to“each paying customer we receive will cost us X dollars”. This is easier in some businesses than others, but you can usually run some sort of calculation to get to this number. In the senior group home example, it’s very common to pay for “move ins”, which is essentially a fee you pay to an outside sales organization if they refer someone to your home that actually moves in (i.e. becomes a paying customer). That makes the calculation pretty easy…
- Taking into account the above numbers, what is the potential big picture profit per customer or per time period (monthly, etc.). Again, this is not meant to be used to develop your financial projections…it’s just to understand how you will profit from the business. While building a business your passionate about is important, you need to be able to profit in order to sustain and grow the business.
Going through the above steps will help you quickly vet your idea. This is by no means meant to be the end all be all of business planning. It’s just the start, but it should help you think through your business idea, define it more clearly, and understand the basic economics of the business fairly quickly.
Tools That Will Help YouAlthough every business idea is unique, all business ideas are similar in that they require a lot of research to think through and move forward with. It’s important that you take action rather than research the years away on your great idea, but below are a few tools that may help you uncover some powerful information that you can leverage when starting the business.
- Quora.com – Quora is an amazing resource for finding answers to questions related to business, marketing, and quite a few other things. For example, you can find specific metrics related to various industries (i.e. typical conversion rates for online retailers), the technology used by various companies (i.e. how was the Groupon.com website developed), etc. In short, it’s a solid resource to find answers to questions that come up (and dive down the occasional rabbit hole) as you’re researching your business.
- AngelList – AngelList is basically LinkedIn for independent investors that are actively seeking startup companies to invest in. While you may not be ready for investment yet, it can’t hurt to identify specific investors that are active in your industry (i.e. if they’ve invested in other companies in your industry) and reach out to them to discuss your idea. If you have specific questions to ask and don’t come across as someone that is going to waste their time, then it’s fairly simple to form some pretty powerful relationships through AngelList. In short, be honest, be clear, and be compelling…that will go a long way. Remember, these investors are actively putting themselves out there to be contacted by startups…you shouldn’t be scared to contact them ; )
- Google Search Operators – You’re going to spend a ton of time on Google researching your business. You may not already know that you can use specific search codes on Google to find very specific information. For example, this search shows you anything on ImJonTucker.com that mentions “Google search operators”. Become familiar with how these work and get comfortable using them. It will take a bit of time of forcing yourself to use them, but once they’re part of your standard Google search behavior, you’ll realize that you are finding much more relevant content very quickly.
There are bound to be additional tools, but I’ve put this blog post together fairly quickly. If any others pop into your head as you’re reading this, don’t hesitate to leave them in the comments.
If you’re in the process of brainstorming a business, CONGRATS! A great idea is good to have, but actually pursuing an idea can be an extremely rewarding experience. At a minimum, you’ll learn a LOT and it will lead you to new opportunities at every turn. At best, your idea will turn out to be a big success, produce a lot for you…and you’ll still learn a lot and see new opportunities at every turn.