Being an entrepreneur is engaging for many reasons. Some people think about their business idea all their life but never get around to doing it. They’re living on ‘Someday Isle’ as motivational speaker Jack Canfield usually likes to say. “Someday, I will tidy up the garage. Eventually, I will hang that picture. Sometime, I will open a business.”

Then some people open one or more businesses, hustle their way through whatever gets thrown their way, and make it with a little lost of ambition and bit of luck. I am very familiar with this person. I face him every day when I look in the mirror.

You have a million business concepts or maybe just this one nagging idea that does not seem to go away. The question is, where do you start? How do you figure out that your business idea is good enough to pursue?

I met someone in this exact situation just a couple of weeks ago when it seems to me that even the most seasoned entrepreneurs still find themselves regularly evaluating business ideas. It can be quite challenging to know whether it is worth the investment and commitment your plans may need — which is why most people I know approach this regularly.

How to Know Whether a Business Idea is Worth Pursuing?

The small answer is: if you would have to waste the rest of your life regretting never having pursued one particular idea, go ahead and start your business because life is too short for regrets.

Unfortunately, not every decision is as straightforward because sometimes the actions you would be regretting the most is never having attempted any of your thoughts, and there’s no particular business idea that you have placed your heart on at the moment.

For those of us who have a diversity of business ideas and want to narrow it down, here are five ways to figure out whether your business idea is good or not.

1. What Do Competitors Advertise?

You can go ahead and ask competitors what they think their strengths are. The issue with that is twofold:

  1. a) they might not respond at all;
  2. b) what they say might not reply to what their numbers are telling.

One simple way to find out what sells for them is to check out their online advertisements. Whatever makes them most competitive in their given market is 99 % of the time spelled out in their online text advertisements.

Let’s look at a real example and imagine the business concept is to sell shoes online. We can now search on Google and type in “buy shoes online,” have a look at the advertisements, and figure out what the general selling points in the industry are.

Here are some of the advertisements that can show up for the keyword “buy shoes online”:

Looking at the image above, you can tell immediately that companies promote only two things: their brand and discounts.

Additionally, shipping seems to be significant as well.

What Does This Mean for Your Business  Idea?

If you were going into selling shoes online, you would now know based on the advertisement analysis that you either need be very competitive with prices or to have a known brand and have flawless shipping set up. New businesses do not have a well-known brand, so you either need to be conscious of the fact that you require a lot of budgets to fight as a brand or you now know that your only solution is to beat people’s prices and better have the fastest free shipment in place that the world has ever seen.

Looking at these advertisements as a marketer, you also notice that at least three of these ten advertisements are part of an at least medium scale campaign that uses dynamic keyword insertion or that the commercials are part of a powerful search campaign.

How do I know? Check out the heading of these three advertisements that are highlighted below:

This looks like effective keyword insertion which is a code that is usually used by advertisers that have to introduce a medium-sized campaign with around 75k+ keywords. All this code does automatically insert the keyword that was triggered by the search query in the heading of the advertisement. You can manage the capitalization of those keywords with a small code modification which is what tipped me off here.

My keyword was “buy shoes online,” and those advertisements say “Buy Shoes Online” with every word capitalized – to automatically capitalize every word just so happens to be the most famous code. If there’s space after the code, you could also attach the brand name. Using the code is an excellent way to get a good click-through-rate on AdWords while setting up thousands of advertisements with Excel in an almost short amount of time.

Dynamic Search Campaigns are usually used for large inventory e-commerce businesses, so either way, it seems that whatever potential competitor we are dealing with online is ready to sell a considerable amount of products at a high price.

As a startup, this looks like funding to me either from your pocket, from investment capitalists, or whatever else is a choice for you.

What if You Aren’t Looking to Open an E-Commerce?

The example above was just a show of how to analyze online advertisements and consequently draw summing up about what it may take to be able to compete in this industry. Not every idea requires funding, and not everyone minds need funds, so the conclusions will be changing depending on what business idea you are looking into.

2. Can You Make it a Purple Cow

So let’s say you have drawn a picture of what you would be presenting. Now the question is, how can you make your service and product stand out from the crowd? Best-selling author Seth Godin explained this thought well with the term “purple cow.”

The concept behind the purple-cow-concept is to present your service and product in a way that would make it so prominent as if it was a limited edition. Prominent is a significant term here because it is defined as “worthy of attention.” If you didn’t make an extended version of what you are offering, I would say to cross this business idea of the list because if you do not stand out, nobody will purchase.

If you are asking for a particular example of performing the purple cow idea, look at Tim Ferriss’ “4 Hour Work Week” book cover as an example. He divided the cover by putting the book next to other books with a diversity of covers, watched what people overlooked and what they picked up, and then made a judgment of what the book cover would look like. He chose what was “worthy of attention.” He also split tested various titles of the book with Google AdWords advertisements and chose the one with the highest click-through-rate which is a standard technique to split test business names.

3. Competitive and Perceptual Positioning

It is a chance to go back to the drawing board. Use a competitive positioning matrix to find out where your brand or business would rank compared in the current industry.

The traditional competitive positioning matrix looks at quality and price:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Naturally, having a low quality at a low cost and having high quality at a high cost are the two distinct ways to position yourself. Anything else usually is challenging to achieve. There is another matrix to think through which analyzes how people distinguish your brand, also referred to as perceptual positioning.

The ordinary perceptual positioning metric looks at how a brand is perceived, not how companies are recognized. This differentiation is hugely significant because a company can carry more than one brand that is perceived very individually from each other.

For example,  for Starbucks, it would be coffee in a paper cup, for Nike it would be the running shoes, and so on. Then find words that buyers would use to describe the item.

These are just examples to explain the concept, the perceptions of the matrix change based on what brand or industry you are looking at and of course based on what you are planning on selling.

4. Likelihood of Successful Execution

Based on your outline of point 1-3, how likely is it that you will be able to make your business idea a reality? There’re some things to take into account when determining the chances of success.

Aspects to consider include but aren’t limited to:

-Up-front costs

-Funding needed yes/no/when/how much

-Time commitment

-Core competency required

-Dependency on others

-Market size

-Level of competition

There are very a couple of niches nowadays where the level of competition is low. One of the things I feel is most ignored is the question of why the level of competition is high. It isn’t enough to figure out that you are competitive and able to handle the competition. Managing the competition isn’t the game. The game of entrepreneurship – or at least part of it – is beating the competition.

How to Beat the Competition

For being more successful than others, you first need to know how the industry works. One of the ways to figure out is by using Michael Porter’s Five Forces. I was cursing at this model during all my two business degrees, but I have to indicate that this model is truly famous. It helps to immediately get an overview of what kind of industry you are possibly getting yourself into.

The simplest way to understand this model is with examples. Think of it as a microenvironment that surrounds the company, almost like an ecosystem that the business lives in.

Here are a few examples.

If you are driving a protein product that is directed at people who are going to the gym, there is a huge threat of new entrants. Hundreds of new protein products come out daily.

You can also use this model about the perceptual positioning matrix. The threat of substitute services or products can be the perceived level of product determination. Think of bottled water for example. The water in the bottle is the same anywhere; it’s pure drinking water.

The business power of clients refers to price sensitivity among other things. As it is shown in the example with the online shoe store, clients can be so sensitive to prices and go for the lowest price. This is one of the features companies like Walmart count on for example.

5. Impact Your Lifestyle

Great business concepts can take over your life. The trouble with being a passionate entrepreneur is that you do not mind. I recently spoke to one of my customers who is a small business owner.

He is going through the process many small company owners go through. You start your first business and enjoy working on a 24/7 schedule. Afterwards the talks began with friends who think that you should take a day off and you start thinking that they ask, you grow apart, you find more friends that know what you are doing and only after a while do you admit that what you are hurting from what I name the “Golden Cage” syndrome.

The “Golden cage” is a successful business that you can’t get out of because the cage needs the bird and you are that bird. It is an excellent cage to be in because the business is earning money, but it requires you to be there all the time and is not deserving a whole lot without the bird in it. It is difficult to be bought at this point because the business does not work without you.

Conclusion

I have seen enough small business owners stuck with their businesses. Rather than suggesting you start whatever has high prospects of succeeding, I would instead say start something that allows you to live the lifestyle you envision for yourself.

You can’t improve the world in a cage anyway, so why start building one in the first place? Making a variation and living the life you want aren’t mutually exclusive, so go for what is best thinking your happiness also. Happy leaders inspire and inspiration is the base for any success.

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