Is Your Idea a Business or a Product?

December 14, 2006 at 2:17 am 2 comments

Many business ideas stem from an “aha” moment when a founder is frustrated with a certain task and thinks of a solution. This leads to some great products and innovations, but doesn’t necessarily lead to great businesses. A business is an organization that sells a product or service, and so to be a successful business you need to have something that can be sold and the foundations for a selling mechanism. 

So if you have the next great idea, run it through these filters:

Who is my customer and will they pay for my idea? 

All businesses have customers. Some pay for a service, some buy a product, some use your service, some buy advertising, but to be a businesses you need to have customers.

Understanding who your customer base is makes it easier to determine if they will be paying you. 

Am I competing on price or benefits?

There is a tendency when developing business ideas to assume that a business can attract users by competing on price. This works in a vacuum, but not in a competitive business environment. Unless you have a tremendous technological advantage that you can leverage to create significant savings (think VOIP), competing on price will not work. Most users will be unlikely to make a change to an unknown startup for a little bit of savings, and if they do, then your competitor will lower their pricing. 

Features however, makes it much easier to attract customers and if they are significant, can also make it very hard for competitors to quickly match.

If everything goes right, what are my competitor’s barriers to entry? 

Assuming your idea checks out with the above questions and you are ready to rock and roll, you should probably take a step back and view the idea from a long-term perspective. You are about to dedicate much time, energy and money to this venture and you want to make sure it wont be easily killed by a larger competitor. So ask yourself, if it all works out how difficult will it be for someone else to enter my space.

This is the hardest question to answer because the best defensible strategy is good execution, and there is no way to know how you will execute until you do.  Nonetheless, the better the barriers the better the idea.  I will write more on this issue on a latter post 

So now you know you have a great idea for a business and it makes sense to start doing more research and diligence.  Good luck!!!

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Entry filed under: Start-up.

Cost Breakdown – Technology Development vs. Marketing Fred Wilson says it best…

2 Comments Add your own

  • 1. R  |  December 16, 2006 at 5:13 pm

    Thanks a lot! Keep on counselling.

    Reply
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About

Exactly one year ago I set off on the most exciting journey of my life; I started Emerging Demographics Inc (the parent company of HireWorkers.com).

Along the way I was selected as one of the top 20 young entrepreneurs by BusinessWeek.com and the 21st coolest young entrepreneur by Inc. magazine. I have also appeared in ABC7, Telemundo, NPR, and been quoted in StaffingIndustry.com, WorkforceManagment.com, Entrepreneur Magazine, and various other publications.

Over the next few months I will recount some of the stories and lessons learned from building, developing and creating a business from scratch.

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