How to choose the right business idea: the four criteria that matter
Having trouble deciding which business opportunity to pursue? You’re not alone!
I’m often scribbling business ideas in my note book, adding to an ever growing list of possible ventures. I’ve also spoken with many budding entrepreneurs that have their own lists.
I’ve come to realise that many of my own thought bubbles are best left as ideas on a page, because taking a closer look often reveals that some ideas aren’t worth pursuing.
Most advice on working out which business idea to pursue is focussed on ‘will it make money?‘. Whilst that’s certainly a sensible question, there’s also a far more important consideration: is it the right fit for you?
I’ve met business owners that are very successful, but completely miserable. Money is worthless if you don’t have happiness.
The business should add value to your life, not just financially.
Choosing a business to pursue requires not just looking at the merits of each idea, but also looking inwards at yourself.
So with that in mind, I’m going to share with you the four criteria that actually matter when it comes to picking the best business idea. You’ll note that these criteria are as much about you as they are about the business.
It’s an easy system to remember, just think: “LIVE” (the first letters of the four criteria).
A good business is one that allows you to live a great life. A bad business is one that takes over your life!
You shouldn’t have to compromise on the lifestyle that you want, in order to run the business.
If you hate the daily commute, long hours and sedentary nature of being ‘chained to a desk’ in your office job; then the last type of business you should start is one that replicates any of those aspects.
Think carefully about the elements of your current or previous jobs that you haven’t enjoyed. If a business venture is likely to have those features, and they can’t be removed through clever process design or by outsourcing the frustration to someone else – move on to another idea.
A business doesn’t have to be focussed on your greatest passion (of course it helps), but you should at least find it interesting.
If the topic, market or product bores you to tears – then you’ll quickly lose interest in running the business. You may even grow to hate your business as much as many ‘9 to 5’ workers loathe the ‘daily grind’.
Of course it’s possible to outsource many aspects of running a business. So theoretically you could simply oversee the business, working ‘on’ rather than ‘in’ the business.
However, the problem with that theory, is that most people still need to grow the business from the ground up themselves, until it reaches a point where outsourcing is a viable option. If you find the business topic to be particularly mind-numbing, then there’s a very high risk that you’ll abandon ship before it grows much at all.
I speak from experience on this, having started and quit several business ventures. I learnt my lesson, eventually. Hopefully you’ll learn from my mistakes and not your own, because it’s much cheaper learning from other people’s mistakes!
A business that doesn’t provide a good return on your investment (of time, money and other opportunities forgone) is a hobby at best and a burden at worst.
The business needs to be based on a viable market opportunity.
To identify viable opportunities, you could start by listing topics or industries that are aligned with your interests. Once you’ve compiled your list of interest areas, drill down to identify potential target markets. Consider the size of each market (the number of potential customers), the purchasing capacity of consumers in this market, and their desire to actually purchase your proposed product offering.
These elements can be summarised as ‘market demand’. It’s important to examine how (and how much) this market demand is currently being served. E.g. how many existing operators are already serving this market and how well are they serving the market?
Once you’ve identified a viable target market, you should conduct some testing to determine the best messaging and product offering for this market; and most importantly, to determine if your assumptions about market demand are actually correct.
If the business opportunity proves to be unviable following testing and tailoring of your messaging and product offering – be prepared to cut your losses and move on. Wasting time on an unviable business is simply wasting resources, namely your time and money.
The ultimate business is one that still hums along without much (or perhaps any) involvement from you.
This frees up your time for other pursuits, such as spending time with your loved ones, travel or hobbies.
This type of business is also a very saleable asset, because anyone could be the owner of a business that runs on autopilot. This gives you options for the future; because at some point, you may want to exit the business and pursue other ventures.
A lot of small business owners feel like their business would collapse without them. In many cases this is actually true, because the business hasn’t been designed to operate effectively without extensive involvement from the founder. This can place a lot of pressure and stress on the business owner.
Aim to build a business that prospers with or without your input. You’ll be a much happier business owner!