What’s in an Idea? How to Choose Your Next Business Idea

  • August 27, 2009 by Corbett Barr
  • 16 Comments

lightbulb-idea

How do you come up with and decide on an idea for a new business? If you’re like me, you’ve had lots of ideas for businesses.

The hard part is in deciding which ones to pursue. Here are some guidelines to help you get past the ideation phase and into really building something.

I’m about to launch a new business online next week (a great new way to learn Spanish, more on that later). For this business, I’m using a get-to-the-point approach where everything we do in the development of the product is aimed at generating revenue, from day one.

This is different from other “delayed revenue” businesses that are popular (and that I’ve built), where the goal is to accumulate a large audience first before you can earn any revenue. Blogging would qualify as a “delayed revenue” business. Relying on building a huge audience to make it is a swing-for-the-fences approach. It can make you spectacularly wealthy if you’re the next Youtube, Facebook or Twitter, but the chances of success are slim and the lifestyle that type of business leads to is dismal.

Much of my current thinking around how to build a business was influenced by the fantastic book Getting Real by 37 Signals. The book is really focused on creating web applications, but most of it is applicable to any type of online business. It’s a free read online, and definitely worth a few hours if you haven’t read it already.

Coming up with an idea is really just the first step in what should be a long series of steps in creating a business. Unfortunately, a lot of people get hung up on this step and never make it any further. That’s either because there are so many ideas out there that you don’t know where to start, or that you’re so wrapped up in trying to get the “perfect” idea that you never find it.

There are a few reasons why you shouldn’t stress so much about the idea for your online business. First, there is no perfect idea. Second, choose something that you’re really interested in, and you can rule out lots of other things. Third, ideas are just a multiplier of execution, meaning that without solid action to carry out your idea, it’s worth nothing. You need at least a decent idea and good execution to build any meaningful value.

What should you sell online?

Notice that I asked what you should sell online. Yes, you’re going to be selling something. The primary point of a business is to get people (customers) to give you money in exchange for something of value. I’m assuming that you want to get to that point as quickly as possible, so let’s ignore other delayed revenue business models that first require getting a huge audience in order to “monetize” the business.

Think about something that customers would be interested in buying (either physical or electronic) that you can create, purchase, have someone create for you or purchase and modify. I have a strong preference for electronic “goods” because I don’t want to deal with inventory and fulfillment of physical things. There are ways you can sell physical goods without physically touching them, but that’s something you’ll have to research separately.

Electronic materials are great because they’re easy to deliver to your customers, generally easier to create and they have higher margins (the profit you keep after deducting the cost of the goods from the sales price). Examples of electronic goods include eBooks, videos, podcasts, newsletters, software and anything else that is essentially information.

How will you acquire customers?

When you think about things you could produce for sale, you also have to consider how you’ll reach potential buyers. I mentioned earlier that blogging is a delayed revenue business. This is generally true because you have to take time to build your reputation and audience before you can sell anything. If your goal is to start making money as soon as possible, that type of business won’t satisfy your needs.

Instead, consider ideas that will allow you to use paid advertising in the beginning to bootstrap your audience. Sure, you’ll still rely on social media, word of mouth and other audience-building techniques for the long term, but in the beginning you need some way of getting your product in front of people.

To determine if advertising can help get your business off the ground, you’ll have to figure out whether or not you can afford to pay for a customer. What do I mean by that? It basically means finding out what your cost to acquire a customer through advertising is. You then take that number and subtract it from your revenue per customer (also minus your cost of goods and other per-sale costs). The remainder is your gross profit per customer. This number obviously has to be a positive number, and should ideally leave you plenty of padding in case your estimates are wrong.

Finding out what advertising will cost you will have to be the subject of another blog post. With the right tools, you should be able to estimate the cost with a few days worth of work, and less than $500.

Essentially, you’ll create a simple website with details of your product and a mock sign-up page. You then advertise using one or more services like Google Adwords. Divide the total cost of advertising by the number of sign ups to get a rough approximation of your cost to acquire a customer via ads. The closer your website is to the final product (and the longer you run the test), the closer your result will be to the real thing.

What’s your process? How do you decide?

This is the process I used to confirm the idea behind the new Spanish learning tool I’m launching next week. I’ll tell you more about the success of this method after the launch.

How do you decide which business ideas are viable, and which should be left behind? Let me know in the comments!

photo by Cayusa

Written by . Corbett is cofounder of Fizzle, a place for creative entrepreneurs, writers, makers, coders and artists, all working to support themselves doing what they love independently on the Internet. Follow Corbett on on Twitter.


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Rasheed Hooda August 27, 2009 at 7:48 am

Great Post, Corbett!

You are right, turning ideas into a profitable venture requires execution, and this is the part I get stuck in, for not knowing what steps to take. Thanks for spelling out the process. Now I have a blueprint to work with.

Keep up the great work.

Rasheed

DeyIrfanAdianto August 27, 2009 at 8:19 am

I think the best things to sell is something closely related to your interest. The closer the better.

Just like your spanish learning video that you’re launching soon. It seems that you made that because you’ve fell in love with Mexico. I sure hope I’m right =]

Corbett Barr August 27, 2009 at 8:58 pm

Definitely, I really enjoyed the time we spent in Mexico and love learning Spanish, so it was a natural fit.

John Bardos - JetSetCitizen August 27, 2009 at 9:50 am

Hi Corbett.

Good points!
An idea is worthless without solid execution.
All business have to sell something of value. It is not a business otherwise.

I look forward to hearing more about your Spanish program!

Jen August 27, 2009 at 10:02 am

Hey Corbett
Great post, it’s good to an outline of practical steps. I’m great on the ideas but not always on the next stages!
thanks
Jen

Bob Bessette August 27, 2009 at 11:17 am

Hi Corbett,
I enjoyed your post. I too agree that electronic materials are more easily delivered to a customer and you do not have to deal with inventory, etc. As far as what business ideas are viable vs ones that are not, I think that all depends on the timing. I had a friend who developed a keylogger software package that was geared to capturing a log of instant messages sent on a computer. It was selling well at one time and then texting basically replaced instant messaging. So the sales of that product pretty much has trailed off. So viability may be time-sensitive.

I look forward to hearing about your Spanish learning program and good luck in the new venture.

Best,
Bob

Corbett Barr August 27, 2009 at 9:01 pm

Hey Bob, you’re right that timing can be important (and can make the difference between a mild success and a home run), but I also think that worrying about timing too much can keep you from ever getting started. It’s just another dimension to consider when evaluating ideas. You can rarely be sure if your timing is right or not, and getting better at knowing that requires experience.

David Turnbull August 27, 2009 at 8:54 pm

I’ve played around with quite a few ideas over the years, many of which were successful. But my current project, my blog, formed out of a simple idea. I just asked myself a question: if I had to work on something everyday for the next 40 years, what would it be?

I’m sure I’ll play around with other ideas over the years, because it’s the ideas/startup phase that I enjoy the most, but it’s nice having a central, consistent platform for all my thoughts.

Corbett Barr August 27, 2009 at 9:03 pm

I agree about using the blog as a platform for your thoughts. It’s a great place to share and refine ideas. What I was trying to convey in the article is that it’s a long-term proposition if you’re hoping to make money directly from a blog.

Nate August 28, 2009 at 7:17 am

Hey Corbett, I like the post a lot.

What you said about pursuing a business that could make you money right NOW it important. I would love to make money from my blog for the rest of my life, but I needed to get moving and stop waiting, that’s why I just started my first business. Maybe the blog income will come someday, but honestly I don’t really care if it does or not.

Your Spanish lessons idea is awesome and I have a good feeling that you will be successful :-)

Robert August 29, 2009 at 6:14 pm

Corbett,

I’m hungry for more. I love this post and its approach, hope to see more of your tactics, tools and process soon. I know there’s plenty more of this type of content out there, but coming from a trusted source like you, I seriously can’t wait. I’m in the thick of this in my life right now and making the clear cut distinction between kicking around ideas (“successful failures”) and actually executing and earning income. Again, totally appreciate the focus on a product that cuts to the chase and doesn’t require months of audience build up. There’s nothing wrong with that model, and I’ve really come to enjoy blogging but there’s something to be said for developing a “hard” product and drawing people to it in a quality and passionate way.

I hope to see how you did the market testing for the spanish service! Thanks!

P.S. The spanish site looks great, might be more useful than Rosetta which I’m struggling to keep committed to.

Corbett Barr August 31, 2009 at 4:37 pm

Hey Robert, I’m glad this topic strikes a chord with you. Bear with me for a while as I get the new service up and running. I’m definitely planning to share all kinds of details about market testing, product creation, marketing, advertising, etc. It sounds like you’re struggling with all of the above at the moment. Please also share what you find from your projects as well.

Andrew September 11, 2009 at 10:07 am

Excellent post, left me wanting more. What if I have a dozen products to make and sell? Does that mean I should market test them all? I would need more capital to do that. Hmmm… when are you doing a post on raising capital for marketing research?

Bob Bessette August 28, 2009 at 9:22 am

Hi Corbett,
I hear what you are saying. I guess if he worried about timing he may have never written the software. He really did make some decent $$$ from the package he developed, so that was a big benefit. I also think he learned a lot about selling his program at the same time so that certainly helped him going forward with his latest products. I really enjoy your site and blog and I’m glad I read your guest post on RobbSuttom.com. I think you bring up some really relevant ideas and points especially for those of us who are working on online ventures. This site has rapidly become one of my favorites..

Best,
Bob

Bob Bessette August 29, 2009 at 10:45 am

Correction. RobbSutton.com. Sorry Robb..

Best,
Bob

Robert September 11, 2009 at 8:51 am

I’ll be launching a product, merely for trials sake in the next coming weeks. I want to nail the steps down and go through the thought process from the resources I’ve gathered so far. Hope to hear more about your methods…so I can then tear my steps up and improve and adapt. Looking forward to more, thanks C.

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