It seems that most people, at some time, have what they think is a good idea for a new product or service. Not everyone goes so far as to put a business plan into action, of course, although 62 percent of Americans say they want to make their dream of owning a business a reality. The true reality is that while good ideas abound, simply having one doesn't necessarily make for a good business. Multiple factors come into play that can determine the health of a new company, from cash flow and timing to go-to-market strategy. One aspect remains a constant: The most successful businesses solve a problem the market hasn't been able to solve on its own.
People take vitamins to help ensure they get the proper amount of nutrients. It's something that both our mothers and our doctors have encouraged us to do. But let's say you become ill and you have to choose between spending your money on vitamins or pills that can alleviate your pain. It's a safe bet you're going to go with the latter. This is a way of saying that "must have" products always win out over the "nice to haves" when dollars are limited. Vitamins can be helpful, but pain pills are essential.
In my experience as a venture investor, I've found that companies offering "must have" solutions typically have better exits and are more recession-proof than "nice to haves." In the choppy waters of our current economy, expect to see companies that sell "vitamins" struggle. Conversely, solutions that fill a real need, such as software that creates efficiency, allowing companies to do more with less, are more resistant to economic downturns.
Another important point: It's not enough to simply have a solution to any old problem. There are plenty of problems out there, but that doesn't mean there is a market or a willingness to pay to solve them. The problem also has to be "known" and it has to be big enough that it is worthwhile to solve.
As a simplified example, think of selling frozen popsicles. If it's a hot summer day and your stand is outside in the flow of traffic, you're probably going to have a pretty easy time. Your potential buyers know they have a problem — they're hot and thirsty — and you're offering a product that will leave them feeling refreshed. Now think of having to sell the same number of popsicles on a chilly February day. You must first convince buyers that they have a problem (perhaps they are thirsty?) AND that they need your product to solve it. To do this, you've taken on a component of education as part of your sales cycle, which always slows it down. You'll have to get creative in your pitch, telling your potential customers that they are thirstier than they realize and they need to avoid dehydration. Or, maybe you take the healthy route, trying to convince them that they need the vitamin C in your popsicles to help ward off a winter cold.
The point is, if someone knows what their problem is and they're already searching for a solution, it's a much easier sell. Having to first educate prospects that they have a problem and then convince them that they need your solution to solve it is exponentially harder.
At different times, solutions have appeared that take care of well-acknowledged, chronic problems affecting a substantial number of users. Here are just a few:
Apple iPod. I might be aging myself, but how many of us remember trying to take a jog while listening to music on a compact disc? The problem was that whenever the disc was jarred, it skipped — at the time, a frustrating but unavoidable event. Enter Apple's iPod which for the first time allowed a seamless music experience for mobile listeners.
Salesforce.com. The job of the salesperson is a complicated one that involves relationship building and moving prospects incrementally through the sales funnel. How do salespeople keep up with potentially hundreds of contacts, their follow-up with them, and their status in the sales pipeline? Salesforce was the first CRM tool that enabled salespeople to organize and more effectively manage the lead-to-customer process.
Cloud storage. Over the last two decades, our workforce has become increasingly distributed — something even more true in light of our current times. More workers need access from anywhere, while companies are realizing the cost savings and other advantages of cloud storage versus on-premise, hardware-based servers. A number of companies have become trusted, go-to providers, including Amazon Web Services, Microsoft Azure, Box, and others.
If you plan to invest your blood, sweat, and tears into building a business, make sure your solution solves a well-known and significant problem, thus filling a gap in the marketplace. Do you want to further tip the scales in your favor? Develop a solution that creates minimal disruption to the way things are currently being done. This is the clearest path to success; a recipe to consider before you make the entrepreneurial leap.
Easy formula, right? Not really. Building an innovative business is hard work. Use these tips as an early screen when determining whether your "good idea" has the legs to go the distance.
The article was originally published in Forbes
