This is an article Mike Cooch wrote for Entrepreneur.com.
Iâ€™m just like most other entrepreneurs I know â€“ I have at least three new business ideas before I get out of bed in the morning. And the ideas just keep coming throughout the day.
Thankfully, after years of trial and error as an entrepreneur, Iâ€™ve learned to evaluate my new ideas carefully to determine if they are actually an opportunity, instead of just an idea.
Even more importantly, Iâ€™ve learned to evaluate if itâ€™s a good opportunity for me and the lifestyle I want to create for myself.
I do that evaluation by asking twelve questions that Iâ€™ve found are critical to determining if a business is right for me. If I have more than a few â€˜Noâ€™ responses, I can immediately cross the idea off of my list and forget about it. If itâ€™s all â€˜Yesâ€™ responses, I know I have an idea with real potential.
Hereâ€™s the list of questions, with some of my thoughts explaining why each is important to me:
Will this business support the lifestyle I want (income, ability to travel, flexible work time, etc.)? I work to live, not live to work. I also love to travel and have flexibility in terms of when I get my work done. That immediately disqualifies many businesses.
Is there proven demand for the product I am going to sell? Creating demand is hard, slow and expensive. Iâ€™d rather capture my share of already existing demand.
Is there a clear value proposition that will make my product unique in the marketplace? Business is no fun if I donâ€™t have some sort of competitive edge.
Is there a very clear way to market and sell my product or service through existing channels? Leveraging existing sales channels is the fastest and easiest way Iâ€™ve found to get a business off the ground profitably.
Can I leverage online marketing and social media to grow this business? These are two of the most powerful business-building forces of our time; I want to be sure to take advantage of them.
Will this business have gross margins of at least 50% and/or net margins of at least 20%? At the end of the day, a business has to make money.
Can this business become a sellable asset? The big win often comes from being able to sell and exit your business when you are ready, but not all businesses are easy to sell.
Can I automate the majority of the operations of the business? I try to take advantage of as much automation as possible to reduce the overhead of operating a business.
Can I easily find someone to successfully run the business for me? Eventually, Iâ€™ll likely want someone to run the business for me. Is this a business that can easily be handed over to someone else, or does it require my specific knowledge and talents?
Is this a business that Iâ€™ll find fun and interesting to run today? Yes, life insurance is very profitable, but itâ€™s not fun. Profit is not enough; I want to be in businesses that I actually enjoy.
Is this a business that other people will find fun and interesting? Iâ€™ve found that itâ€™s much more enjoyable to be in a business that other people think is fun and interesting.
Is this something Iâ€™ll still be willing to run seven years from now? The reality is that most businesses donâ€™t grow as quickly or as profitably as Iâ€™d like.
If I am still running this seven years from now, will I still find it enjoyable?
Use these twelve questions to evaluate your business ideas. You should be able to answer â€˜Yesâ€™ to the far majority of the questions.
If not, drop the idea and be thankful that you didnâ€™t invest your time and energy into something that ultimately wouldnâ€™t fulfill your entrepreneurial dreams.
Now, go build something!
Thinking of starting a business? Already have one, but havenâ€™t created the lifestyle youâ€™re looking for? Download our free guide to creating a business that gives you the freedom to decide where, when and who you work with.