Meanwhile back at reality, this is unlikely to materialise into an amazing idea, namely because Uber-type opportunities don’t come around that often (never say never!) and you don't have a framework to contextualise your ideas. Sure, ideas mustn’t be too contrived or created in a lab but it helps to have something to guide your thought process.
At a high level, there are two (2) main ways that businesses are formed:
- Actively looking for and dreaming up ideas.
- Passively stumbling upon opportunities.
If you choose to follow the passive route, you will generally find ideas in an area where you have knowledge and often experience. So keep learning as much as you can by reading lots and asking loads of irritating questions.
However passively waiting is risky and may mean that it never happens. So I think it’s always good to be actively looking because then the passive is covered too as your mind will naturally be tuned to identify gaps in the market.
Assuming we follow the active route because we want to jump-start a venture, I think there are four (4) typical paths to finding business ideas:
1. Solve a problem with a product or service – people will always part with their hard-earned cash for something that solves a genuine problem of theirs. “As an entrepreneur, don't complain about problems, build solutions for them.” Paypal for example solved the fundamental problem of a lack of trust when transacting online or between countries.
- Make something cheaper and more accessible – think air travel and AirBnB. Many people would never have thought that they could afford overseas holidays but nowadays you feel like an outcast if you’re not doing it.
- Support a growing industry or product - A great article once said, "don't dig for gold, sell jeans and shovels." The shoe charms for Crocs are a fine example of someone who merely tagged onto a trend and did phenomenally well.
2. Think of something that will be cool in the future – If you look at your bank account these days, there are things on there that your parents never dreamed of. Tell people what they want to buy i.e. Spotify, SpaceX, those cool sock mirror things with your country’s flag on them that people have during the World Cup – you get the picture.
3. Me too businesses – find someone doing something badly, copy them and do it better. I love the phrase “we’ll take it from here.” So instead of first mover advantage, you use the fast follower strategy which is equally formidable. At the start of the interweb there were literally hundreds of search engines and then Google somehow became the word used to describe the internet. Amazing.
- Business arbitrage – take something from the developed world and bring it to an emerging market. If you’re sitting in Africa, Europe and the US can often be a crystal ball as to what will happen next so don’t re-invent the wheel, just bring it over. Emerging markets often do of course leapfrog technologies like with mobile banking so this is a two-way street.
4. Buy a business – this is by far the easiest way to become an entrepreneur and really under-rated. Most tasks are already completed to some basic degree so you don’t have to spend all your time getting logos designed, drawing up invoices and customer letters. You can focus more on the strategy and execution which is fun. The only real trick is to make sure that you know what you’re buying and that you don’t overpay. See the Private Equity blog section for more here.
Once you have thought of a few ideas or found some opportunities, the next trick is to work out whether they are worthwhile or you should stick to your day job.
Below I have listed a few quick checks that you can use to evaluate your idea. Once you have passed these tests, you can move onto the more advanced blog that drills down a bit deeper.
If it’s a B2B (business to business) company, look whether your idea can be applied:
- Across a range of company types: SME’s, large corporations
- In different industries: Mining, retail, tech
- To multiple geographies: Africa, Asia, USA
- Inside different company departments: HR, accounts, admin
If it’s a B2C (business to consumer) company, ask yourself the following questions:
- Is it something that you’ll use 1 or 2 times a day? Think of things that you use daily: toiletries, mobile phones, coffee – all of which are good businesses to be in.
- Will it make your life better? What customer pain are you solving and how significant is this problem in their lives? Be honest here because successful businesses understand their customers’ needs really well and so this is probably the single most important point in deciding whether the idea is good or not. Think of suitcases with wheels - who would buy a bag without them nowadays?
Remember that your idea will generally appeal greatly to a niche audience or very little to a large audience, not both at the same time. It is therefore probably better to develop your offering for the niche audience first because they will be willing to pay for it and then open to the masses thereafter. Facebook for example started off exclusively servicing Harvard students and then once it had traction opened up to the rest of the world. This approach also helps you refine your customer proposition through multiple 'pivots' so I highly recommend it.
At the end of the day great business ideas do not come around every single day or else everyone will be a multimillionaire entrepreneur (on a boat with flippy flops) so if you find something special then you should probably act now and fast.
Next up we’ll properly stress-test your idea to make sure you are setting off in the right direction.