5 Reasons Why a Good Idea is not Always a Good Business
I’ve been working on a business plan for what I think is a good idea. It has taken a lot on my part to really think about the numbers side of the business. Numbers have never come naturally to me, but I was pretty proud of the work I put into this plan. When I sent it to a business-minded relative, I realized I had fallen incredibly short of what I really need to have on the pages.
This all got me thinking about the numerous entrepreneurial adventures that I have been surrounded by from family, friends, and even myself. My family really has the “work for yourself” spirit. I hate to say it, Dolly, but most of them don’t care for “working 9 to 5 just to make a livin’.”
But what I’ve seen and done over the years has really taught me a lot about the need for thinking like a business owner, and not just moving forward on a “good” idea. Based on my own experiences, I’ve summed up 5 reasons why a good idea is not always a good business.
1. Dreams Don’t Show Expenses
If you’ve ever thought about owning a small business or working from home, then you have probably spent hours daydreaming about your idea. A creative like myself can’t stop thinking about all the cool ideas of what a new business will look like. I even dream up details down to the business cards, but what I don’t tend to dream about is the financial responsibility of running the business.
Some of the questions I have learned to ask myself now are:
· How much will it cost for production?
· Will I need to rent a space?
· If yes, how much will I need to budget for rent and utilities?
· Will I need employees or freelancers to help me?
· What type of insurance will I need?
· How much should I set aside for marketing?
· What type of setup fees will I need to pay?
You get the point. I even ask myself questions as small as the cost of toilet paper, because daydreaming may be the fun part, but eventually you’ll need to figure out those expenses if you plan to move forward.
2. Cool Ideas Don’t Calculate Projected Income
While your daydreaming, it’s easier to think about all the money you think you’ll make. Wishing, however, isn’t an accurate projection of potential earnings. You might think your good idea will make you six figures in its first year, but how do you really know?
I’ve watched family, friends, and yes, even myself, leap into business without anything more than the numbers we thought we’d be making. We all found out it is a fatal mistake to do so.
3. Maybe a Good Idea, but Bad Timing
Timing is more important than you might think (even if your idea is evergreen). I have learned stepping into the market at the correct time with the correct strategy is almost more important than the idea. The hardest part of this is there isn’t a perfect solution. You have to really get to know your market and look at what they really care about right now.
For example, starting a food magazine in the midst of a pandemic was perfect for readership, but a nightmare for advertising. You have to weigh the market and think as logically as possible. If you can’t do that on your own, then get some help. It’s better to spend money on a consultant than it is to lose your new business completely. I’m raising my hand here because I know from experience.
4. You Chose the Wrong Market
Remember how I just said that you have to really get to know your market? It is true for a number of reasons and not doing so can cause problems for the future of your business.
Let’s take an example from my past. I had the wonderful idea to open a photography studio. My idea was to create a high-end space where I would provide glamour portraits and collections for pregnancy to breastfeeding. The market was saturated with glamour, boudoir, maternity, and newborn photographers. Ultimately, this shouldn’t have mattered because if I had really gotten to know my market, most of those photographers would not have been direct competition.
I did not do my due diligence. I did not create that annoying, but essential, target market profile. I chose the wrong location for a high-end studio and marketed it incorrectly. Without realizing it, my marketing targeted people on a budget and not the people willing to pay higher prices. I was closed within six months, and while I had taken a lot of photographs during that time, I hadn’t made any money.
5. It wasn’t a Unique Enough Idea
We all think we have the next great thing. In our minds, we know what the world is missing and only we can provide the solution. My social media is flooded with ads telling me how this product or service is unique, and it is the missing piece in my life or business. Wrong! I just saw 10 other ads for the same type of product or service.
Let’s look at my failed portrait studio, again. The only unique service I was offering for my area was the breastfeeding portraits. One of the things that might have helped my business grow was if I toned down all the other services I offered (not removing them, just not highlighting them) and focused on mothers who were nearing the end of breastfeeding their child. If I had been smart, I would have been pulling at their heartstrings and reminding them to capture this special connection before it was gone. I could have maintained them as long-time clients by then letting them know about the other services I offered after they were already clients. However, if I had been really smart, I would have scrapped the younger generation altogether and focused on the large number of retirees.
My point is simple: a good idea is not a business. It’s simply the starting point. If I had taken the time to figure out all my expenses, the projected income, learned my target market, and made sure my timing was also good, I could have had a thriving portrait studio. It’s also possible it still would have failed because maybe it just wasn’t as good of an idea as I dreamed it was.
Business is a risk. Just make sure you are looking past your ideas and dreams and remember to look at them from a logical perspective. Dreams can come true if you do your best to plan appropriately.
Lisa is the owner and publisher of The Chews Letter magazine. She has an extensive background in graphic design, photography, and healthcare. Visit her website to learn more, read food/nutrition-related articles, and get delicious recipes.