Most of the first time business founders start a business, because they fall in love with an idea. They think that their idea will create a huge impact in the world.
Some of them start a business based on their passion. They start a gym, because they like to work out. They start a restaurant, because they like to cook. These are some of the most common pitfalls when starting up a business.
In most cases, first time founders figure out that the marketplace is a beast of its own and it doesn’t react as they expect.
People don’t fill their gym or restaurant, just because the founder is passionate about working out or cooking. People remain indifferent to their business that is based on a brilliant idea.
After a while, those businesses can’t sustain themselves anymore and join the majority of businesses that close down in their first few years.
The Critical Factor in the Success of a Business
The critical factor in the success of a business is not the founder’s passion. It’s not how brilliant the underlying idea is. It is demand.
If there’s demand for what you are offering, you have a business. If there isn’t any, you don’t have a business. It’s as simple as that.
That means you have to validate the demand for your business before starting it. A lot of the first time business founders avoid validating the demand before starting it, because they are afraid that someone would steal their idea.
Before You Start a Business
Most of the time, it’s much cheaper to do a survey about a product or service before starting a fully-fledged business. Another way of validating your idea is to build a simple proof of concept or a minimum viable product and to market it.
Even if you don’t invest any money to build your product, you might end up investing a lot of time in it. Finding out that there’s no demand for your product after a launch can be very disheartening. For that reason, it’s better to test the demand or create it in advance before you even start building the product.
How to Avoid a Flop
Building a premium product is a lot of work and it can end up being an unpaid work if you don’t have the demand first. For that reason, don’t hurry to build and deliver a premium product to the market, because you might end up giving it away for free.
If there’s demand, it will show up in the survey and in your initial marketing efforts. If it doesn’t, it’s a big risk to start a business on that idea, because you have to create demand yourself through marketing in that case. That can be very costly.
One way of finding demand is to research public data such as Google Trends. If you plan to start a content marketing business, you can check the number of followers in certain tags in Medium, which indicate the demand to certain topics.
Once you spot a high demand to a certain product or service, you also need to research the competition. How many other businesses provide products or services in that niche? A high demand, high competition niche can be less profitable than a medium demand, low competition niche.
Finding a profitable niche is a whole different topic. Read the post Value Is in the Intersections of Niches, Sectors, and Markets for more about that topic.
Create Demand in Advance
You can create demand in advance by building an audience via a blog or a vlog. Blogging or vlogging might seem to be a lot of unpaid work, but they create value by building an audience for you, if you avoid some common mistakes.
Building an audience before the product also works as market research. You can see which niches have a higher demand. Your audience might also demand products or services from you that you haven’t thought of before.
When I restarted blogging a few months ago, I used to write about a wide range of topics including finance, investing, and cryptocurrencies. When I looked at my stats, I realized that my posts in those topics didn’t gather as many views as my posts about entrepreneurship. So, I quietly stopped writing posts in those topics, even though they were topics I enjoyed writing about.
Most first time business founders start a business based on their passion or an idea they fall in love with. The success of a business isn’t determined by the passion of the founder or how brilliant an idea is. It’s determined by demand.
Detecting demand, testing demand cheaply in the marketplace, and creating demand in advance are entrepreneurial skills that are critical to business success.