On my Business Owners and Entrepreneurs – Transition Guy Podcast we tackled the issue of knowing that you have a good business idea.

Let’s look at some statistics. Between January and March 2022, there were 205,171 new incorporations and 150,810 dissolutions in the UK. Generally 20% of new businesses don’t make it past their first year, and a staggering 60% go bust within their first three years. Is this because they didn’t have a good idea to start with? Often that isn’t the case, it is actually because they don’t know how to run a business. However, if your idea isn’t that great to start with then you are at a much higher risk of failure. It is important to really think through your ideas. How do I know I have a good business idea? The answer is simple: Does your business idea address a want, need or desire in the marketplace?

Does my business idea address a want?

Want is something where people are prepared to part with their money for. Maybe it’s a new webcam for instance or a new piece of clothing. They don’t necessarily need it, but they want it.

Does my business idea address a need in the marketplace?

A need could be something like a plumber, electrician, a service or need that basically we can’t do without.

Does my business idea address a desire in the marketplace?

Desire is completely different to want. It is more of a luxury want as opposed to a normal want. It could be the difference between an Apple Watch which has metrics and a Rolex watch for £50,000 which is more of a desire piece.

Can you make money from your business idea?

Once you have ticked at least one of the want, desire or need bosses you need to ask yourself a second question. Can you make money from it? Most people start a business because they are passionate about it or they really enjoy it. However, regardless of if it is your passion or not – you must be able to make money from it.

How saturated is the marketplace?

Consider what marketplace you are going into. You also need to consider if the marketplace is saturated or crowded with your product. That will determine how much potential money you can make out of your business idea. If it’s a really crowded space what’s your point of difference going to be? Competing on price is not normally a strong enough point of difference. It usually signals a race to the bottom with the person with the least cash going bust.

Consider how you will execute your good business idea.

Most good business ideas don’t fail because they are bad business ideas but because they’re badly executed. Most people who start a business are not business experts. They have never been taught business and they don’t understand the fundamentals of it. Aspiring entrepreneurs must learn how to sell, how to market and the finances of your business.

If you want to discuss your business idea – get in touch.

“Remember, failing to learn is learning to fail.”