Nine months ago I created an Android app which helped people plan a business. While I didn’t have a budget to advertise the app, the users of the app loved it, gave it great reviews and shared it, helping the app grow organically.
Recently the app hit 50,000 downloads and out of those downloads, there have been over 10,000 businesses planned on the app!
However, I noticed that the entrepreneurs on my apps were consistently running into difficulties in the idea-generation phase.
Since the topic of business ideas is such a common one, I have written extensively about some of the best-practice ways to come up with business ideas that are right for you. It is precisely at the idea stage that many companies make big, but very avoidable mistakes.
In this article I want to focus on some of the common problems with business ideas, and what the common pitfalls to avoid.
IDEAS ARE THE EASY PART
The overwhelming majority of entrepreneurs who need help with business ideas are first-time entrepreneurs. The reason for that is that there is a very low barrier to entry to begin thinking and dreaming about an idea.
But in reality, dreaming and hoping does not make someone an entrepreneur. Execution makes someone an entrepreneur. Ideas are worthless without execution. To the point we give them away for free on this site. Like the header says, “Ideas on us. Execution on you.”
So naturally, I observe a very high rate of people simply quitting their business ideas once there is no further material to dream about, and once there is actual work that needs to be done.
Part of the reason is that people often dream up ideas that do not take the full picture into account, largely because they do not have the experience to draw from in order to conceptualize what the big picture is for a particular idea. That commonly results in ideas which are simply not a great fit for the entrepreneur.
Often, people do not take their skills, strengths, and passions into account when evaluating their ideas. A good founder-to-idea match should have a balance of all three of these while also avoiding any weaknesses.
For example, if a person loves to cook, they may dream of opening a restaurant. And even though food is a passion of theirs, restaurants require quite a bit of money to open and run until they can break even financially. So if the person cannot raise that money, then this kind of a business is not really playing to their strengths as much as it originally seems. Additionally, enjoying to cook is one thing, but running a restaurant is an entirely different thing — where the owner has to do everything else except cook.
First time entrepreneurs almost never know how to think deeply about the financials of a business.
Let’s take the same restaurant example. How much money does it take to open a successful restaurant? Most people find it difficult enough to count up the costs to start the business.
What is more difficult is to understand how many months the restaurant will be open, but will be losing money on a month to month basis, and how much money it will lose during those months.
But this is not even the most difficult part. The real challenge is gauging customer demand at various price points, while covering the costs to operate the restaurant at sustained long-term profitability.
And those concepts barely scratch the surface of the financial analysis that might be required to manage or run a restaurant (or any other business).
A first time entrepreneur rarely thinks that far ahead, let alone explores this issue with the care it deserves. Which means they’re often faced with ugly financial realities when it is already too late.
IDEA AS A PERSONAL FINANCE SOLUTION
As we just saw in the example of a restaurant, getting into a business you may not understand deeply can lead to a substantial financial loss if you put your own money into it.
That is counter-intuitive to many people because many people see the idea of starting a business as something profitable. In reality, businesses started by first time entrepreneurs have a shockingly high failure rate, and require substantial commitment of money, time and energy. The odds are high are that starting a business might actually make a person’s financial situation worse than it had been before, at least at the onset.
So as we’ve seen, a business idea is very different from actually starting a business. It is fun to dream and think about, but if you are actually planning on doing the business, you must approach it with a lot of care and discipline, and if you are able, get mentors who can help you.