As I write this, during the worst pandemic in 100 years, in the grips of a severe economic slowdown — let’s all hope it’s just recession, not depression — people still want to start new businesses.
We still come up with new business ideas. Some ideas come from the new problems we are experiencing, some are long-standing good ideas, some would work now, and some would work only after the economy reopens and recovers. These ideas still deserve a process to help sift and sort through, as you weed out the bad ones, and pull up the best ones.
This post reviews the fundamentals related to dealing with new business ideas, crisis, or not.
The goal is good guessing, not certainty.
Before we get into the specifics, we need to remember one essential truth related to new business ideas: you have to guess. You don’t get to be sure, ever. Starting a new business is risky, and no matter how much data you get, no matter how well you plan, you still have risk. And, furthermore, you’re looking at the future, so you are still guessing.
No amount of research or data eliminates uncertainty. You can create prototypes, do surveys, even take initial orders, but you can’t fully anticipate what’s going to happen if and when you actually launch and start selling. Uncertainty is part of the realities of startups. Entrepreneurs live with it.
Therefore, from the outset, don’t aim for being sure or certain. Aim for as strong an educated guess as you can make. Aim to reduce uncertainty, not eliminate it. Educate those guesses as much as you can, but don’t expect to eliminate them.
Step one: Define success
Start with thinking through what you want from your business. Maybe it’s financial success, maybe freedom and independence, maybe just a way to make a living on your own terms, or maybe you want to change the world. Some want fame and fortune like Bill Gates or Jeff Bezos.
And in these times of crisis, some want to get through the financial crisis caused by the pandemic and make a decent living to replace the jobs or business they may have lost. It makes a big difference to what you look for and what you want to test.
It’s not like the questions and the process are different for each variation on what’s considered a success. You should just keep this in mind as you go through the other steps.
Step two: A step back and a critical look
In the real world, you don’t go straight to prototype, surveys, market testing, or whatever. You take a step back from your idea and give it a good hard critical look. You realize that good ideas are like fly traps, they catch you and draw you in. So, you fight the urge to fall in love from a distance. You pull away and review it critically.
The first big question is whether or not people really want what your new business will sell. You’re probably in love with it. You’d buy it. But can you separate your own view from inside the idea from what it looks like to everyone else? You have to start by trying to see it objectively.
Take the leap, by force of your own will, to look at the product or service like an adversary, or devil’s advocate. Accept that there’s a fatal flaw that you’re not seeing, and look harder for it. If you have access to some people you can truly trust, who have some insight into the area you’re considering, then ask them. But be careful. People will tend to tell you what you want to hear. That’s human.
So pose your questions in a way that frames the problem in the negative. Ask them to please tell you what’s wrong with it? What are you forgetting? What are you not thinking about, or not seeing, that they see?
The goal here is the “aha!” factor. Finding out what you’re missing, that others see. Counterexamples, competition, all the possible reasons why not. And this is the first big abandonment point. If your idea doesn’t survive this test, then it’s a no-go. Consider it tested and failed.
Step three: List what has to happen
Make a list of concrete specific things that would have to happen, with an estimate for each of what it would take in time, resources, and skills/expertise. Don’t list everything; just a few major items, the essentials. We call these milestones.
For example, in a retail store, the list might include writing an initial business plan, choosing a location, fix-up and fixtures, signage, initial stock, staffing, and marketing your launch. For a software-driven online business, the milestones might include an initial business plan, getting the right people on board, website specs, design, first website launch, marketing launch, and so forth. Whatever business you’re considering would involve some major milestones.
If you can’t make that list
If, however, you can’t make such a list, then that’s an important input. You were testing a business idea. If you don’t know enough about it to make this list, you have a dream but not a real business idea. You have to find out a lot more.
You either partner with somebody, or take a job in that industry, or let it go. We all have dreams. A business idea is something different. Here too, consider it tested and failed.
Or, once you have the list
Once you have that list, then stop, breathe, and think. Can you do it? Is it reasonable? Ask yourself the following critical questions:
Regarding you and other people
Do you have the knowledge, experience, and skills you’ll need? Can you do it yourself or do you need some other people? If you do need others, can you identify the skills and experience those others need to have? And if so, can you find them? Can you get them to join?
Regarding financial resources
Just a broad-brush at first, but try to think through what financial resources you have and what level of financial resources you might need. You should know what you have. But you’ll have to guess what you might be able to access. Make it an educated guess.
Start with whether you’ll need tens of thousands of dollars, hundreds of thousands, or millions. If you have no idea, you’re not ready yet. In idea testing and startups in general, we don’t get the luxury of not having any idea. Some idea of the general scale is required. For a simple quick view, you might learn more about startup funding. And look as well for articles on business loans, angel investors, and friends and family funding.
Regarding any other doubts and contingencies
Be honest with yourself, and skeptical too. If you can’t see these milestones being accomplished or don’t know how then be careful. Maybe this means that your idea just failed the test.
Still there? Passing so far? Do a lean business plan
If you can, then you’ve now broken your uncertainty into more manageable pieces, and you’re over your block. Get going. Develop a lean business plan. It’s not a full formal business plan, not even close. It’s just a page, bullet-point lists, and tables, for yourself. Write down for yourself and your early team the key bullet points of strategy (about the problem you solve, why you solve it, why you, strategic focus) and execution and tactics, and essential projections including sales forecasts, expense budgets, unit economics, and cash flow.
Use the lean business plan to test whether you know enough to go further. As with your list of major milestones, if you can’t do this, then you aren’t ready. It may be a good business idea, but you need more help to be able to decide. Turn to people you trust to help you flesh out your plan.
Don’t just hire a consultant; you need to do this first basic lean business plan by yourself. But if you aren’t sure where to start, you can download our free lean plan template or get step-by-step guidance with a tool like LivePlan.
Conclusion: a good decision based on educated guessing
Don’t aim for certainty. Understand that in doing a new business, you don’t get to certainty. What you want instead is a truly educated guess.
Don’t be afraid to say no and not go forward. If this method saves you from starting a bad business, hooray.
If you do go forward, understand the risk. Plan well, revise the plan often, and execute.