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All Business Ideas Are Not Created Equal: How to Know if Your Startup Will Succeed

Once you exclude my childhood lemonade stands, movie rental businesses, and lawn mowing operations, I have  attempted serious entrepreneurship twice in my life. One time it flopped, the second time it worked out quite well.

If you’re struggling to find business ideas that actually work, perhaps you can learn a thing or two from my story. Here are my two attempts at entrepreneurship:

Startup Idea One: Big, Bad, Brilliant, and Unsuccessful

The first business came about during college, when I launched StageOff.com (no longer in operation) – a website with the focus of being an online talent show. I realized that YouTube was doing well, and American Idol was doing well. If I could combine the two (idea arbitrage), I could be a huge success! While I did a relatively good job with the marketing (getting myself interviewed on NBC, discussed by WSJ writers, and mentioned on multiple blogs), I was weak in two areas.

First, I can’t stand programming! Although I don’t mind sitting in front of a computer to write, any time I have to deal with even the smallest technical element of the online world, I get incredibly bored. Therefore, I hired programmers in India to develop the website for me. The drawback to this was that I had to pay someone any time I needed even the slightest change made.

Second, learning from Facebook and YouTube, I planned to make my millions from advertising. I didn’t stop to think that you need an incredibly large audience to make any kind of a profit from advertising. While it is possible to reach a user base that large, you have to have some sort of financing strategy in place to survive until you make it.

With StageOff I decide to go big or go home. I went home.

Startup Idea Two: Knowledgeable, Profitable, Scalable, and Successful

My second stint at serious entrepreneurship was right after dropping out of my PHD program. I needed a way to make a living until I could find a job that interested me.

This time, rather than trying to start a new business in a field I was unfamiliar with, I scaled up in an area I was already making a little side cash from – freelance writing and marketing.

For a couple of years I had been casually picking up freelance jobs in writing and marketing. My experience in marketing StageOff proved to be a valuable asset in promoting my marketing abilities to others. Meanwhile, my HubPages portfolio, where I had been writing for fun and money, made it easy for potential clients to view my work.

It wasn’t long before I was able to make $50+ an hour writing online!

The benefit of this business venture, as opposed to StageOff, was that I started making money right away. StageOff required an investment of time and money without any guarantee of a return. Meanwhile, I didn’t have to invest any time or money into my freelance business unless I had a client already lined up to pay.

The Two Types of Entrepreneurship

As I discovered from my personal journey, there are two types of entrepreneurial ventures.

The first type of entrepreneurial venture is what I call The Exciting Gamble. The characteristics of this form of startup include:

  1. Starting a business because it sounds fun. In all reality, startups take a lot of time. If you are only launching this business because you think it will be fun, you will have a hard time focusing when reality hits.
  2. Launching a business in an unfamiliar industry. Facebook wasn’t started by a social media expert, it was started by a computer programming nerd. You may be the world’s best lawyer, but that doesn’t mean that you will launch the world’s best restaurant. If you are unfamiliar with the industry, and you don’t hire someone who knows what they’re doing, you’ll soon discover that the deck is rigged against you.
  3. Creating a business that requires a large investment of time and money to be operational. If your business needs 100,000 monthly visitors to be sustainable, or your app costs $100,000 to develop, take a step back. What happens if your concept doesn’t initially peak people’s interest? Can you still support yourself and your business while redesigning it? Many businesses fail because the founders end up under calculating the startup costs by fifty percent or more.

Ultimately, The Exciting Gamble venture creates a mirage of riches and glory, but usually falls flat on its face.

The second type of venture is what I call The Logical Next Step. The characteristics of this type of startup include:

  1. Starting a business in an industry where you are already an expert. It makes complete sense for someone who worked as a hospital recruiter to go and start their own recruitment agency. However, it doesn’t make a whole lot of since for that recruiter to buy out a hair salon. If you are familiar with an industry, you will already know what you need to do to succeed, you will have the networks in place to support your venture, and you will understand the risks involved.
  2. Launching a business that will start making money immediately. Don’t invest time and money into an untested idea. If you can start small, and leave room to grow quickly, you will be far more likely to succeed than if you have to get large before you can actually start making money.
  3. Creating a business that is the logical next step. If a chef starts catering on the side, and realizes that people love his dishes, starting a restaurant would be the next logical step. Meanwhile for a nurse to quit her job to start a restaurant would be completely out of character.

Read about any successful entrepreneur and you will discover a clear pathway of experiences that attributed to their success. If you want to succeed with any business, make sure that you set yourself up to have that business be the next logical step.

When you have the experience, network, and financing to support your idea, your odds of success will be exponentially higher.

What have you seen and experienced in regards to starting a new venture? Is it possible to succeed without any experience in the industry, or do you need to be a pro before you can become an entrepreneur?

Photo credit: here and here

Rob

Rob is enthusiastic about everything related to money and investing. A financial analyst and instructor, he enjoys using what he’s learned from 10 years of studying business and money to help others achieve financial stability. He founded Money Nomad in 2014!

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2 Comments

  1. I think that in terms of e trepreneurship, execution is more important than the idea. A lot of entrepreneurs fail not because their idea is bad but because they couldn’t execute it. The inability to execute may stem from a host of factors eg not having the necessary skills, not having sufficient financial backing.

    1. That’s very true. Execution is a big part of it. So if you can start a business that you have the experience and financing to follow through with, you’ll be much more likely to succeed.

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