Coming up with a profitable business idea is tough. Trying to validate that idea is even harder, and it is often easier to talk yourself out of something than in to something.
Firstly, you don’t have to reinvent the wheel. Google wasn’t the first search engine and Apple didn’t make the first mobile phones – but they did it the best. Don’t be scared away from a business idea because you weren’t the first to it – in fact it would be very rare to come up with a completely new idea. What you will find is as you start developing your business and products, they start to evolve and merge in to different and better products, and that’s where your value lies.
Secondly, I highly suggest you don’t start a business where your point of difference is simply a lower price. All that happens is you will find yourself in a race to the bottom where someone else is willing to operate on zero margins or even a loss! This is currently happening in the data storage space as we see sites offering more and more free space just to get you to sign on with them.
If your business idea has low initial costs and it is possible for you to ‘just try it out and see how it goes’…do it! You have little to lose and potentially everything to gain! It’s unlikely your first idea will be the best one, but even in failing it will stimulate many new ideas, and you will learn so much from the experience which you can put in your next idea.
You also need to keep in mind not just your financial costs, but your opportunity costs – the costs of your business taking up your time (or the opportunity lost you could be working elsewhere). If you are custom making a product, it is going to take some time, so make sure you come out at a decent hourly rate.
An ideal eCommerce product (in my opinion) is a product that has low postage costs and high profit margins. Not all business ideas fall within this criteria but it’s a good place to start.
This also brings in to consideration scalability. As you get bigger, will you be able to keep up with demand? Perhaps not vital early, but something to think about if your ball starts rolling! Paul Graham – a cofounder of the Y-Combinator venture firm – suggests that startups “do things that won’t scale“. This allows you to first and foremost focus on customer satisfaction, then you can find ways to scale as you grow! An interesting take on the subject.
Here is a great place to start, an article by Entrepreneur.com listing “20 questions you can ask yourself to validate and idea”.