How to decide if you have a good business idea (and whether to stick with it)

I've been working for ca. 33 years now. The last 18 years of which wearing the entrepreneurial hat. During that time I have started numerous businesses, some succesful and many - really many - not.

In fact most of the business ideas I played with failed, mostly because they didn't pass my internal tests to assess if I should continue investing my time in them.

As deciding whether we have a good business idea is so difficult I thought it might be useful to share my approach in the hope it helps you in your own journeys.

As with all my posts, please remember to take them with a pinch of salt as these are approaches that I have finetuned over time for my personal style and character and so work well for me but may need finetuning for your own personal circumstances. Take these posts as inspiration rather than "how to" guides.

... as as always, I have added totally irrelevant pics from my recent work travels to make you completely envious. Or to inspire you. You can decide.

Ok. Got your coffee and sitting comfortably?

One in a a hundred

Publicly you might know a few of the businesses that I've started or co-started. A healthcare company that became a case study used by MIT, Harvard, Stanford, etc., a tech company that was featured by NASA, another company that runs the online academies of over 413 cities and organisations, etc.

But what you do not see are the hundreds of business ideas (sometime they are standalone business ideas and sometime add-ons for existing businesses) that I look at, test and then quietly drop without much fanfare.

But starting (and growing) a company requires a lot of time, energy and effort (let alone capital, though much less than people think):

• So how do I go through so many businesses and still manage to stay standing?
• How do I decide which ideas to pursue and which not to?

My first trick: learn about the dynamics of falling in love

Whenever we "discover" an idea it helps to know how we are wired as human beings. As much as we would like to pretend to be rational and logical and all that, we are very likely to start developing biases and preference, often very similar to what happens when we fall in love.

When we fall in love:

• We can't really see the faults in the object of our love
• We fantasise about all the positive long term scenarious
• We get a chemical kick inside our body (think lust :-) that puts our energy into overdrive, a level of enthusiam and energy that is not sustainable in the long run
• People see how much we are in love and generally don't try to be be negative about your new found relationships. This is a lovely trait and means you are surrounded by people who like to see you happy, but not ideal regarding your business

I think you can draw your own conclusions from the above for your own circumstances. For me personally I use that awareness to remind myself that I will be a little blinded by that initial falling in love so that I might not see my new idea in perfect clarity.

It does however get much easier over time, kind of similar to someone who has been in many relationships.

People who have been in many relationships are a little more clear-eyed about the cycle of emotions they will experience. They approach the new flame with a little more perspective. That doesn't mean you shouldn't enjoy the feelings, but just be aware of them and that they may not last with the same intensity that they started with.

This is in part why the evidence shows that the most succesful entrepreneurs are those who have a lot of experience behind them and have been around the block multiple times and know how to separate the emotional buy-in from the rational perspective that allows one to make better and less emotional decisions.

A little hack: surround yourself with retired business people as mentors or your informal board... 

they can add incredible value in getting perspective during a very emotionally exciting period        

Listen to the hype...

When we fall in love (with a person or a business idea) or bring to market a new service or product I think the Gartner Hype Cycle is an immensively useful tool to keep a little perspective. Am not going to explain it in depth (there are tons of awesome short youtube clips about this - keep in mind the cycle can be drawn around many different industries) but it essentially is a powerful reminder of how a business often develops and how it goes through various phases, incl wild enthusiam and excitement as well as a inevitable falling out of love phase before slowly taking the form of a real business idea.

How I use it in my entrepreneurial life...

One of my strenghts is that I've learned how to compress the timeline axis to literally a few days or weeks. So when I look at any idea I run it through this model to test a few thoughts, specifically:

• Once my initial love for the idea cools off, will I still have the energy, time, interest and desire to continue investing resources in this?
• Do I have enough resources (time and money) to carry this idea past the through phase?
• Am I the right person to grow it and do I have a clear and practical idea of how? If there is one thing I've learned is that starting something is EASY. Getting that initial traction is EASY. Growing it is HARD, especially past your circle of friends and acquaintances that generally support you at idea phase.

An idea may be a stepping stone to the next one...

Something I've learned which has helped me enormously is the realisation that whatever idea I have might not be the final idea. So I welcome it, test it, tweak it and have absolutely no issues with dropping it safe in the knowledge that the processing I just did might turn out to be the foundation to build on for the next idea. So I am not looking to get married to the idea but rather to go out on a date and see if there really is a match. This approach also makes you less reluctant to drop an idea which is enormously important from a psychological attachment perspective.

Dating analogies goes rogue...

To the risk of taking the dating analogy too far, one date isn't enough to know for sure if she is the one. So I often introduce my idea to friends and my network, sometime one on one and sometime seemingly more formally but launching a free website, a bit of publicity (a few posts etc) to test how people react to it. Do ignore my date? Do they compliment me on the excellent choice of companionship but that's it or do they show a real interest (the difference is sometime measured in something like "York: I saw your post about XYZ. am very interested as we were thinking about this. Can we have a discussion and see if we can't work together?"

But what if someone steals my idea?

Now... some of you might be afraid to share your ideas to the wider world. And that's ok to have those feelings. One day you will lean that how little value ideas carry and how much execution matters. I can't tell you how many times I've shared how our model at The StartUp Tribe works for others to copy who then never do. And even if they did, do you think once you start growing your competitors won't copy you? Your ONLY defense is clients... make that, HAPPY clients.

YOUR COMPETITIVE MOAT IS THE SERVICE YOU PROVIDE TO YOUR CLIENTS.

(the good news with the above is that you can technically launch me-too services that already exist and just deliver them with much better customer service and support).

Sometime your idea will tun out to be really bad (like my deciding to buy this mask to wear during zoom calls)

But what about persistance?

There is a ton of stories of entrepreneurs who stuck it out and then succeeded. Don't read them. They are very deceiving. The reality is you'll go broke - financially and energetically - before you'll make it through the through from the graph we discussed earlier in this post.

Depending on your industry, sometime the adoption timelines require you to stick around with your service offering as it just takes TIME for clients to trust you and buy into your offering. However, most of us will not have the resources to pay the overheads to just stick around for the time it takes (think B2B sales cycles of 11 to 18 months or more).

If you absolutely believe in your idea and are stupidly convinced that IT WILL TAKE OFF one day then I get you. I had the same thing with the StartUp Tribe. I had a gut feeling that it would take off but was also acutely aware that I might be wrong in terms of how quickly it would (experience pays off... no business takes off quickly). So when I set it up I made sure that I would limit what it would cost to run it each month and that I could afford it from earnings from other sources (this approach actually is now so ingrained in our way of doing that we have possibly the lowest operational costs of any online academy... because we are careful with each and every cent we spend).

But let's say you want to stick with your idea...

Here's how I decide if to stick it out....

1. How much of my businesss idea can be setup so it appears "real and ready" with once off effort vs continuous effort? For example, I might decide that investing 3 months intensive energy and time is a good investment to get the idea up and running and that then there is literally very little running costs to it. I did this with the StartUp Tribe. Took me 3 months of hardcore time investment to setup the academy, create the courses and get to a few thousands of people signing up. Then I just parked it there and once a week or so did a post etc just to keep it alive in the public eye. It took 9 months for a contact to approach me and discuss a way to use what we have in their community. It took another 9 months before other cities saw this and asked what it was and how they could use it. 18 months from idea to a little real traction. But it was 18 months at very little financial expense (apart from my time, real expenses where around USD 150 a month).
2. I constantly listen to what people I chat to are saying and then tweak my description of what I offer accordingly. Today we have 4 very clear value statements (here's an example if you're interested: https://www.thestartuptribe.org/pages/municipalities ) based on WHAT our CUSTOMERS told me the value is, and NOT what I thought it was.
3. I am hyper aware of the energetic and financial costs of committing to adding features. Much easier is to list all the features in a trello board and keep them there as a roadmap to customers to show them where your product will go over time (there are awesome free sites where you can create public product development roadmaps that can be shown elegantly to customers). Resist at all costs the temptation that "if only I had this more people would come"
4. I religiously only look at things that can be scaled. That doesn't mean they will. But they need to be technology enabled. So for example, I stay clear of doing live webinars with experts in our 417 academies around the world as it would require enormous time in coordinating, promoting and managing these events (though I am warming to the idea of evergreen webinars... google it!). Do things that are easy to launch and test for traction and interest.
5. I spend - roughly - 5% of my time on the product/service and 95% on the access to market challlenge. To be very clear: the 5% puts us really at world class standards (today we are ranked #1 on google for our 417 online entrepreneurship academies - try google for example Cape Town Entrepreneurship Academy), but having a great service or product in this day and age is almost a nice to have. You need to invest in your go-to-market strategy. This is very personal by the way... I come from a philosophy that believes in the power of collaboration with partners to devleop long term powerful win-win relationships vs transactions so partnerships for me are a natural place to go to and thus I look constantly for partnerships. In your case you might have different preferences.

Learn to love variable overheads

Most of my businesses have very small margins. That's in part because I want to work with our clients for a long time (if you understand how expensive and time intensive it is to acquire customers you'll understand this really well) so have a very tranparent approach with them, including also setting limits to what we offer so that we don't have to build in too much buffer for the occasional requests that are not our core and can rather discuss the pricing of these individually). These pricing models also make it easier for clients to renew their relationships with us.

This means however I need to be very strict on our costs. Adding features, services etc adds the fixed overheads and managerial complexity of delivering the service (plus makes it harder to train people to take over specific roles and responsibilities). So my approach is to keep things ridiculously simple and clear and easy to handle so that a request from a client can be handle perfectly, professionally and most importantly quickly by anyone in our team. Quickly means they spend less time on it.

I'll give you a practical example:

Cients used to ask us for reports of how the academies are doing. It was painful work to take all the data from CSV and write a report. Painful and time consuming and therefore expensive.

Until we actually sat with a client and explained our challenge. They said they would actually prefer the CSV file as they then can do their own analytics and shape the data according to what they wish to see. Plus they said they can then hire local companies that they already work with to do surveys and impact measurement assessments. These are local suppliers that they know and work with already. We tested this with other cities and it turns out cities love this approach. We probably could make a lot of money from reporting and impact studies, but it is not a business that to me is scalable plus requires me to ramp up our fixed overheads, let alone the challenge of doing this across all 27 countries we operate in.

The clients helped us simplify our offering so that we can focus on what we are brilliant at. To me that was an eye opener as I often thought I needed to deliver an all-encompassing solution.

Which brings me to my final point...

Learn where your idea fits in...

I can't stress this enough. Only in the rarest of circumstances will you develop a solution that will just attract people from scratch to you. In most cases you will need to fit your solution in somewhere in a existing excosystem of solutions and challenges... This is much better news than it might appear.

We learned that cities need a easy to deploy solution to support their citizens at scale but they didn't have the budgets or interest in developing a total program. So we develop one program and licensed it to the cities to use. And then moved away from a pay per user classical "make investors rich" approach and towards a "unlimited users" approach that the cities love (if you know anything about adopton of technology you'll know that unlimited users is not nearly as risky as it sounds).

We also learned to partner the organisations that have existing relationships with corporate clients and want to add a service to help their clients quickly but don't have the budgets and expertise to develop it all in house. This was less a product of our insight and more of lots of random conversation and a few press articles that were read by the right people (thank you to the amazing journalists that took an interest and believed in our work! Eternally grateful).

Knowing where you fit in also allows you to know WHO you need to specifically speak to, their pain points and how to position your vaue. Imagine if you are growing vegetables that end up on the plate of a restaurant. Do you sell them to the waiter or the chef? Know who the person is who needs it.

A little hack: if the above feels a bit daunting remember to ask for help. Get someone on board who has a lot of experience and networks and can help. Just remember to bring in someone who has a real practical understanding of how startups work and isn't just a corporate person who thinks they understand startups.

What about passion?

Amazon started as Amazon and today is still amazon, right? Wrong (sort of). Amazon today is a very different beast from what Mr Bezos envisioned at the outset - at least in terms of income generation... think their AWS offering as example). Yet the logo and company name is still the same. The point I am trying to make here is that the big brands we know so well create the deceiving impressions that the company started and grew to what it is today in a sort of linear fashion. The reality is that companies - behind the branding facade - are in a constant state of change and re-invention. So just like them I invite you to welcome the winds of change in your business ideas. Passion certainly helps, but in my experience the biggest superpower you can develop is the ability to listen - really listen - to your potential partners and customers.

Listening superpowers

Trust me... listening is not easy. In some ways I am quite stubborn (as the wonderful Ferdinand Mühlh?user ?????? discovered during the amazing Founder Institute Berlin / Germany hardcore incubation program I graduated from earlier in the year). But listening is probably the best skills ever... What makes an amazing entrepreneur is their ability to turn what they heard into something practical that can be offered. But I digress... Let's go back to the listening bit.

If "Listening" is too fluffy for you, here are some more practical ways I go about listening that might help you:

1. Understand how you process info. We are all different. I am a voracious consumer of information and knowledge but it takes me a long time to really digest something and understand what I actually heard. Knowing that I am wired like that I welcome all sorts of inputs from everyone but do not express opinion on it or act on it for a while until my mind has had the time to really internalise all that stuff I learned and then create connections in my brain.
2. Get out there. Test different variations of what you do with different people to see what sticks. More importantly once you put a variation (e.g. it could be a different way of explaining what you solve) then shut the (swear word) up and listen to what is being said and not said. Do they engage with you? Do they probe? Do they want more? Even today when we have a pretty good idea of what we offer we are constantly trying new ways of presenting it. I think I have 160 different variations of landing pages for the academies that we offer.
3. Turn what you heard into something you can show them. We are a digital academy so it is quite easy to change things. In other cases maybe not. But nothing sells easier than showing the client examples that they can play around with around what you understood from their discussions. I can't stress this enough. See next point.
4. Proposals (pdf and powerpoints etc) are almost universally the worst you can do. If your business allows create things that your clients can see, even if it is just the landing page to the service they might buy from you. Let the clients SEE what you mean vs letting them read a long description of what you mean in a proposal. Once they see it they can speak to it. if you're writing proposals and presentations you are not listening but talking.
5. Listen to everyone but listen to what is being said and not who is saying it. One problem in today's age is that we idolise people and then elevate everything they say equally. Learn to take everyone anyone says and decide on the merits of each statement what is relevant, not relevant, useful or misinformed, etc. I think in some circles this is called critical thinking. But this approach allows you engage much more proactively with people. My long-winded point here is to learn to listen proactively and critically.
6. Remember timing... sometime what you hear now will only be useful a year from now. Allow knowledge from all avenues even if you can't quite figure out what to do with it now. A nice walk in the fresh air will do wonders for your brain's ability to create interesting new connections and realisations!

The rough seas of business

Hope the above helped you in navigating the sometime difficult and temperamental seas of entrepreneurship! This is an analogy I picked to justify my posting this pic I took in Lisbon last week visiting the codfish museum.