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5 ways to determine if your business idea will flop
There are plenty of statistics out there to look through when you want to start your own business. One of the big ones is that more than 75% of startups will fail within their first five years of business. This is a statistic that might seem unrealistic, but it's not, and I've seen plenty of startups crash and burn because their ideas weren't that great to gain attention from anyone.
When you have a business idea, it's always a good thing to run it through a checklist of things that might make or break it. You'll need to know if there is a demand for your product if people would be willing to pay your prices if you can gain attention from investors if your product will crash after a fad dies out, and how many businesses have already tried what you're about to attempt. If you can get that information before starting, then you'll be in better shape to know if you should invest your own time and money into a business concept.
There isn't much demand for your product or service
One thing you need to focus on before starting your own business or selling a service is if there is a demand for it. If there is a high demand, there will be a lot of competition, and that's a good and bad thing at the same time. If there is no demand for your product or service, there is a slim chance you will make a decent amount of money, but you could also be the authority within that area in a much shorter timeframe.
The idea of jumping into a difficult field isn't the most appetizing thing a business owner will want to do, but getting into a field with no demand is even less appealing. At least with high demand and high competition, you will still have a chance to bring home the bacon lol.
People will never pay you what you want to charge
If you're thinking of charging 5x what your competitors are, and you're a startup, you better have the best sales team on your side. I mean, you need a sales team that could sell holy water to the devil if the opportunity ever arose lol.
Think about it, you are going to compete with plenty of people around the world who are all trying to do the same thing as you, and that is making a sale. If you have a superior product or service, that's amazing, but the fact that you're charging so much will push away a lot of potential buyers.
Know your competitor's pricing, and you will know if you can enter into the niche with a fighting chance. Remember, you're a startup, and that means you don't have any reviews or testimonials yet. You'll be going up against businesses that have had skin in the game for years, and I'm sure they have a great pricing structure.
You can't get an investors attention
One big red flag for me is if I have a unique idea, and I can't get the attention of an investor. I know that not all investors will throw money into any industry that shows potential, which is why I only target digital startup investors, and I tend to have a better chance of obtaining capital.
What you should do is get the attention of an investor, get them to sign an NDA, then pitch to them what you have in mind or what you already have going on. The more profits you have coming in already, the more likely you'll pique the interest of an investor, and the more likely you'll obtain funding. People can still get an investor to come on board if they have a concept they're looking to run with, but it's much more difficult to convince the investor, and that's why you should always have some profits rolling in before pitching. You can always talk to a few investors to see if they've invested in similar ventures, don't give away your entire plan, and you should be golden
Your product or service is based around a fad that could fade out
One thing I hate seeing is when a startup thinks they're going to become billionaires because their current business is taking off. The problem is that the business is revolving around a fad, which tends to die out quickly, and I'm sure you understand that when something dies out, then the profits dry up. The only good thing about jumping onto a fad and profiting is the money can then be re-invested into something that has a longer chance at life. Use the fad, run it until it dies, then take those profits and start something substantial that will continue to bring in money for years to come.
Many businesses have already tried and failed at the same thing.
If you think you can succeed where others have failed, multiple times at that, then you're probably not the smartest person in any room you go into. Sure, there's like a one in a million chance that your idea could be the one that breaks the mold and does something different where others tend to fail, but I doubt it.
You need to look up who your current and past competitors were to see who is flourishing and who has closed up shop. If there are dozens of businesses that have closed their doors, or altered their entire business plan, then you might want to switch gears and target something else. You'll be fighting a losing battle, and even if you win once or twice, it will take many man hours and a boat load of cash. Don't try to prove others wrong when they were also trying to prove someone wrong. Do your research, don't jump into a dead idea, and figure out what works for you.
Knowing if your business idea will work from the start is what a lot of startups should have been doing, but they're not, and that's one reason 75% of businesses fail within their first five years. You need to know your audience, know what they're willing to pay, talk with investors, avoid fads, and never jump into something other people couldn't succeed in. If you can follow those simple rules, you should avoid most of the risk that comes with a startup business
Thanks for reading
- Tommy Carey