Ideas are worthless. Execution is where the business begins. Entrepreneurs run on ideas, but a successful business has to have four critical building blocks.
I bet your idea is brilliant. You can probably turn that idea into a very successful business.
Just remember there are no guarantees in the business. Even with every building block in place, all you have created is the potential for a successful business.
If one iteration of your business isn’t working you can use these powerful building blocks to further tweak the details. Your business has only failed if you quit before it becomes a successful business.
Element 1: Passion For the Solution
Virtually every new business we see popping up seems to begin with passion. Direct selling companies are infamous for pitching passion as the cornerstone of why someone should join their business. Passion isn’t enough.
While passion is an amazing feeling and can often help an entrepreneur push through the hard times, it should not be the driving force to start a business. Passion for a product doesn’t pay the bills.
Plus, it’s hard to maintain a passion for an entire industry or a particular product over an entire career.
If you get tunnel vision because of your passion it’s hard to take a step back and realize you need to pivot. Let your passion come from the happiness your clients feel after you’ve solved their problem.
A perfect example of passion implemented correctly is rentable portable toilets.
The owners of various portable toilet companies around the world are likely not passionate about poop. Instead, they are probably passionate about solving the issue of access to bathroom facilities where none exist.
Consider if the portable toilet companies had tunnel vision about some specific element they invented for the toilet. Then a superior product arrived on the market and the owner refused to pivot.
That portable toilet company would now be providing an inferior product instead of finding passion in the best solution for their client.
Element 2: Product Niche
No matter what your product is, it should solve a problem for your future clients. Increase your client’s pleasure, decrease their pain, and make them feel happy to give you money.
There are no universal products. Successful businesses never think their product is meant for everyone. Figure out who your product is meant to serve. Concentrate on making your product exactly what your ideal client needs.
During the creation process, you should continuously check back in with your ideal client. If you create your product in an echo chamber of loved ones telling you how amazing you are missing a critical research step. You need more discerning feedback.
A chef might experiment a few thousand times and come up with a revolutionary new way to make ice cream. That chef might think their ice cream is perfect for everybody.
However, if that master chef was smart, they would target a specific niche with their new ice cream.
Your product could target a broad demographic like gender or age but it could be a very specific target market. The new ice cream recipe might be perfect for diabetic vegans who want to share their dessert with their dog.
There is always a new more perfect product for willing shoppers.
Element 3: Profit You Can Live Off Of
Even if you have created the most perfect product that solves a huge problem for your ideal client you still have to make money. Every product has a break-even tipping point and a sustainability point.
Add up all your fixed expenses, calculate a living wage for yourself, and add a little padding for good measure.
Once you have that total in mind find out if your ideal client will pay that price. If you aren’t able to find customers who will even theoretically pay enough, then your business isn’t sustainable.
Makers of physical goods are very susceptible to creating products that don’t earn sustainable profit margins. Luckily there are lots of things that can be done to pivot into a successful business.
Reducing expenses, improving processes, expanding market share, and increasing volume can all result in higher profit margins.
Service-based businesses also very commonly charge less than a sustainable price. Clients don’t pay service based businesses for the hours they are working together individually. In fact, they are paying for the years that lead up to the skill level of that successful business.
Take for example a videographer charging $10,000 for an hour of filming. That person might have decades of experience editing footage into exactly what the ideal client is looking for. They might be working with a hundred thousand dollars worth of equipment and software.
Behind the scenes, that hour of footage might take 40 hours to edit into the final product. Plus, that business needs to pay taxes, have insurance, stay current on new technology, maintain a website, hire a part-time assistant, pay commercial rent, keep the utilities on, have their kid in daycare, feed their family, and God forbid take a vacation.
Element 4: People Paying You Money
It might seem beyond simple that you need paying clients to have a successful business, but you would be shocked at how many entrepreneurs never make it to this step.
Remember it is all about the execution.
Your first sale is etched in your memory forever. By the time you reach your tenth sale, you feel like things are clicking. And they are. You took a real-life person’s problem and you solved it.
Keep people at the forefront of your decisions. Paying customers are going to provide feedback to improve or expand. Follow the trends of your existing paying clients to ensure your successful business continues.
For many businesses, your first clients will be friends and family. Maybe your business is handmade soap. All your first clients tell you how amazing your handmade soap smells.
Unfortunately, none of them tell you that it crumbles apart super easily making it impossible to use more than a few times.
After a few months, you start to wonder why none of your first clients have purchased from you again. Furthermore, you realize none of your clients have come from happy customer referrals.
Those silences are your customers giving you valuable feedback.
Potentially Successful Business
- You have found a problem you are passionate about solving.
- You have created or found a product that can solve that problem for a select niche of people.
- You have done the math and think you’ll be able to make a profit.
- You have people paying you actual money.
Congratulations! You have created a potentially successful business. You see, there are still a million things that could go wrong.
Starting a successful business is hard. But running a successful business once it becomes successful, that’s fun.
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For 13 years Veronica Hanson has made a living using passive income streams. She teaches clients how to leverage their current situation into crushing debt, traveling the world, or retiring early with her business Vacay Visionary.