Asking the question “Is this a good business idea?” is very different from asking “Is this business idea a good fit for me?”. When I first started out, I only thought about the former. If you actually want to start a business, answering the second question is at least as important!
So how do you find an answer to the question “Is this a good fit for me?”.
Ask yourself: Is it fun?
I found that fun is a great indicator to judge if a business idea is a good fit for me. Also, I like to think about any business idea in terms of two phases. Because once you have an idea, there are only two things left to do:
- create the business (phase 1), by bringing the idea into the world, and then
- run the business (phase 2).
Phase 1 takes time, it takes money, and hopefully, it is fun for you. Phase 2 also takes time, but it should make you money (otherwise it’s just a hobby), and, again, hopefully it’s fun for you.
Combining the idea of fund with the two phases leads to this simple framework for categorizing business ideas:
|Phase 1||Phase 2|
|How much fun will I have?||a lot of fun, because I can spent most of my time creating software||probably less fun than phase 1, because I must spent more time on things that I don’t enjoy as much|
|How long will it take?||months||until I decide to stop|
|How much time do I have to commit regularly?||whatever I decide||high, because I want to provide great customer service and respond quickly|
If you want, you can get more specific: Think about what makes things fun for you and use these as separate categories. For example:
- How creative can I be during each phase?
- Will I work alone or with other people?
- Will I need to be on-call for emergencies?
- How much of the work can I delegate?
But, of course, fun is not a very good indicator of an idea is financially viable. So before you consider starting a business, just because you think it sounds like fun, here are some more things you should consider:
- What is the expected revenue?
- How volatile is the revenue stream?
- How likely is it that you will succeed reaching that expected revenue?
- What is the risk/reward ratio, i.e. the likelihood of success vs. the expected revenue?