How to Choose a Profitable Business Idea

Choosing what business to start can be challenging and stressful, and in the end, if you choose the wrong idea, your business is likely to fail. The initial excitement of starting a new business may get you to the point of launching, but profitability is what will keep your doors open. 

Starting a business is hard – it takes an incredible amount of  time, energy, effort, and financial investment. And the profitability and overall success of your business will depend on the quality of your business idea.

So, how can you know if your business idea is good and will lead to profitability? While there is no fool proof method, there are five important filters you can use to assess your business idea to help determine its likelihood of success. 

#1: You’re Passionate About It

With every business idea you must be honest –  are truly passionate about this idea?. If you are not excited at the thought of working in that industry or with the clients or customers that business idea will attract then you must move on to another idea. As an entrepreneur you will probably spend more time working on your business, with people and your customers, as compared to any other part of your life. So you better make sure you have the passion to persevere in that field.  If you would not enjoy working in that type of business, then you should not pursue that business idea.The drive of profitability is not enough to keep you going, and you will most likely end up miserable if you chase after money and profitability only. To discover a business idea that would fit your talents, skills and interests, check out our Business Idea Survey. 

#2: Must Meet a Need

The first thing to understand about business is the fact that every business has one common purpose – to solve people’s problems. Your products or services must meet the needs or desires of your customers so they will be willing to pay money for it. The drive for  income is secondary, it is a natural result – and solving a problem is primary. To know if your business idea meets a need, you must know your target market. And you  must also know the problems your market faces and how they want those problems solved. In all honesty – if your customers don’t need your product or service, they will not buy it. Another part of choosing the right business idea is to ensure that the needs or desires it is meeting is not fleeting or temporary – you must  ensure there is sustainability and longevity to the need you are seeking to address. 

#3: Strong Potential For Profitability

People needing or wanting your product is not enough to make your company profitable. You must also make sure the product or service will provide enough of a profit, and you must ensure that enough customers need your product or service to warrant your efforts and production. Tod know this, you must measure the size of your target market to ensure that there are enough people interested in what your company has to offer. Additionally, it is important to identify your price point and do a cost analysis to know how much you will be spending and how much you need to sell to offset your costs and produce a profit. Many entrepreneurs skip this step and make assumptions based on inaccurate information. This vital mistake can result in devastating consequences such as bankruptcy. Although it will require a lot of time and work, it is important that you gain the information needed to  properly assess the profitability of your business.

#4: You Can Provide the Product or Service 

Don’t bother trying to produce or sell something that you don’t know how to do, or you can’t gain the necessary skills and knowledge. Taking a self-inventory of your skills, talents, resources, and tangible assets is a great first step in understanding what you have to offer and what you can provide. Whether it is past work experience, formal education, industry knowledge, personality strengths, your network, or access to start-up capital, you need to know how to leverage what you have to effectively provide your product or service. Check out our free Asset Inventory worksheet to help you identify and understand the value of what you have, and how those assets can translate to a good business idea. 

#5: Support From Mentors

Having a wise, dedicated business mentor willing to invest time into you and your business is invaluable. Seek a mentor’s thoughts, feedback and advice! If people you know with strong business experience and success are affirming your business idea, that is an indicator that you are on the right path. On the other hand, if your mentors are expressing hesitations or  concerns, don’t ignore them. Listen to their questions and advice, and implement the steps and changes they are suggesting. Great business leaders are  willing to modify, improve, adjust or even completely rethink their ideas in the search of improvement and growth. 

This venn diagram illustrates the 3 necessary parts of every profitable business. If you are missing one of these, your business will fail. And once you find an idea that meets all 3 requirements, you must be sure you are passionate enough about that business to work long hours and enjoy what you are doing and the product you are providing. And be sure to ask your mentors if they think it is a good business idea too!

If you need help starting or growing your business, check out our Business StartUp course! Through this self-paced, online course, you will identify your personal values, strengths and assets, and learn what makes a good business idea, how to conduct market research by using our simple and clear step by step market research guide, and even how to write a strong business plan by using our business planning master tool and templates. But that’s not all,  you will also learn how to create a purpose-driven company, how to maintain a healthy life/work balance, time management, goal setting, leadership skills and vital financial management tools. Don’t miss this opportunity! Start today!