Evaluating and being Realistic?
We all have that next million-dollar idea. Whether it’s for your existing business, an extension of that business or an entirely new venture, you need to answer this question: “Can I make money from it?”
If I could answer that with 100-percent certainty, I‚’d be heading south for the winter. But since I’m not, I want to give you the tools to determine this for yourself.
Honest Feedback
I bet when you told business acquaintances and friends and family about your idea, they all thought it was great. If not, you are lucky to have honest friends.
When evaluating your idea, find someone who is brutally honest and who understands the idea and your industry. You want the truth; not comments designed to make you feel good. Remember: you are spending money to develop this idea, so let’s make sure it’s plausible.
Research
If your cynical friend approves, dive into some research. Google it and see what the competition might be, even if it’s a niche idea that you think no one else is pursuing.
Let’s say you‚Äôve developed a unique and innovative auction site. You need to see what the big dogs like eBay are doing. Just because you have a slick new system, that doesn’t mean people will start using your website.
You probably will face two problems: 1) People already know what they can do with ebay.com; 2) They will think you provide the same service or product regardless of what you tell them. Then they still will use eBay!
If your Internet search didn’t uncover any major websites, see if there are small ones that turn up in the depths of Google, you know, the search results on about page 50.
Are there websites that are similar to what you are trying to do? If so, ask yourself why a potential competitor website is buried in the search results. Is it poor marketing; is the idea not sellable; is the website just plain ugly? There can be a multitude of problems.
But if you look closely, you can figure it out. If the website looks like it is a failed business, call the owners. If they’ve failed and given up, they will most likely tell you why and what they should have done differently.
Can your idea make money?
You can have the greatest idea, but if you can’t make money or get the backing of a venture capitalist in hopes of making money, you had better stop now.
Getting too attached?
At this point, you are probably getting emotionally attached to your business idea. Step back and look at the facts. It’s easy to become nonobjective. It’s like your child. I get attached to projects and ideas, too.
Figuring out your revenue model
How will your Internet idea make money? If you are selling a physical product or the software as a service model, then it is fairly clear.
The Internet is a global market. You need to compete with price, service, unique product and innovative marketing. It’s easy to visit many websites to search for a cheaper price or similar product or service.
Making money from advertising
Let me be clear: you cannot get rich on advertisement powered websites! Those who do are exceedingly rare. Advertising revenues vary anywhere between a penny per click to a dollar or two if you are lucky. Depending upon your content, layout, ad effectiveness and about 100 other factors, you can range from a click from one in every 200 visitors to one in every 2,000 visitors. It’s really a guessing game.
You might think if you can get 0.01 percent of the market to visit your website, you’ll be rich! But start by doing the math. It will take a lot of visitors to just maintain your website. Now if this makes sense and you have figured in all the technology, web developers, IT specialists, marketing and legal expenses then your business may succeed.
Marketing
Many clients think, “Build it, and they will come!” Not true. There are more than 215 million websites on the Internet. That’s a lot of noise to cut through before someone finds you online.
Look at your current business website. You market and advertise your business to get 100 or maybe a 1,000 hits a day. Now apply this idea to your business idea. You can see this is a big problem.
What is your marketing plan?
Developing your marketing plan requires a savvy, and creative marketer to develop a strategy to launch your project even before you build your idea.
Your marketing plan doesn’t need to be set in stone, but you should have a good plan. Don’t plan on producing a viral effect! That is a risky strategy, and there is no way to determine your success rate.
Ideas with a regional base
A regional website, of course, must have high relevancy to your location. If, for example, you are a local news organization, most website visitors will live within 100 miles. With that knowledge, evaluate how you will market your website locally.
It can be lucky for you that you live in Omaha where many products are tested before they are launched nationwide. Many products are tested here because of Midwest’s even blend of demographics.
If the product works in Omaha, it will most likely work everywhere else. You need to find out how much effort, money and time it will take to build a reasonable customer base. Don’t start national; start local! It makes it easier to control your website and learn from it.
Extending your brick-and-mortar business
Extending existing businesses are generally the most successful ventures. Just make sure it’s a natural extension of your business and not a spinoff into an unusual product. The best ideas usually offer a competitive edge or a valuable service to help build customer loyalty.
These ventures are more successful because you have existing customers. They already know and trust you and are more likely to buy your products.
In addition, your expectations will be more realistic, and your financial estimates will have a far less margin of error than trying to create an entirely new Internet business.
One step at a time
Many aspects of developing an Internet business are similar to developing a business plan for a brick-and-mortar venture. And many of these Internet ideas are turning things on their head as compared to traditional business structures. Don’t let this discourage you or become overwhelming. Take it one step at a time.
There are hundreds of resources on Internet business development. Make sure you take advantage of them before spending your hard-earned money.
Joel works with entrepreneurs and small businesses to plan, develop and nd resources to help them develop their Internet venture and provide a better chance of success on their journey.