Recognizing Profitable Business Ideas

Recognizing Profitable Business Ideas: Introduction

95% of entrepreneurs fail because they make the mistake of thinking they know what their customers want, when in actual fact… they don’t.

Most businesses start as beautiful, ambitious, “entrepreneurial creations” that soon degrade into impulsive, overly-confident landslides that tumble and fall before crashing to a devastating halt.

Many people understand they have the power to start their own business… but what they seldom understand is that their target market does not necessarily think like they do.

Michael E. Gerber makes it a point in his critically acclaimed best seller, the EMyth:

“When it comes to marketing, what you want is unimportant. It’s what your customer wants that matters.”

You need to research your market and cut your own opinion out of the equation as much as possible.

Ed Dale says that around 95% of businesses fail because they don’t research properly or enough. The key is research, research, RESEARCH.

Source: http://www.veer.com

YOU can prevent yourself from committing this mistake by following my 5-step process….

In this blog entry I will show you how you can:

Recognize a profitable business idea
Examine the demand for the solutions to that problem
Find the competition in that niche
Interact with the market and find out what they want
Take action!

Step 1. Identify a problem

For entrepreneurs and marketers, problems are blessings because it’s when we identify and act on them that we succeed. Picking or finding a problem is easy – think about what you’re actively involved in each day, or what you’re passionate about. Think about what makes you tick. What are your talents/strengths? Know a lot about something?

If you’re still struggling, here’s a trick that you can try out – have a look to see what magazines are being printed in a large bookstore such as Barnes & Noble or Borders. If you’re thorough you should be leaving the place with at least 10 potential markets to research.

Yesterday I spent only 10 or so minutes in the magazine section of our local Borders and I found airplane model-building, metal detecting, knitting and clay pigeon shooting magazines that you can bet have a large following (just imagine what the overheads for magazines are for crying out loud).

If you’re taking home a magazine about diets or fitness, then there are literally hundreds of small to medium sized problems that you can solve for the people that read these magazines (how to look thinner, how to burn fat, how to get bigger biceps, what exciting foods to eat that will help you lose weight etc.)

Apart from looking in the bookstore, also look at eBay Pulse, Amazon.com bestseller lists or Google trends – you’ll find what sort of topics are hot and what exact items people had been buying.

Step 2. Determine the Demand levels first

The best methods we have found for researching the feasibility of business ideas is through online keyword analysis. There is an art to this and to keep this on topic, I’m going to save explaining that for another day. What I will do is give you some juicy resources that we have found to be very powerful which you can go away and digest immediately:

Kim Roach’s Google Domination Videos: http://www.buzzblogger.com/traffic/(very easy to understand videos explaining niche market research)
Market Samurai Keyword Research Tool: http://www.marketsamurai.com/(wereally recommend this tool for absolutely anyone researching niche market competition)
Shoe Money’s Extreme Marketing Program: http://www.shoemoneyx.com/(this is a 12 week, free internet marketing e-course)

If you take action and absorb the resources above, you’re literally around the corner from success. You’re going to learn that competition research is all about numbers. Give it your best shot – Market Samurai and Shoe Money’s Extreme Marketing Program have try-before-you-buy features.

These tools will help you find out if there is there a hungry crowd for your business idea, where they are, if they’re willing to pay for the product you’re planning to sell – and more.

If the answers to these questions are positive, only then do you proceed to step 3. If the answers are negative, look for another problem/niche to explore and repeat the process.

Step 3. Determine the Competition levels

Recognizing demand for a product/service is all good and well, but there’s still a big chance that it’s not a viable opportunity because of already existing competition. Basically, you’re going to have to perform some kind of competition analysis to find out if this is in fact worth your time.

The software in Step 2 will help you determine your competitors in your chosen markets, but you must also assess your strengths and weaknesses relative to this competition.

What will it take to beat them? How long will it take for you to establish yourself as “the go-to guy” for this market?

Pick battles you have a chance of winning! Entering a market that has an extremely high competition can crush you instantly – that’s why you are better off finding a niche.

What is a niche?

“A niche market is a focused targetable portion (subset) of a market” – Wikipedia.org

An example of a niche market is taking the market of photography, and targeting all the people that are only interested in wedding photography.

Since public school education doesn’t adequately prepare us for business of this nature, most business startups focus on providing for broad markets such as web design which in fact comprises of many subset markets (corporate websites, personal portfolios, web applications, web conversion tactics, SEO etc.).

What we need to understand when we target niche markets is that we’re going for smaller, more focused groups of prospects that will be much easier to sell to. We won’t have to appeal to a broad psychographic that have different pains and desires - we can just tap into a portion that we can offer high profit margin products or services, whilst taking advantage of a smaller competition.

Think about this – would you rather have a loyal, focused following of customers that you could sell to over and over again with a small marketing budget, or ten times more prospects but hardly any chance of getting them to choose you over your already-established, multi-million dollar corporation competition? If you can afford the latter then all the power to you, but we’re going to assume you prefer the sound of smaller niche markets as a starting point.

Big corporations don’t usually attack small niche markets since it’s not beneficial for them to do so. Therefore you can usually expect to find limited competition in smaller niche markets and that makes it much easier for you to dominate them.

Step 4. Interact with your hungry crowd and ask them what their frustrations are

Now that you’ve found your hungry crowd, and now that you know you have a fair chance of dominating that niche, you can now find out what the hungry crowd is clamouring for.

Social media is a great tool to get answers to questions you have. If you have a blog you can put up a poll asking your readers some questions. Alternatively, if you have a Twitter account you can tweet your followers to ask them questions. If you don’t have either, find forums or newsgroups where your target market is likely to “hang around” or frequent, and create a generic account. Post some meaningful content that contributes and adds value (this is important so that you create credibility and establish rapport) and then ask your questions in a subtle manner.

Your existing competition may not be doing a good job fulfilling their needs. It’s likely that you can do a better job. So find out what your hungry crowd wants!

Step 5. Give it to ‘em, baby!

Now that you know what they want, it’s just a matter of putting your product together according to their specifications. Ask them what they want and give it to them. It’s as simple as that.

Conclusion

Many aspiring entrepreneurs fail because they:

Pick the products they are going to sell without any basis or knowledge of the market
Enter a market that has very little demand
Enter a competition field where they are literally fighting Goliaths whom they have no chances of winning against
Don’t have a frigging clue what the market wants or what problems their customers are struggling to solve

However with this simple 5-step process, you can be among the top 5% of entrepreneurs who succeeds in dominating profitable niche markets.