How I Evaluate Business Ideas So I Can Make More and Work Less
Having spent almost a decade as an entrepreneur, since leaving the corporate world back in 2013, I’ve established a handful of businesses of varying degrees of success.
My first startup, Hotdesk, was a failed office-sharing marketplace. Sure, I managed to raise some seed capital, but demand and revenue were a different story.
I took some lessons out of the experience and went on to form Collective Campus in 2015, a corporate innovation and startup accelerator that has been a seven-figure company since 2016.
Collective Campus’ success gave me the financial and time freedom to explore a number of revenue-generating side projects, such as Lemonade Stand — a children’s entrepreneurship program and platform, NoFilter Media — a podcast network, and Collective Content — a content agency, among a handful of less successful ideas.
With the end of a crazy 2020 fast approaching, I took some time to reflect on what I’ve learned over the years and what my personal business selection manifesto looks like today.
This isn’t a manifesto for high-growth startups, but for those looking to live Seneca’s maxim that the proper limit to wealth is to first have what is necessary and to second, have what is enough. For me, that translates to generating several-hundred thousand dollars a year whilst working, on average, no more than 20 hours a week. That’s it.
The following is a dynamic checklist of sorts that I will use to evaluate business ideas going forward, and whether or not I choose to pursue them. It is written to me, but I hope that some of you reading it will get something out of it too, especially the early-stage entrepreneurs out there who simply want to earn their freedom to live life on their own terms.
1. You Enjoy It
If I wanted simply to make money at the expense of enjoying how I made it, then I would have stayed in investment banking or management consulting for the rest of my life. When you enjoy something, you invest a more sustainable and higher level of energy and cognition into it, which ultimately increases your chances of a positive outcome.
2. You’re Good At it
Lots of entrepreneurs pursue ideas that they simply lack the requisite skill-set to make happen, and whilst they can learn as they go, by working on something that aligns with your existing skillset — coding, marketing, writing, sales — you are much more likely to succeed, and register early runs on the board — something that’s critical to sustaining motivation.
3. There’s an Engaged Niche Audience
If you’re building something for an audience that’s indifferent to what you’re doing — eg. there is flagging customer appetite — then you face an incredible uphill battle in trying to educate your audience of its merits. Far better to sell something that people are already interested in.
You also want to shy away from trying to be something for everyone, because more often than not, such products end up appealing to nobody. Far better to target a small audience of highly engaged people than it is to target a large and indifferent one.
4. It Makes Enough Money / Serviceable Obtainable Market (SOM) is Sufficient
For me, it’s no longer about building a unicorn, or even about building a 9 or 8 figure company. Nowadays, it’s about building what is enough, and it turns out that a 7-figure business with a team of several engaged people is enough to satisfy my financial needs, freedom needs, and workplace enjoyment needs.
Contrary to what you might read, you don’t need to dominate a market to win — you only need to take a tiny percentage, and when you focus on tight niches, capturing this tiny percentage becomes a lot easier.
Finally, on this point, opportunities can be found at the intersection of growing and/or emerging need, and not yet saturated supply.
5. It Can be Highly Automated and Delegated
Translation: empowers me to work fewer than 20 hours a week, whilst still generating enough income.
Nowadays, by leveraging automation tools, outsourcing platforms, and crowdsourcing, this is an achievable reality for a lot of businesses across myriad industries.
6. Offers 50% Margins
By leveraging automation and outsourcing, you can create space for large margins. This can also be assisted by eliminating waste at your organization — eg. pointless meetings — and honing in on the 20 percent of everything that will give you 80 percent of the results (eg. best customers, best sales techniques, best marketing channels, best products, etc).
7. Large Lifetime Customer Value (LTV) / e.g. B2B customers
One of the most important ‘aha’ moments I’ve had on my entrepreneurial journey has been going from B2C (selling office space rental for about $100 a pop to individuals) to B2B (selling a startup accelerator to a large organization for $300,000).
The former required a lot of grinding to simply get a few orders over the line. The latter required having the right conversation with the right person at the right time, and the deal was done. I can’t imagine how much harder I would’ve had to work to generate $300,000 in office space bookings (not to mention my B2B margins have been about five-times that of my experience with B2C).
8. Budget Exists
You want to sell things that either people and in particular, companies, have already set money aside for. If I’m selling employee wellness training to the Human Resources department at IBM, you can bet they will have a budget set aside for it that they need to spend.
The alternative? Selling something that they need to create a budget for through business cases and internal lobbying. The former can be a quickly done deal (1 to 3 months). The latter can take years.
9. Aligns With Your Existing Knowledge and Assets
Assets extend to social media followers, mailing list, web traffic, networks, skill-sets, domain expertise, technical and human resources, and so on.
For example, I’ve built a significant web audience and email list in the corporate innovation space. If I were to build an online product in that space, it would be much easier for me to sell it, than if I were to build something for, say, health practitioners.
Chances are, also, that if you focus on areas where you have unique domain expertise, that you might identify unique opportunities that not too many other people are pursuing.
10. You Believe In It
Marcus Aurelius once wrote that “nothing should be done without purpose”. When you truly believe in what you’re working on and feel that it is creating value for the world, it is much easier to keep getting up and going after it each morning without becoming pessimistic and throwing in the towel.
11. You Can Perform Targeted and Personalised Marketing at Scale
While this might be true for many target audiences nowadays, you want to be sure you can target specific audiences, otherwise, you will be at the mercy of expensive and ineffective above-the-line marketing efforts.
12. You Can Use Content to Build Your Funnel
This ties in with #9, #2, and #1 for me. As a writer, content is something I both enjoy doing and am somewhat good at.
It just so happens that today, content can be used to drive your SEO rankings and generate inbound inquiries.
It has been our key marketing channel at Collective Campus for years, and depending on what you’re selling and to who, can be much more effective and economical than paid advertising.
13. It Can Be Tested, Built, and Modified Quickly
Having been in the game long enough, and worked with hundreds of entrepreneurs courtesy of our corporate startup accelerator programs, I’ve seen firsthand that a great idea and a great time usually isn’t enough. 95% of startups fail.
Time is precious so if I’m going to pursue a new idea, I want to ensure it’s something that I can test market appetite for quickly and cheaply, something I can build a sellable product for quickly and cheaply, and something that I can modify and iterate with quickly and cheaply, as market forces and customer demands dictate.
Otherwise, I might find myself spending too much time in build and spend mode, and too little time in sell mode.
14. Your Share of the Market is Defensible
Whilst almost no opportunity can be defensible in perpetuity, and in today's market we always need to be ready to adapt, pursuing something that can generate an income for you for several years at least is a decent benchmark. Defensibility comes from a range of things, such as lock-in contracts, unique value proposition, switching costs, non-commodification, size of the competition, and so on.
There you have it — my business manifesto for the entrepreneur who recognizes that more money won’t necessarily generate more happiness, but who wants to generate enough to live a meaningful, comfortable, and free life.