(1) There are five essential elements for something to be considered a business. These are:
- It creates and delivers something of value.
- That other people want or need.
- At a price they’re willing to pay.
- In a way that satisfies the customer’s needs and expectations.
- So that the business brings in enough profit to make it worthwhile for the owners to continue operation.
Based on these we can define the essential processes:
- Value creation.
- Value delivery.
You should have a solid understanding of these processes. And a good business plan will outline them as well.
(2) It’s fine to pursue things for the sake of relaxation or enjoyment, but if you want to get paid then you should focus on skills which relate to the five areas of business.
(3) The iron law of the market. You can invent something ingenious but if there isn’t market demand for it then it’s not going to be successful. Market research is a way of increasing the likelihood that your idea will be well-received by the market.
(4) There are some core human drives which help to explain what people will want to buy.
Maslow’s hierarchy of needs:
- People seek existence first
- Then relatedness
- Then growth
Five core human drives:
- The drive to acquire
- The drive to bond
- The drive to learn
- The drive to defend
- The drive to feel
All successful business sell some combination of money, status, power, love, knowledge, protection, pleasure and excitement.
(5) Humans are hard-wired to place a high priority on status. We spend a lot of energy determining what our status is. Research shows that people will make decisions based on the perceived effect on their social status.
When you approach a prospect, they will be considering how your proposition affects their social status. Building social signals into your offer increases appeal to the target market.
(6) The 10 ways to evaluate a market. Rate each of these between 0 (extremely unattractive) and 10 (extremely attractive). When in doubt be conservative.
- Market size.
- Pricing potential.
- Cost of customer acquisition.
- Cost of value delivery.
- Uniqueness of offer.
- Speed to market.
- Up-front investment.
- Evergreen potential
Add them up and if the score is less than 50 forget about it. 50-75 will pay the bills but will require a lot of energy etc. 75 or above? You are onto something promising, go for it post haste!
(7) There are hidden benefits of competition. For example, if you enter a market and find out other people are doing the same thing: you know that there is a market of paying customers for this model.
The best way to observe what competitors are doing is to become a customer. Buy as much as you can of what they offer. This can teach you a lot. Learn everything you can from your competition and then create something even more valuable.
The competitor to be feared is one who never bothers about you at all, but goes on making his business better all the time. -Henry Ford