If you’re reading this right now, there’s a good chance you want to start a business.
Or you already have. And if so, you’re probably doing some serious thinking and agonizing over your great business idea.
No, I’m not a psychic, but I have spent an incredible amount of time during the past five years planning, strategizing, and growing my own company Rich20Something. So, I know a thing or two about what you’re going through.
Creating a business idea and then successfully launching it is one of the most challenging parts of entrepreneurship. There’s no going around this obstacle, it all comes back to that great idea and how well it’s mapped out.
Your idea certainly isn’t everything. Contrary to popular belief, innovative ideas are not the epitome of good business, and a genius idea can flop if it’s poorly executed. The good news is that a mediocre idea can soar with brilliant execution.
Yet the question remains: How do you know if your startup idea is any good?
While I was working on my new book, I developed a simple method called “Three Question Validation” to determine whether you’re headed for a business breakthrough—or simply a breakdown.
READ MORE: 100 of the Best Side Hustle Ideas
The Three Question Validation Method
At its core, this method involves asking three pivotal questions to determine if your business idea is likely to succeed. There are plenty of great tutorials and insights out there for validating business ideas, but this one is a compact and simplified method to test if your idea will work.
If you can say “yes” to all three of them, then it looks as though you have an idea that’s likely to do very well.
If you can’t say “yes” to all of them, it’s time to go back to the drawing board.
READ MORE: Checklist for Starting a Consulting Business
Question 1: Is there competition in my space?
Contrary to what you might expect, you want competitors in your space. There are two disadvantages to entering into an unoccupied marketplace.
You’re either the first one there which is risky territory: nothing has been tested and there’s no roadmap for you to follow. Or, you’re the last person to arrive which means that other people have tried unsuccessfully and abandoned the market. Being last doesn’t mean that you can’t find a way to make your idea work, but it will take considerably more effort.
Choose something where other people are doing the same thing you want to do. For example, I look at job board sites such as Upwork to see what types of freelance skills are popular. You can research freelancers in your chosen field to see what skills they have, and brainstorm your area of expertise you would like to pursue.
Question 2: Are my competitors making money?
A bit of a no-brainer, but very important to consider. Even if lots of other people are doing what you want to do, you need to make sure they have enough customers or clients to be making the type of money you’d like to make.
This step will ensure that it’s worth your time to invest in your idea. To find out how well your competitors are doing, you can look on their website for testimonials and client success stories or browse through their portfolio.
You could even give them a call or stop by their business to ask about rates, schedules, and typical client experiences. Have a look at their reviews and ratings on third-party websites like Yelp, this will give you an insight into their reputation and client relationships. If other people are successfully bringing in clients and customers, so can you.
Question 3: Can I do my idea differently and/or better?
This is the question that ties everything together. You’ve found your competition and they appear to have steady business. Now what?
It’s time to stand out from the crowd.
This point of difference between you and your competition is called a USP, short for “Unique Sales Proposition.”
To attract customers to your business rather than your competitors, you must show why your product or service is different and/or better. If you can show why you’re unique, you’ll attract just the right customers who are perfect for your business. The perfect clients are the type who will buy from you time and again, and who will refer you to others.
Standing out Using USP
1. Better (Lower) prices
Typically, I don’t like competing on price. I prefer to provide greater value and get paid accordingly. However, when you’re just getting started and you’re not 100% confident in your skills, it may benefit you to have a lower price point than more experienced competitors.
You won’t have to stay here forever as long as you increase the value of your services, but undercutting your competition and then providing stellar work will help to get your first few customers in the door. There’s a reason why Walmart continues to lead the retail game. Everybody knows that their USP is “Always Low Prices.”
Again, I want to stress that the quality of your work still needs to be very high because most people expect that lower prices equate to lower quality work. Blow their expectations out of the water and you’ll most certainly draw attention, recognition, and a steady stream of new business.
Making your products or services more convenient for the customer gives you a huge advantage. As a society, we’ve adapted to getting things we want right away.
A few weeks ago, I ordered a FitBit to track my sleeping patterns. Amazon shipped and delivered it the same day. It was on my wrist by 7 pm that night just in time to start logging my sleep. You can take advantage of this trend by making your products and services extremely easy to access.
For example, one of my students Micah is a personal trainer. But rather than have clients come to him, he makes the process convenient for the client with a mobile gym. All the equipment for his appointments was in a van ready to drive to the client’s homes. After the session, he added a cherry on top by providing offering healthy snacks he had on hand. As working out with him was so much easier than getting dressed, fighting traffic, and dragging yourself to the gym, clients were flocking to him, and he charged increasingly higher rates than his competitors.
3. Better quality/aesthetic
In my house, I have two Macbooks, an iPad, a 27″ iMac desktop, 2 iPhones, and an Apple Watch.
And I don’t even own Apple stock. (Seriously rethinking that right about now.)
I also don’t consider myself a diehard Apple fanboy. But I do love the way my technology looks. Despite arguably slipping a few points every year in their technological advancement, there’s one thing Apple does very well: Make beautiful products that don’t break easily.
The quality and attention to detail you put into your products and services are huge factors in a customer’s buying decision. If it looks or performs better than the competition, I’m more likely to buy. That’s just basic human psychology.
You can read more about this in my bestselling book Rich20Something.
4. More variety
Did you ever see that Subway commercial where they touted that you could make over 1,000 different sandwiches? To a former SAT instructor, this irks me a bit as it’s basic multiplication of toppings, not an indicator of sandwich superiority. Nevertheless, the campaign was highly effective.
In a world where everything is instantaneous, clients want to get started quickly and have the maximum amount of flexibility with their choices. If you can provide that, you can stand out.
5. Superior Customer Service or Guarantee
Most competitors in your space are going to have average or below-average customer service. They’ll get back to people soon, but with no urgency. They’ll offer refund or exchange policies, but only ones that are designed to protect the company’s best interests, not the customers. There’s a huge opportunity here for you to rise above and provide first-class service and a better overall experience.
If your competition provides a 30-day money-back guarantee, make your company’s 60 days … or 180! If they usually respond to clients in one business day, make it a point to respond to any inquiries the same day in four hours or less.
There’s a certain medical marijuana delivery service in Los Angeles that I’ve certainly never used. They offer service from 11 am to 11 pm, every day of the year (even holidays!). Their competitors are always closed or busy, but this one company is always open.
Do you know who I’d hypothetically call when I wanted to get blazed on a Friday night?
Exactly. Customer service, people!
These seemingly small tweaks to your offer are big in your customers’ minds and they do add up over time. They are free-to-cheap to implement, so there’s no reason not to do them. It’s such a low-hanging fruit if you want to stand out.
Starting a business is one of the most challenging things you can do, and often the solutions to these challenges are counterintuitive. The good news is that you don’t have to climb these mountains alone.
Got a business idea that passed the test? Let us know in the comments below!