Before you start up your business, you must ask yourself this question: What problem are we solving?
There are many other follow-up questions you must ask at the beginning of your business, and on an ongoing basis, but this is the first one.
If you don’t have a good answer to this question, you likely have an issue. For almost every successful business, if you dig just a bit below the surface, you will find they are are solving a problem that their customers (and others, potentially) care about deeply. Let’s look at a few examples.
When Uber started, what are some problems it solved? On the demand side, taxis were expensive and often inconvenient to get. On the supply side, many people were hurting for money and had cars that were relatively underutilized.
What about AirBNB? On the demand side, people were looking for relatively cozy and less expensive accommodations. On the supply side, once again, people were hurting for money and had first or second homes with excess capacity and significant costs to be covered.
And YouTube? On the demand side, people were looking for more authentic and varied video entertainment. On the supply side, people were looking to express themselves in video and advertisers were looking for another medium to reach their target markets.
The list of examples could go on, but you get the idea. The list of problems these businesses solved could go on as well, but the important point is that these hugely successful businesses didn’t happen by chance. They happened due to a confluence of factors on both the demand and supply side, and many of those factors had to do with answering the question: What problem are we solving?
So, how does the answer to that question look in your business? Are you solving meaningful problems on both the demand and supply side, or at least on one of them? Or, are you simply attempting to foist another copycat competitor on an already crowded marketplace?
Once you’ve answered these questions and are fully comfortable that you are solving one or several problems that increase the likelihood of success in your business, before starting up, you’ll need to follow up with answering several other questions, among them:
- Can this business, eventually, become profitable to a level that it will make it worth my while to start and run it? if yes, how long is that likely to take and how much of my time and capital will I need to invest in the meantime? Be sure to perform a break-even analysis to give you a reality check on your answers to these questions.
- What sort of team will I need to put together to execute this business successfully and solve the identified problems in a profitable manner?
- Is this business one that I’m strongly enough interested in to put in the time and effort to make it successful? All businesses will have challenges, especially in their early stages. Starting and growing a successful business is almost always a marathon, not a sprint.
- Does the business have sufficiently high profit margins that we can make some mistakes and still survive? If you’re starting out of the gate with a thin margin business, unless you can do very large volumes, you are asking for trouble. There may simply not be enough margin available to deal with the inevitable arrival of unexpected other costs and challenges.
- If all goes perfectly (it won’t), does this business have the potential to grow to a size to make it worth my while? Will that growth and size be sustainable? It’s a tough question to answer, of course, but there are clues available in the size of the market, the market growth rate, the strength and number of competitors, etc.
The basic question is: What problem are we solving? Beyond that, there are many other questions you need to be asking before start up and on an ongoing basis thereafter. The questions above are some of the key ones. If you cannot come up with satisfactory answers to these questions, you need to reconsider whether you want to put the next several years of your life and untold blood, sweat, tears and capital into this business. Be honest, as it’s better to answer these questions up front than after you’ve already discovered you’re in the wrong business.
Image by Ryan McGuire from Pixabay
