When running a business, you invariably come across decisions that will define your trajectory. Should you launch a new product? Should you partner or acquire a competitor? Or should you make new hires?
Oftentimes these decisions aren’t black or white, which makes them so hard to make. So how can you best evaluate all the critical decisions you’ll have to make to ensure you’re putting your best foot forward. Here are three questions any entrepreneur should ask to help them think through opportunities.
1. What problem are you solving for?
We all have ideas that ostensibly seem interesting. What if you can offer a subscription service for pet owners so they make gourmet pet food? Or what if you can create an aggregator for kid’s activities so schools can easily offer after school classes?
Ideas are a dime a dozen, and only few have real teeth to be real business opportunities. That is why only 10% of startups succeed.
Fundamentally, you have to ask yourself what problem are you solving for? Are you solving a real urgent problem people need a solution for, or are you contemplating something that is nice-to-have?
In the example of meal kits for pets, are you solving a real problem for pet owners? Do pet owners try to make their own food, and are they desperately looking for solutions? What may seem like a problem or opportunity for you may not be the case for others.
Bruno Marotta, the founder of Im-a-puzzle, explains, “A family member of mine who loves jigsaw puzzles told me how her friends wanted to solve them while traveling, but couldn’t find any options to do so. It made me realize there was an opportunity to create an online alternative for these people.”
Before pursuing a new idea or initiative, make sure you have conviction that you’re solving a real problem.
2. Is it big enough to matter?
Whether you’re starting a business or operating one, your time and capital are your most precious resources. Everyday that passes means you have less time and capital to realize your vision.
When understanding what decision to make, you have to ask, is it big enough to matter? Of all the ways you can invest capital or spend time in your business, are you focused on maximizing your potential.
This is especially important when starting a business. How big is the market you’re addressing? If you want to launch a product that helps paleontologists discover dinosaur bones, can that be a big enough opportunity? Is that the best way to use your time and resources?
Once you know you’re solving a real problem, go through the exercise of understanding how many people may want your product, and how many people can you realistically convert or sell it to. Don’t limit this to one single idea either. Go through this exercise with all your ideas or initiatives. You’ll start to see the math on which one may be the best use of your resources.
Assaf Cohen, who runs Solitaire Bliss, explains, “I knew I wanted to get into the gaming space, but there are so many different types of games to play. When I learned that solitaire continues to be the one of the most popular games globally, I knew there would be a big market of users if I built solitaire games.”
Try to understand if an opportunity is big enough to matter. If it’s not, you’ve saved yourself time and energy, and can move on.
3. How do you measure success?
Before jumping into an opportunity, determine what’s going to make it successful. Is it hitting a revenue target and reaching a number of users?
If you can’t measure what success looks like, you’ll be flying blind. How will you know if you’re on the right track and deploying your resources properly?
Moreover, measuring success isn’t limited to one or two key performance indicators, but also the time in which you hit those goals. While success, for example, might mean reaching over a million users, is that how you’d define success if it took 10 years to hit that goal?
Remember, you have limited resources, and running a business means you have to figure out how to maximize the return on that. Make sure to time box and set goals within a particular time frame. If you can’t hit your goals on time, you have to ask if it’s worth continuing down that route, and if you should shift gears.
Going into an opportunity knowing how you’re going to measure success creates accountability, and allows you to be a more effective entrepreneur.
Sharpen your critical thinking
Asking these questions gives you a holistic understanding of any idea you might pursue. It forces you to think more critically about your decisions, and give you the best chance of succeeding.