I always enjoy reading fiction--also known as 90 percent of all start-up how-to guides and articles. The dreamscapes they paint always seem to have a knack for happy endings.
Follow your dreams.
Turn your passion into profits.
Do what makes you happy.
This is lovey-dovey utopian nonsense. This sort of advice would have you believe that if you simply put your all into something you will be successful. Bottom line: if the start-up idea you're passionate about isn't capable of generating revenue, your passion will bankrupt you—as was almost the case with my first failed start-up, which I dissect in detail in my book Never Get a "Real" Job.
Fact: Business is hard, and most won't make it for weeks, let alone years. So before you go ahead and "get passionate" about a business idea that you jotted down on a cocktail napkin one night at the bar or go crazy about the "guaranteed billion dollar" domain name you purchased, you must ask yourself these 9 questions to make sure your idea has what it takes to become a profitable business.
1. Is your idea really a business or just a hobby from which you'd enjoy creating a business?
2. Can you actually realize your vision with your available time, capital, and resources?
3. Is there a real, palpable, and evident demand for your offering among consumers? How big is the market?
4. Does it have a real business model that will allow you to generate income immediately or a "maybe" model that might take years to (maybe) make a dime?
5. Can you fully defend to your harshest critic the reasons why your business is capable of generating a dollar? How about $1,000? $100,000? More?
6. Approximately how long do you believe it will take to generate income? Can you survive that long? How about two or three times longer than what you anticipate (which is more realistic, if not generous)?
7. Why have other similar businesses failed and how is your iteration of an idea different?
8. Is your idea a money pit or a cash cow? Will it need constant reinvestment or can you scale organically?
9. Can you survive a total failure or are you "all-in" if you want to get started?
As you ask yourself each question, don't let your "passion" blind you into being a foolish idealist—otherwise you'll be headed to the bank that gives you food stamps, not cash. Be a pessimist and your business will be better as a result.
What are some other essential assessment techniques one can utilize to determine if a venture has potential and other tips for first time entrepreneurs? Let me know what question No. 10 should be by posting a comment.