Kevin O’Hara is a serial entrepreneur and successful executive with decades of experience leading and innovating. He most recently founded CUE.
If you have a business idea, there are a tremendous amount of resources that tell you how to build a business model, think about working capital, marketing, sales, operations, etc.
But I haven’t seen as much good material on what constitutes a good business idea.
I recently postedv this question to a friend who is an officer with Silicon Valley Bank. His answer was succinct: the best businesses are those that identify an existing problem and then set out to solve it.
The businesses that struggle are the ones that come up with a cool idea or app, but where the market demand is not obvious or doesn’t exist. I’ve also learned to add an additional category: make sure that the market opportunity is large enough to justify the investment and the effort.
There are clearly exceptions to these simple statements (Facebook and Google come to mind), but for most entrepreneurs, sticking with the above approach will generally serve you well.
I’ll use one of my current start-ups, CUE, to illustrate the point.
The only time I have taken a job in the last 25 years for a business where I didn’t get in on the ground floor, was as President and CEO of Integra Telecom. I served for three years, and the experience was positive but very different and not as personally satisfying. However, I learned a lot about small businesses.
Both MFS and Level 3, the first two start-ups, were focused on providing services to very large and sophisticated customers. These customers had large groups of engineers and IT professionals. To present ourselves intelligently to these target customers, we employed a sales force that was technically savvy and possessed advanced business acumen.
When I joined Integra, we had 90,000 small business customers, and the level of sophistication of technology generally didn’t exist within this customer base.
The customers were amazing at what they did, whether it was running a small accounting firm or law office, medical practice or a health and beauty business, but they wanted to spend time running and growing their business, not researching, buying and managing their technology needs. And, the customers rarely had internal staff support to help in these areas.
Customer feedback and surveys consistently ranked Integra as the number one service provider in their markets, but Integra only sold telecom services and a limited set of related products. For the balance of services that they required, the customers either paid consultants or Value Added Resellers (VARs) a lot of money, or they suffered through countless frustrating hours researching and buying software and services.
Once they bought a piece of software or subscribed to a cloud-based service offering, they were left on their own to figure out how to set up the applications and set the appropriate access for each of their employees.
If a new employee joined or an existing employee left the company, or the credit card used to secure the purchase expired or was lost, the business owner was forced to go to every application individually and update the records.
After researching how large the market is for software and services for small businesses, I couldn’t get a precise value for the annual revenue opportunity but concluded that it was in the $10’s of billions. I could now check the boxes for what constitutes a good business idea: a clearly identified need and a very large market opportunity.
Throughout our first year, the concept for CUE evolved.
I spoke to countless small business owners, as well as professionals that focused on small business customers, and the feedback for CUE was consistent and overwhelmingly positive.
CUE would do the research on software and services that are appropriate for small businesses, and we would present them and compare the features of the competing offerings in plain English.
Additionally, CUE would help answer questions and assist with setting up the applications that were purchased along with offering a free 30-minute solution consultation.
We also developed a simple management tool that allows business owners to manage and pay for all their services in one place.
For instance, the management dashboard CUE developed allows the owner to go to a single location to update their credit card information once and have it populate all of their applications.
I met with a business owner recently that used 20 pieces of software to manage various aspects of his business. All 20 apps were subscriptions, and all were purchased using the same credit card. He lost his card and spent almost an entire day logging in to his services and updating his information: this was an entire day of productivity that went out the window, not to mention the level of frustration he reached along the way. CUE’s dashboard would have allowed him to solve his problem in under five minutes.
It’s too early to declare victory with CUE, but with each passing day, the opportunity gets further validated.
I have learned over the years that the identification of an opportunity often occurs when you are working for a company and see a need that your customers have that your company doesn’t address.
These opportunities also present themselves in your private life when you or other enthusiasts in your sport or hobby share a frustration over the limited offering for certain equipment or services.
There are opportunities that all of us see every day. If you can apply the simple tests of identifying a market need and validating that the market demand is large, you’ll have a better sense of whether or not the opportunity is worth pursuing as a business.
In conclusion, it is much easier to be successful starting a business if that business solves an existing problem, and the opportunity is large enough to justify the effort.
The first part of this blog describes the making of an entrepreneur, find it here. Need help finding a software solution? Schedule a free 30-minute consultation appointment with our expert team and let us assist you in getting the best software for your needs.