If you were to start your own restaurant, what is the most important thing you want to make sure it is successful?
Maybe you want a great location right in the heart of downtown? A friendly, professional service? The most talented chefs? The freshest ingredients?
I miss food in California!! That was lunch with friends today
A video posted by Ramit Sethi (@ramit) on Apr 17, 2015 at 2:13pm PDT
I miss California food
These are all important pieces. But would any of them guarantee success?
More crucial than all of these things is that if you want to start a successful restaurant — or business of any kind — you need a hungry crowd.
You need a crowd that wants exactly what you’re selling and is willing to pay for it.
Seems obvious, but people forget that when they start a business. They’re so engrossed in their own ideas and sexy topics like web design and marketing that they never bother to find out if they even have a product that people are paying for.
Ignoring this and making products nobody wants is why so many startups fail.
When we develop products at IWT, we go through a phase of intensive research. Every hour we spend at this stage saves us tens of thousands of dollars down the line.
With this test you practically guarantee that your online business will be a success. Let’s walk through why people skip this, then I’ll show you how we do it.
3 big mistakes people make after finding a business idea
Why do most businesses fail?
People assume they know what other people want without ever asking. So they put all that time, money, and effort into a deal thinking it’s going to be a home run only to hear crickets when they finally start.
Here are three of the most common assumptions people make to lead to flops:
They assume everyone is like them. (“I love Russian novels, so I’m going to create a 60-hour course on crime and punishment. I’m getting rich!”) They tried to create a product that would fit and appeal to everyone. (When you buy razors, do you buy general razors for anyone? Or razors for your gender?) They saw that no one else had their idea and thought that was a good thing. (No competition often means no demand.)
So how do you make sure you have something that people want?
Before you do anything — before you create the product, create a website, or start marketing — you should get to know your customers thoroughly. We put it this way: just as a good spouse knows their partner better than they know themselves, you want to know your client even better than they know themselves.
See how we do it.
How to practically guarantee that your business idea will work
Do you remember the needs matrix from the idea mapping checklist?
This matrix has helped you create a list of possible ideas even if you don’t have one yet. Now it’s time to test these ideas through thorough research.
Find your hungry crowd
Go out and talk to people you think would be interested in your idea. You can do this online or (better) in person.
If your idea is to help people improve their dating lives, talk to your single friends to find out what struggles and challenges they face with this lifestyle. If you want to show people how to improve their social skills, talk to introverts to find out how they feel about becoming more social.
You can tell them:
Step 1: Find 1 person – ONLY ONE! — who might be interested in your idea. You can do this by email or in person. If you’re not sure, ask ANYONE even remotely close to the idea, even your parents. We are not striving for perfection now, just a beginning.
Step 2: “Test” your idea with this script: “I’m thinking of starting some kind of website [YOUR IDEA]. When you talk about it with your friends, what do you say? What is the biggest problem [YOUR IDEA]?”
Step 3: Write down the exact language they use. Did they really say, “I want a solution that’s simple, fast, and secure”? No, they didn’t. WRITE WHAT YOU ACTUALLY SAY. “I hate the way these jeans look on me” is a great answer. “Every day when I wake up I’m afraid to go to work,” is another.
When we shared these steps with IWT readers, the insights people got were incredible.
People realized that ideas they thought were great wouldn’t have worked at all. And learned how to tweak mediocre ideas to make them compelling and profitable.
Here’s an example where a reader shares her original business idea along with the new idea she discovered after talking to someone she thought might be interested.
You’ll learn what she expected from this friend, what she actually said, and how it completely changed her business plan.
Talking to the right people has improved Tanya’s business idea
Tanya learned that while her initial idea seemed strong, it wasn’t what her clients wanted.
Do you see how crucial this is?
Tanya could have put tons of time and money into developing a course that teaches artists how to do business – and nobody would have bought it!
It doesn’t matter how slick her website or logo is, or how many inspirational quotes she has posted on Instagram.
Now that she has a better understanding of what her audience wants, she can target them with the actual words they use to describe things—in marketing, in their products, and everywhere else. It’s not just fancy semantics. They use these insights and make better products for customers.
In this way you remove a huge risk from your company.
Talk to your customers and find out what they want, then create a product that fits their needs. In this way you guarantee the success of your product.
Creating the perfect product
When we’re working on a new product for IWT, we spend weeks, months, even years talking to people we think might be interested. I call this “immersion” – going really deep to understand who our audience is and what they want. That is long before we create or sell anything.
For example, we recently launched a $25,000 product for successful entrepreneurs. One feature we wanted to add was “Ramit’s Rolodex” – a list of freelancers and companies that we use at IWT that people can turn to when they need quality, trusted help in a hurry.
We reached out to people we thought might be interested and asked their opinions. We assumed they would love it, but the reaction was lukewarm.
Here’s an actual email response from a potential customer we spoke to.
Conclusion: The customers weren’t enthusiastic about “Ramit’s Rolodex”, so we didn’t make it.
Talking to people has saved us from wasting time creating something that doesn’t matter to our target market. Instead, we asked more questions, got more feedback, and created something that fits their needs exactly.
We don’t create products and hope people will buy. We find out what our potential customers want, make sure we can deliver something outstanding and 10x to 100x better than anything else, and then give it to them. By speaking to customers first and developing products based on their feedback, we have launched over 18 successful products over the last 11 years.
Find your profitable business idea
What if you could build an online business that paid you to live the life you’ve always wanted? Get inspired and get started today with this free downloadable PDF guide, 30 Successful Online Businesses You Can Model that will prove you can make money with the skills you already have. ↓