According to the Small Business Association, roughly 50 percent of businesses survive to reach their fifth year. What is interesting, however, is that the SBA’s analysis found that these survival rates generally remain consistent regardless of the overall state of the economy. In other words, lasting success is largely dependent on choosing the right business opportunity.
While understanding the basics of running a business is certainly important, your ability to recognize meaningful opportunities will play a major role in whether you author a lasting success story.
Idenitfying these opportunities isn’t an exact science, but there are still telltale signs to look out for, beginning with the following five.
1. You’ve found a noteworthy market inefficiency
Not surprisingly, the best ideas come when you find a meaningful problem to solve. As I’ve written previously, some of the easiest ways to identify these opportunities come by looking at problems within your own community or drawing from things you’ve experienced firsthand.
A big part of why these methods are so valuable is because they help you identify issues that you are going to be more passionate about. As a result, your business endeavors are more likely to be warmly received and create a meaningful impact.
2. Identify successful business models in similar markets
I recently had the chance to speak with Alex Cruder, CEO of Curbie. During our conversation, he advised, “Pay close attention to business models and products that work well in similar markets to your own, but aren’t currently available in your area. Look for ways to bring these concepts to your local market, as they will have much lower risk than more novel ideas. For example, I saw the success of online car dealerships in the United States, a business model that had not yet been introduced in Canada. Bringing an already-successful idea to a new market led to incredible growth.”
Even in our digital-centric age, many successful businesses are still confined to a particular country or region. This gives you the opportunity to establish your own similar business in your own area. The basic business model and product line have already been proven. Using this model to launch your own brand is an easy course to success.
3. A new approach to a tried-and-true idea
In a 2009 on-campus podcast interview, Raffi Amit, professor of management at Wharton, gave this example of how digital entrepreneurs develop winning ideas: “You could go back to the beginning of eBay, where they saw an opportunity to connect people through launching a virtual flea market. It offered a platform that connected buyers and sellers directly.”
This description of eBay as a “virtual flea market” doesn’t make it sound too unique, but that’s a big part of what helped make it so successful. It took a concept that people already knew and understood and brought it to the digital world. This same idea has worked for countless other brands. Finding ways to digitize or otherwise streamline an in-demand concept will fuel rapid growth.
4. It’s something people are asking for
Regardless of whether you currently run your own business or are working in a 9-to-5 job, your work experience gives you ample opportunity to hear from customers. Direct customer feedback, buying trends and other requests give you greater insight into what the market wants and needs.
Sometimes, your customers will ask for something that isn’t currently being offered. Other times, they’ll want something similar to what is already available, but better. Whether the opportunity lies in a new product or improved customer service, paying close attention to what customers are saying is key for identifying business models that will be well-received by your local market.
5. There is an opportunity to act quickly
While market research and other preparatory steps are certainly important, many of the most meaningful business opportunities are those which allow for a fast launch and an agile, iterative approach. This allows you to respond quickly to market disruptions and pivot so you can better serve customers with your winning idea.
Being the first in your market with a particular idea also gives you the opportunity to establish yourself as the market leader. As one example, an evaluation of pharmaceutical launches by McKinsey found that on average, the first product to market maintained 40 percent of the market 10 years after its launch. Those that were fifth to market or later only achieved 10 percent of the total market share.
The advantage was even greater for drugs that had a longer lead time before other competitors entered the market. The ability to get into the market first has played a big role in the successes of brands ranging from Amazon to Kellogg.
At the end of the day, you’ll never know if a business opportunity delivers meaningful results until you test the market. However, by using these principles to help you better identify and evaluate ideas, you will be better poised for successful market entry.
Don’t delay when you have a winning business idea in hand. The sooner you act, the greater your impact on the marketplace will be.