A business idea is a concept that can be used for financial gain that is usually centered on a product or service that can be offered for money. An idea is the first milestone in the process of building a successful business.
The characteristics of a promising business idea are:
- Innovative
- Unique
- Problem solving
- Profitable
A business idea is often linked to its creator who needs to be truly convinced of the business value in order to make it happen.
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What is innovation?
For businesses this could mean; creating new ideas, new product development through research and development or improving existing services. Innovation can be the central focus of a business and this can help them to grow and become a market leader if they execute their ideas properly. Businesses that are focused on innovation are usually more efficient, cost effective and productive. Successful innovation should be built into the business strategy, where you can create a culture of innovation and drive forward creative problem solving.
Examples of innovation
- Apple was a $2 billion company in 1997, then it jumped to a $700 billion valuation in 2015 as a result of the innovation that came from the; Macbook, iPod, iPad, iPhone.
- Tesla built an electric car with exceptional aesthetics and efficiency, which has helped build the electric sports car company earn a market capitalization of $33 billion, with revenues up 54% since 2014.
- Uber was founded in 2009 and has become a $50 billion company in just 6 years, with its simple yet extremely unusual idea of getting a taxi with the press of a button that has completely revolutionized the way we travel.
These extremely successful companies were built on sheer innovation and we can see how valuable they have become in the short time they have been around or have been focusing on innovation. When we compare Tesla's value to that of General Motors, we see that the market capitalization of General Motors is $53.98 billion today in which the company has been around since 1908 whereas Tesla was founded in 2003 and has achieved 50% of General Motors value within 12 years.
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Unique Selling Point
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unique selling point (USP) is the factor that makes a company or a product stand out from its competitors, whether it is through; pricing, quality, customer service or innovation.
Each successful company has a USP and this is what potentially makes their customers loyal to them, as this is the original reason as to why they chose to buy from them. A USP can be created through the element of being first to a market, for example with Uber; who were the first company that gave you the ability to press a button and taxi would appear within 5 minutes to pick you up. Because Uber had reached this market first, it gave them a USP and therefore they received loyal customers for this. However; with fierce competition copying Uber's business model, Uber has had to develop their service through innovation and this is where innovation can be used as a USP, as Uber have had to develop their services to a wider market in which they are now working on a delivery service called "Uber Rush."
Problem solving
Business ideas that solve problems are fundamental to developing our world and companies such as Curemark are one of many who do this. Curemark is a biotech company founded by Dr Joan Fallon, who noticed that a lot of the children she treated were low on an enzyme for processing protein and since then she has quit her job and has built Curemark to solve this problem. Curemark has now raised $50 million and is on its way to solving a problem that truly exists.
Profitability
Profitability is a business's ability to generate earnings compared to its costs over a certain period of time. This is possibly the most important aspect of any business idea in the long term, as this is what makes a business survive in order to keep having the impact that it has. Profitable ideas need a strong revenue stream against its costs and this tends to create the success of the business, however some companies defy this and make losses to begin with, yet are still exceptional business ideas that are worth billions.
High valued companies making a loss
- Snapchat is valued at $10 billion despite making a loss, because of the monetization potential it has based on the 100 million everyday users of the app.
- Uber is valued at $50 billion and is making a $417 million operating loss. Despite this; investors are still willing to offer large amounts of money to fund the company because of the potential the company has in the longer term.
These companies show us that even if your idea might make a loss in the beginning, a business idea could still be extremely valuable depending on its potential for growth, based on its level of; innovation, uniqueness and its ability to solve a problem.
Source of the article : Wikipedia
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