The Difference Between a Great Idea and a Great Business

Clearly, the first step to becoming a real entrepreneur instead of an aspiring entrepreneur is to come up with a great business idea, but that phrase can be a little deceptive. There is a difference between a great idea and a great idea for a business. There are many, many ideas that are beyond cool, that wouldn’t actually make great businesses. For example, providing free meals to every hungry child is a noble idea, but it’s clearly not a great business as you wouldn’t want to charge your customers and wouldn’t be able to make any money. How about a tool for consultants that drastically reduces the number of hours it takes them to service each client by automating huge portions of the work they used to do? That’s an awesome idea, right? But maybe it won’t be the billion dollar business you dreamed of because most consultants charge by the hour and it’s tough to get someone to pay you money for something that means they now have to charge less for their work, reduces their average customer value, and therefore lowers their margins.

Finding a great business idea is not just about coming up with something that is really cool; it’s about coming up with something that is really cool and that lots of people are willing to pay money for. The conventional wisdom out there is that you should find your next business idea by identifying a problem and then developing a solution for that problem. That’s absolutely correct, but there’s a little more to it than that. You need to identify and develop a solution for a problem, but you also need to be able to get people to pay good money for that solution – more money than that solution costs you to produce and deliver. That means that you need to understand your target customer before you know if you have a good business idea. Don’t know who your target customer is or if there are enough target customers out there? You’d better figure it out fast. To start, try taking a look at a couple of my older videos about creating target customer personas and doing market research.

The bottom line is that while most new entrepreneurs are asking themselves if their idea is cool and new to decide whether or not to pursue a business, they should be asking if it’s something that enough customers will pay for. A super boring but easily salable idea is a way better business than a super cool idea that nobody will pay for, period.

To get you started be honest with yourself about the following questions:

  • What is the problem I’m solving and who am I solving it for?
  • What are people currently using to address this problem and why would they would go through the effort of switching to my solution?
  • Is the customer going to pay me more for this solution than it costs me to market, produce, and deliver that solution?
  • Have I verified my assumptions about the customer by talking to them or am I building my solution in a bubble based on my own experience only?

If you’re honest with yourself about these questions, you’ll be well on your way to determining if you actually have a great business idea, or if you just have a really cool idea that maybe you can pursue as a hobby.

Don’t Let Sunk Costs Sink Your Business

I’ve been in the entrepreneurship world from every angle: as an employee, as a business owner, as a consultant, and as part of the investment team, and one thing that I see every single stakeholder make that can have very negative consequences for the business is succumbing to the trap of sunk costs.

Sunk costs are those costs that are already gone. It’s money already spent that you can’t get back and, therefore, isn’t actually relevant to your future strategy…yet it somehow seems to always keep weaseling its way back into the conversation. Have you ever caught yourself saying something like, “We’ve already put so much into this initiative, we can’t turn back now,” or, “I know we’ve invested a lot of time in this marketing campaign and it doesn’t seem to be working, but we’re in too deep to give up now so let’s just give it a bit more time”? If you have, then you’ve fallen victim to the sunk costs trap.

It’s a natural human reaction to have a negative emotional response to loss, and when you’ve sunk time or money into a project or initiative that isn’t paying off, you feel the loss of those resources. The trouble here, is that that negative emotional reaction causes you to think irrationally and try to eliminate the feeling of loss by sinking more resources into a bad project or throwing good money after bad.

So how do you pull yourself out of this trap so you can manage your business effectively and not run it into the ground because you refuse to walk away from projects or initiatives that aren’t working just because you’ve already invested in them?

Firstly: recognize that money spent is not relevant to the conversation about what to do moving forward. Now I mean this, really recognize that fact and accept it. For example, if someone came to you and said they had an advertising program and for every $500 you spent on ads you would generate $100 in sales, would you do it? Of course not, because it has a negative return on investment and, therefore, makes no sense for your business. So now let’s say you decided to pay for some Facebook ads to promote your new product and you spent $500 on the ad campaign but only made 2 $50 sales as a result of it…would you continue the campaign because it was planned to last for a month and you’re only a week into it? Hopefully no! Assuming you’ve let the ad run for long enough that you have valid data about the way it converts, the $500 you already spent is not relevant. The only thing that is relevant is that the return on investment is negative.

Secondly: set clear expectations for any new project or initiative. Agree on clear goals that will indicate the success of the initiative or project and timelines for when those goals must be reached by. If you get to the deadline and you’re not reaching the goals you agreed upon at the outset, it’s time to terminate the project, period. Don’t allow yourself the option to get caught in the sunk costs trap. Just stick to what you decided before the emotion of lost resources and a failed project entered the picture and muddied your decision making.

Finally: have an outsider spot check you from time to time. An outsider doesn’t have the same emotional investment in the sunk costs of your business, so they will more easily be able to tell you where you’re wasting resources by falling into the trap. You may feel like you can’t invest in new customer relationship management software because you just paid for the system you have now last year, but an outsider will point out that your current CRM system is making you lose money by missing opportunities and making costly errors without feeling any attachment to the system or taking the cost of the current system into account when determining if a new system is worth the cost.

The sunk costs trap gets the best of us and I have yet to meet any entrepreneur who hasn’t fallen victim to it at least once. However, if you employ these methods you can drastically reduce the likelihood that you will continue to be suckered by it and drastically increase the likelihood of succeeding with your business.


Now I’d like to hear from you. Tell me an example of a time that you fell victim to the sunk costs trap and what the consequences were. Then tell me what techniques you use to avoid it. Let me know in the comments section below and, if you found this video helpful or you know someone else who would, please spread the love by liking it and sharing it.

How to Create Target Customer Personas to Maximize Your Marketing

Understanding who your ideal customer is, where he or she is, and what he or she is motivated by is key to a successful marketing strategy. If you don’t understand who you’re selling to, it will be pretty difficult to sell. Therefore, creating target customer profiles or personas can be a great way to get started with your marketing strategy development.

Customer personas are quite common in the development of marketing strategies and they’re basically character sketches designed to help you understand your customer and his or her needs and motivations.

To create one, begin with some solid market research so you will be basing your persona on facts instead of just making things up. If you’re not sure how to begin with conducting market research, you can check out my video about that topic.

Next, you want to keep the information you gained from market research close at hand and sit down and begin brainstorming about your ideal customers. You can start with the easy stuff like demographic information: is your customer male or female? How old? What type of job do they have and how much money do they make? Are they well educated? Where do they live? What is their family structure like? Then start moving on to deeper information about the target customer’s personality and motivations: What are their morals and values? What does a typical day look like? What do they do in their free time? What are their habits and likes – i.e. is this a vegan yoga addict or a martini-drinking club-hopper? Do they want to go to the spa on the weekend or go hiking and camping? Where do they hang out and who are they there with?

Be as detailed as possible when you describe your target customer. If you need help structuring the brainstorm, grab my Ideal Customer Worksheet to help you. It’s over on the Free Downloads page.

Once you’ve created a full persona for your ideal customer you can use that persona to inform your marketing strategy because now you understand who it is you’re selling too. If you want this person to actually buy from you, you need to look at their lifestyle and target your marketing so that it hits at the right time in their buying schedule, appeals to their needs and desires, and fits in with their lifestyle and self-image.

When you come up with ideas for new marketing campaigns, go back to your ideal customer persona and think, “Would this campaign appeal to this customer? Would they see it? Would they remember it? Would it motivate them to buy?” If not, it’s not going to be a successful marketing campaign and you need to go back to the drawing board.


Now I want to hear from you: Who is your ideal customer and have you used personas in your marketing planning in the past? Let me know in the comments section below. 

Did you like this video? If so, please remember to like it and to share it with anyone whom you think would it find it helpful. And don’t forget to follow me on social media and sign up for my newsletter so you never miss any info that will help you grow your business.


Give Yourself an Entrepreneurial Goal Alignment Check-Up

No matter why an entrepreneur starts his or her new company, it’s very common that somewhere along the way s/he loses sight of what the original goal was. That’s why it’s so important that all entrepreneurs regularly check in with themselves to ensure that their actions and business strategy continue to align with their overarching goals. This goal alignment is the secret to achieving what you wanted to achieve by becoming an entrepreneur in the first place.

In order to make sure you’re still on track you first need to identify what your original goals were with starting the business. Did you seek freedom, autonomy, and control? Work-life balance? An IPO and billions of dollars? Whatever it was that kickstarted your career in entrepreneurship to begin with, take a second to remember it and write it down.

Next, identify what your current goals are with your company. Maybe they’re exactly the same as when you started but maybe they’ve changed. It’s perfectly acceptable to have reassessed where you want to go, but when you compare your current goals to your original goals, make sure that if they don’t match up you’ve given some real thought to why they’ve changed and that you’re 100% comfortable with where you now intend to go as opposed to having just let your goals wander away as things came up in your business or having been influenced by others. Comparing current goals to your original goals can often highlight for you where you may have let things get away from you and bring you back to focusing on what’s really important to you.

Now that you’re 100% clear on what you want out of entrepreneurship, take a look at your business’ strategy and check that it aligns with those goals. So often people get sucked into running their businesses and forget to keep their eyes on the prize. If you became an entrepreneur because you wanted to improve your work-life balance and spend more time with your family but your company’s growth strategy will require you to work 15 hours a day, 7 days a week – you need to take a step back and figure out how to adjust your business strategy. If you want to IPO but you have no plan in place for growth or financing, you need to do your homework and develop a strategic plan that will get you there.

And finally, once your strategy and goals are aligned, you have to check in on your actions and make sure that they match up with the strategy you’ve already confirmed will get you to your goals. Creating a growth strategy that involves you making 100 sales calls a week and then going to the beach instead does not get you where you want to go, nor does hiring a manager to handle your business so that you can spend time with your family and then micromanaging him or her so that both of you are working 15 hour days.

Entrepreneurship has a great many benefits to offer, but only if you remember to give yourself and your business a check-up and keep your strategy and actions aligned with your goals.

Yesterday’s quotable seemed very appropriate for this post so here it is again:

If what you are doing is not moving you towards your goals then it's moving you away from them.