Developing that right side business idea, one that you can launch with your current resources and skills, one that solves a real problem, and has a way to deliver that value, can all be a challenge.
Over the years of working with people who are struggling to develop their business idea, I developed the Side Business Idea Equation. It’s an original methodology I developed to help people exactly like you, who work full time and want to start a side business.
Table of Contents
What is The Side Business Idea Equation & Method?
The Side Business Idea Equation is an original equation and methodology I’ve developed over the years in order to develop side-business ideas that I could go on to launch.
It is a three-step process/ equation that will help you develop the right side business idea for you.
One that you can launch with the own resources and skills you have.
No need to spend more time scouring the internet, looking for business ideas.
How can this equation can help you
Using this equation, you can find a problem that you can solve for your local area. After that, you can learn what you’re passionate about, the skills you have and resources to combine that into something that adds value to others in that problem. Then, you can put it all into a system that will deliver that value in a way that someone may want to pay for.
Ultimately, developing a side-business idea that you can move forward with and execute.
This equation also helps you think of more business ideas. The more business ideas one can think of, the better. If you are able to think of 10 new business ideas each day and do this every day, you would have over 300 business ideas in a month! Imagine how much better your ideas would be by then. The exercise we explore later will help with this part too.
When you learn how all the pieces of the equation fit together, each business idea you think of will be much better than it was if you did not consider this equation. It also allows you to kill business ideas quickly if the one piece is not very strong.
Part 1: The Problem
To better understand business ideas, I have broken down a business idea into a simple equation. We’ll look at the size of the problems you need to identify to be successful, as well as different types of problems. Then to get you started there are three actionable steps you can take at the end to find problems you can solve for your side business idea.
Why the problem is important
Every business out there solves a problem. For example, accountants solve the problem of dealing with taxes every year, or a caretaker providing elderly assistant services to solve the aging population problem.
Problems come in all shapes and sizes, and it is important you have the ability to recognize both those aspects. It can be great if you know how to identify problems, but if the problems are extremely particular to one individual, you are not gaining a broad enough view of problems.
The size of the problem
For the problem piece to be effective for your business idea, the problem you are going to try and solve needs to affect at least 1,000 to 2,000+ people for it to be worth pursuing. Otherwise, it is too small of a problem, and you may not make enough money to stay in business.
Types of Problems
There are problems that relate to all levels of Maslow’s Hierarchy of Needs.
All of these levels can be catered to because each one has problems that these needs solve. For example, if you are dying of thirst and buy a water bottle, they solved the physiological need that you had. It was a problem that you were thirsty and the company was there to solve that problem.
Another example is esteem needs. Companies that offer products and services to this level are what make up a majority of companies in North America and Europe. Clothing, jewelry, and accessories are all examples of types of companies that cater to esteem needs. Although they do not solve the real problems associated with the esteem needs, they do cater to them.
Problems You Can Relate To
It is best to try and solve problems that you can relate to and have a passion for. A great example of this is the creator of the app Peerex, a recent case study done on this brilliant entrepreneur. The founder saw a problem related to currency exchange that personally affected him, and wanted to solve it because he himself would find the solution valuable. Knowing other travelers would benefit, Kai became very passionate about solving the problem.
How to find problems to solve
If you were like me and struggled to find problems to solve, here are a few ways to get started.
The Startup Matrix
This tool is great if you are want to find problems to solve using a technological business idea. This matrix gives you a great understanding of where others are in the marketplace, and possible places for you to fit in. Once you find a spot that you would want to think of business ideas for, you can begin by finding the problems in that industry. Check out the tool here.
Business Ideas From the News
Problems found in the news is a great way to get started. The reason I love it so much is because the problems you find are usually from groups of people, so you are not depending on one person’s opinion. Another great aspect is that new articles get published by the minute these days, so you get a fresh stream of content to peruse. As an aspiring entrepreneur, it is important to learn how to identify the real problem that is presented, and question if you want to solve it. For in-depth examples, check out business ideas from the news.
Asking Friends & Yourself
Finding out the problems in your own friend group is a great place to start. It can be as easy as texting them, and asking what problems they face. Try to ask questions that dive into the details so you understand why it is a problem. Sometimes the problem a person says is not the actual problem that they are facing.
Part 2: The Value You Can Bring
If you are going to be thinking of business ideas, and move forward in your entrepreneurial journey then knowing the value you can bring to the marketplace is crucial. You’ll also need to know how you can find all the aspects that make up the value you bring. When you’re done reading this you’ll be able to easily find problems you can solve with the value you can bring.
Why is the Value You Can Bring Important?
The value you can bring is very important. If you are going to execute on a business idea and solve a problem, you are going to need capabilities, resources, and skills to do this. This is all part of the value that you can bring.
Your capabilities include both your natural and acquired strengths and skills. The combination of your strengths and skills also makes you unique, take note.
Your resources include your money, time, help, access to vital equipment, etc, that you will need to operate your business.
For example, if someone wanted to start an industrial building development company, they would need to have access to large amounts of money to afford the huge material, labor, and machinery costs. If you do not have access to that kind of capital, it is key to think about how you can get gathering funding or move onto a different problem with the value you can bring at a smaller scale.
If you choose to move forward with a problem and you don’t have all the value to bring the idea to life, then you will need to start thinking about how you can fill the gaps. That could involve hiring a co-founder or a key employee that will be able to fill in where you cannot.
Finding Value You Can Bring to The Market
If you are wondering how you can take into account your resources, skills, and capabilities? I’ve made an actionable checklist below with both free and paid (for the advanced) exercises you can try.
This is a list of things you will want to think about when you are taking into account your resources:
1) How much money do I have access to, to put towards my business idea?
2) How much time can I commit towards my business idea?
3) If I am not making money in the first few years, can I afford to live or will I need to get a job?
As successful entrepreneurs have said, it is important to know and understand your capacity and resources if you want to be successful. So many business ideas fail because they run out of money or other key resources because the founder underestimated the capacity this business idea was going to take.
If you are looking a more advanced version to find your strengths, I would highly recommend you buy and take the Strengths Finder 2.0 book and assessment. I could go on for hours about why I love this strengths test, and how it is the best one out there, so if you are wondering more, you can read the review I wrote here.
Capabilities & Skills
To account for your capabilities and skills, I would write down what you believe you are good at. If you end up getting stuck, a really helpful thing that I have done is ask my close friends and family what they think I am good at. They know me very well from a different point of view so they can offer great insight to what I am good at and enjoy doing. Get stuck, answer these questions:
1) What am I good at?
2) What do others say I am good at?
3) What task do I get lost for hours in?
Putting The Problem And Value You Can Bring Together
Knowing how the value you bring to the marketplace fits into the problems at hand is a very important tool to have as an aspiring entrepreneur. It will make your chances of success with your business idea much higher, than if you were to otherwise ignore all this information.
Part 3: The Business Model
In the previous two parts of this series, we first went over the problem side to the business idea and second part goes over the value you can bring, and ways of discovering that.
Why Your Business Model is Important
Your business model is extremely important for your business idea. It will explain how it will operate, and ultimately determine if the business idea will succeed or fail. To better understand, you’ll need to know what exactly a business model is.
According to Harvard Business Review, a business model answers these questions:
- How do we make money in this business?
- What is the underlying economic logic that explains how we can deliver value to customers at an appropriate cost?
- Who is the customer? And what does the customer value?’
A key detail to note is that different business models will have different answers to these questions.
McDonald’s business model is to sell a high volume of food that is cheap to make and cheap to buy. They deliver their value to customers in an efficient and cost-effective way. On the flip side, a high-end restaurant makes money through providing the best of the best with food and service. They deliver their value on a silver platter (no pun intended).
Another example would be Netflix vs Blockbuster. Netflix used a subscription business model and delivered their product digitally. Whereas blockbuster utilized a pay per use model, and had physical products that needed to be distributed through retail stores. Both very different business models in the same industry.
Service based business models
Why a service-based business model? Well, I believe it’s much easier to operate as your first side-business, while you work a job, as you don’t need to worry so much about the product and inventory management, which can be very difficult if you’ve never executed before.
With a service-based model, it’s easier to capture the value you can bring and deliver it to people in a way that would allow you to charge higher prices than with a product, as you can deliver a transformation.
There are different types of service based business models to think about. For instance, you could have a one-off fee that you charge, or an on-going monthly subscription fee for service. Both of these would create slightly different service business models as you would be delivering value in a different way for each.
Choosing The Right Business Model For You
Choosing the right serve business model will depend on how your target market wants to be charged, and how they want the service delivered.
For instance, if the service involves transforming someone’s life from being fat to in-shape, that is something that can be done in two ways. You could be a one-time fee-based service model and provide them all the tools they need in a session to reach that goal.
Or, you could charge a monthly fee to work with them more personally to achieve the goals. Both would create different situations in how you’re paid and how you’d deliver the service to the client.
Putting The Side Business Idea Equation & Method Together
Once you put all the pieces of The Side Business Idea Equation together, the problem, the value you can bring and the business model, you’ll end up with your side business idea.
This idea will be one that follows business fundamentals as it solves a problem, is one you can actually launch and have passion for, and has a system for delivering value to the target market.
The problem is fundamental to creating a solution, and you can do that by accounting for your skills and strengths. Next, you can deliver that value in a service-based business model to create the business.
So, the next step is to put this into practice.