Ask yourself 2 questions to figure out if your business idea can make any money
In a video published to the I Will Teach You to Be Rich Youtube channel, Ramit Sethi, CEO of I Will Teach You to Be Rich and GrowthLab, presents what he calls the "pay certainty technique." (He named it that, he says, because it makes certain you get paid.)
Once you've narrowed down some possibilities for your target audience - say, 40-45-year-old women or 35-year-old senior executives - it's time to ask yourself two questions:
- Would these people have the ability to pay ? Do they actually have enough money?
- Do they have the willingness to pay? Would they even agree to pay for this?
It seems simple, but being honest with yourself about these two questions alone can eliminate up to 75% of non-tenable business ideas, Sethi says. He gives an example: Imagine you're a really good stylist. You're excellent at dressing men.
You ask yourself the two questions above in regards to three potential sets of customers:
18-year-old men
- Do they have the ability to pay? No, they don't have the money.
- Do they have the willingness to pay? No. "They don't care. They dress in tee-shirts. They go to college."
65-year-old retiree men
- Do they have the ability to pay? Yes, they have the money.
- Do they have the willingness to pay? No. "They're wearing Hawaiian shirts at the golf course. They don't give a damn."
35-to-40-year-old senior executives or executives
- Do they have the ability to pay? Yes, they have the money.
- Do they have the willingness to pay? Yes. "For them, looking good is important to their corporate careers."
"Is this a broad generalization?" Sethi asks. "Yes. Are there exceptions? Yes. Do I want to spend all my time pursuing a potential idea that has very little chance of succeeding? No."