Business idea

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 base of the pyramid when it comes to the business as a whole.

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 identify the business' value proposition in order to launch to market and establish competitive advantage.

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.[1]

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.[2]
  • 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.[3]
  • Uber was founded in 2009 and has become a $50 billion company in just 6 years, with its simple yet unusual idea of getting a taxi with the press of a button that has completely revolutionized the way we travel.[4]

These 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 [5] in which the company has been around since 1908 [6] whereas Tesla was founded in 2003 [7] and has achieved 50% of General Motors value within 12 years.

Unique selling point

A 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.[8]

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.[9] 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." [10]

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.[11]

Profitability

Profitability is a business's ability to generate earnings compared to its costs over a certain period of time.[12] 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 [13] despite making a loss, because of the monetization potential it has based on the 100 million everyday users of the app.[14]
  • 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.[15]

See also

References

  1. ↑ Unknown. "What is innovation?". Business.gov.au. Retrieved 29 October 2015.
  2. ↑ Kotter International (22 November 2013). "It's not the idea, it's what you do with it". Forbes.com. Retrieved 29 October 2015.
  3. ↑ Dyer, Jeff (19 August 2015). "Decoding Tesla's secret formula". Forbes.com. Retrieved 29 October 2015.
  4. ↑ Davidson, Lauren (21 August 2015). "Uber IPO planned for first half of 2017 as bookings grow four-fold this year". Telegraph.co.uk. Retrieved 29 October 2015.
  5. ↑ Unknown (29 October 2015). "General Motors Company - NYSE". Yahoo.com. Retrieved 29 October 2015.
  6. ↑ General Motors. "General Motors company history". gm.com. General Motors. Retrieved 29 October 2015.
  7. ↑ Tesla. "About Tesla". Teslamotors.com. Tesla Motors. Retrieved 29 October 2015.
  8. ↑ "Definition of USP". whatis.com. Retrieved 29 October 2015.
  9. ↑ Basu, Anasuya (28 August 2014). "Uber tops where taxis fail to tread". telegraphindia.com. Retrieved 29 October 2015.
  10. ↑ "Uber Rush how it works". rush.uber.com. Retrieved 29 October 2015.
  11. ↑ Krippendorf, Kaihan. "great companies solve problems that matter". fastcompany.com. Retrieved 29 October 2015.
  12. ↑ "Profitability ratios". investopedia.com. Retrieved 29 October 2015.
  13. ↑ Egan, Matt (23 January 2015). "Startup lose money despite being worth billions". money.cnn.com. Retrieved 29 October 2015.
  14. ↑ Smith, Craig (8 October 2015). "By the numbers: 60 amazing snaphat statistics". expandedramblings.com. Retrieved 29 October 2015.
  15. ↑ Newcomer, Eric (30 June 2015). "Uber bonds term sheet reveals $470 million in operating losses". bloomberg.com. Retrieved 29 October 2015.
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