Business Idea Study: Most Common Business Idea Types and Causes For Failure

2013-06-09 16:51

For the past year I have been the founder of Problemio which creates mobile applications that guide and support entrepreneurs in going from a business idea to an operational business.  Across all our apps, over 15,000 actual businesses have been planned and 3,500 of those businesses shared their data from which we conducted research, some of which we are sharing in this and future articles.

Approximately 80% of the people who download our apps are at the idea stage with their business. They are either looking for ideas, trying to determine whether their ideas are good, or are looking for help in starting on their businesses.  Naturally, we have seen thousands of questions about business ideas, varying from what kind of business ideas people should have, to whether a certain type of an idea is good or not, and every kind of inquiry you can imagine. Since we cannot answer all such questions every time, we created business idea apps with articles that answer most of the common questions as well as help from a real person if people have questions. Here is the Android business idea app  and iPhone business idea app.

Now, let’s share what we found with our research. Prior to this research, it had been nearly impossible to track small business data at the idea stage because such businesses get started and abandoned without ever being documented.  But thanks to the 3,500 entrepreneurs who shared their businesses with us, we can now share our findings with you.

Our app is mostly global, but since our apps are not available in some countries such as China and Russia, here is a breakdown of where our entrepreneurs came from:

Obviously, the types of business ideas people have in India are not the same as the type of ideas people have in United States. We will go into more detail of business ideas that come from developed vs. the developing world in a later article. Additionally, there are many cultural and financial differences that influence the types of business ideas people tend to have. But as a blend, here is the different business ideas people had:

The biggest challenges people generally face are: not having the right experience, not having enough money, and choosing business ideas that they probably cannot pursue successfully.

To elaborate on the last point. To be able to pursue a business idea well, the founding team must have experience and resources needed to compete within the market in which the business idea is in.  For example, if a business sells shoes online, they have to compete with some of the biggest websites in the world like shopping.com or amazon.com and other established online retailers.  And to truly compete with them, you have to outcompete them on marketing, pricing and other issues. Since they have been building a brand for the last 15 years, it is nearly impossible to outmarket them because Amazon is nearly synonymous with online shopping these days. And it is even more difficult to outcompete them on price in any sustainable way because they have been improving logistics to decrease prices for the past 15 years as well.  So the business idea has to be viable in the environment it is in by finding its niche in the crowded business environment.

Here is a breakdown of the biggest types of challenges new businesses tend to face. A business usually faces multiple such challenges at the same time:

So when you are planning the strategy for your business idea, try to plan around as many of these difficulties as possible so that they do not threaten your business.

So what else did we learn that we can advise new entrepreneurs? Here are a few more tips to entrepreneurs who are thinking of starting a business.

First, try to think about business ideas in fields in which you have a passion, experience, connections, or education. As the founder, you will need to bring as much extra edge to your business as possible. And lacking interest, knowledge, or passion is seldom the recipe for success.

Second, make sure you understand the size of the overall opportunity. If the opportunity is in the billions, you will face extreme competition. So consider whether you can get the resources to compete in ultra-competitive environments.  And if the opportunity is too small, then maybe there just is not enough of a market size to support the business. Try to balance being able to compete with the size of the opportunity.  As mentioned in tip #1, having knowledge and experience in the industry will help you determine your ability to compete and understand the size of the opportunity. You see, these tips are quite pertinent and come up immediately.

Third, try to get guidance and support from people who have started a business in the area that you want to start as well. Getting guidance and mentoring from experienced entrepreneurs can be an amazing boost for your business.

There are a number of articles on various business idea issues on our website. You can take a look at our website’s business idea page.

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