People frequently come to me with new business ideas. At this stage in my life, I try to answer the question, how can we create a good sustainable business in some area that will make the world a better place? That’s my starting point. But for everyone out there getting started with an entrepreneurial endeavor, there are some common strategies I pursue at Canary Ventures that help to identify and develop the best opportunities.

I have one general exercise that I suggest to everyone who comes to me with an idea or a pitch. I tell them on one page, show me how this proposed business will have a 20% net margin, grow at least 20% a year, and will quickly generate $5 million in revenue. If we’re going to invest our time, energy, and money in this new business, it needs to be able to make a big difference and do so quickly.

This single piece of paper encapsulating the business concept and expected results is the launching point. Once this challenge is met, we need to roll up our sleeves and study anybody and everybody in and around this space that’s done well or not. We’ll talk to bunches of people in the industry, adjacent industries, or even things that may be in a completely different field but may have some semblance of a relationship. This is the most critical aspect of the start-up process.

It’s like looking into a very murky crystal ball at the beginning. The only way for me to eliminate the murkiness is by having lots of conversations with lots of people. Hopefully, that includes lots of smart people in different areas. And typically, through enough conversation with enough different people, the murkiness starts to clear, and inevitably, I reach some aha moment. Like, “This is it. This is the problem we’re going to solve.”

Even with all that work, I don’t care how smart we think we are or how great we think this idea is; it too will shift and evolve over the next twelve months because different opportunities will present themselves. We will learn a lot of stuff that we didn’t realize we were going to learn or that we didn’t know we didn’t know. It’s that profound.

The final aspect is to keep it simple.

Keep everything simple because it’s hard to keep things simple, but if you allow complexity initially, then complexity begets complexity.

So, keep it simple. You’re going to make a gazillion little decisions along the way, and you’re certainly not going to get them all right. But if you keep things simple and return focus to your fundamental learning strategy, you’ll stay on track.

In short, it’s never the idea. There are millions of great ideas. There are also millions of market opportunities. What really matters is the process of putting it together. Business is hard. Starting something from nothing is hard. The idea is just the start. You need to recognize this fact of life and realize that you will hit plenty of speed bumps or roadblocks. Only then will you be able to go into the challenges, eyes-wide-open, fully prepared to succeed.

It’s all about finding the idea with the most promise and then uncovering and solving for the million and one problems that it will take to make it a success. If you don’t know how to sift through it, flesh it out, research it, and then turn it around and look at it in a million different ways, then you’re setting yourself up for defeat.

July 19, 2022 by Scott Sohr