There are millions of businesses on the Internet, but only a small percentage make the bulk of their revenue online and even less make a full-time income for the business owner.
If you study highly profitable online businesses, they all share a few common traits. However different they are, they all share these 8 elements of a profitable online business.
A Profitable Idea
A Targeted Niche
A Unique Selling Proposition
Design for Conversion
A Digital Marketing Strategy
Strong Client Relationships
An Optimized Sales Process
What do I mean when I say, “online business”?
You’ve probably heard the term “online business” used in a few different ways.
You may have encountered eCommerce, consulting, or online course businesses.
eCommerce businesses sell physical products on their website and ship them to customers. eCommerce businesses trade products for money.
Consulting businesses can offer an array of services for which clients pay for an expert’s opinion on solving a certain problem and sometimes to implement their advice in a customized way. Consulting businesses usually trade time or value for money.
Online course businesses offer online courses and maybe other digital products like an eBook. The best will also offer live coaching and workshops for their students.
An online business can be any combination of the above and more.
Now, for this brief post, I’m going to break down the first piece: How to Generate a Profitable Idea and explain how anyone can come up with multiple online business ideas from scratch.
Generating A Profitable Idea
Say you don't have a business idea, but you do have the entrepreneurial spirit. There is a simple process that will guide you through coming up with multiple potential ideas.
1. Skills, Strengths, & Interests Audit
Your business idea should be a combination of what you “know”, what you’re “good at”, what you’re “interested in”, and what your audience “wants and needs”.
This first step is about figuring out the first three pieces:
Skills: what you know
Strengths: what you're good at
Interests: what you're interested in doing
Download this worksheet to follow along and complete these steps on your own.
First, we’re going to figure out your existing skills.
1. Your Skills
Skills are generally concrete knowledge about how to do something or things you’ve learned how to do well. The business world calls these “hard skills”, but these can also be skills you’ve acquired through overcoming a difficult challenge.
1. "What skills have I acquired in school / at my job/apprenticeship / online course?" (e.g. writing sales emails, how to lose weight effectively, video editing, web development, graphic design, etc.)
Think about what jobs you have/had and what you learned.
Can you share any insight or knowledge from your work life that will help people who haven’t had that experience? Or, help people get a job like yours?
2. "What challenges have I overcome?" (e.g. overcame my bipolar disorder, curated a diet to treat my gluten allergy, handled my divorce extremely well, started an online business, etc.)
Have you become an amateur or expert at something like playing guitar or finger painting?
Have you gamed the system on earning rewards with credit card points?
Now, list 7 skills (things you’ve learned how to do well) in the left column of your worksheet.
2. Your Strengths
Strengths are generally things you’re naturally good at or that come easily to you, but can also be what the business world calls “soft skills”.
1. "What do my friends say I'm really good at?" (e.g. great listener, funniest person they know, die-hard motivator, travel-hacker, etc.)
2. "What comes easily to me?" or "What do other people struggle with?" (e.g. I don't mind confrontation, I love reading for hours on end, I can meet and get along with anyone in a room, etc.)
Now list 7 strengths (things you're naturally good at) in the right column of your worksheet.
3. Your Interests
1. "Of these skills and strengths, which would I like to explore more if I had an extra 3 hours of free time per week?" (e.g. code a new program, go rock climbing, make a dinner party, build something with my hands, find cheap flights around the world, etc.)
Underline the Skills & Strengths that you're interested in (things you would like to learn more about)
4. Your Business Ideas
Combine all of the underlined skills and strengths to come up with 20 potential business ideas
Skill: How to lose weight effectively + Strength: Die-hard motivator = Fitness & Nutrition Coach
Skills: writing sales emails + web design + Strength: travel-hacker = Online business coach 😉
2. Demand Matrix
Now we're going to figure out where your business idea fits in regards to its potential demand and market by plotting your ideas down in the Demand Matrix below.
Before you start, here are four general types of businesses:
1. Labor of Love: These are the businesses that sell at a low price and appeal to few customers (this is the only business type you cannot pursue if you want to successfully profit from your business long term. If all of your ideas fit into this category, go back to step 1 and start over)
2. Mass Market: These businesses have a low price but many customers. They could be great but are difficult to manage as a beginner because they usually have many moving parts.
3. High-End: These businesses are usually the most common for online freelancers and solopreneurs. They have a high-price and few customers.
4. Golden: These businesses are the best of the best because they have a high-price and many customers, but can be much harder to start because there is so much competition.
Now fill out your own Demand Matrix in the worksheet and plot your ideas down in the category that fits them best. No matter how attached you are to ideas that fall into the Labor of Love category, understand that they are not viable for profitability, but if you start a profitable business you can then fund your Labors of Love.
If you’re not 100% certain where your idea fits, that’s okay! We are never 100% certain,
either. The Demand Matrix is just a framework to organize your ideas, not to make a final decision.
3. Pick one to focus on for now
Now, knowing your ideas potential demand and market, it's time to choose one to test first.
You can always go back and test another idea so just pick the one you like the most or force yourself to pick one at random.
WARNING: DO NOT get stuck in analysis paralysis (analyzing every course of action to the point of inaction). If you start over-analyzing, do whatever you have to in order to pick an idea to start with or have a trusted friend or family member pick for you. The second you indulge your over-analyzing is the second you delay your business for months. DON'T FALL INTO THAT TRAP.