10 red flags your startup idea will fail

In writing my book, The 7 Day Startup, I began to think about the ideas I’ve had that have worked and those that haven’t.

I can count the ones that have worked on 1 finger. I’ve had a lot more ideas that haven’t worked.

In this post I’ll run through 10 signs that you are working on an idea that will fail. If you are launching a new idea, tossing up between ideas, or you want to anaylze past failures, then this should help.

Use these 10 red flags to narrow down your best and worst business ideas – CLICK TO TWEET

1. Was started for the wrong reasons

I’ve fallen into this trap myself and I see other people doing it every day. They start businesses or make changes in their business, because they see someone else doing it well.

Someone else’s success at something is not a good reason for you to do it. Entrepreneurship is a lot more complicated than that. There is timing, luck, product / founder fit and a whole bunch of other factors involved.

I made this mistake when I launched a deals website after seeing other people do it well. It was a dud and I ended up with a container load of Chinese toys in my garage.

2. Doesn’t offer a unique solution to a common problem

People often talk about having a unique point of difference. But that isn’t enough. You have to offer a unique solution to a common problem.

When I started my first web agency, I differentiated by offering websites based on open source Content Management Systems (CMS).  Believe it or not in 2006 that was a point of difference!

The problem was, clients didn’t care. They didn’t see it as a big problem that their web developer had to update their site. Most of them wanted their developer to do it and no intention of managing their own site.

Offering CMS-based sites made me different from my point of view, but to clients I wasn’t offering a better solution to their problem than the next agency.

3. Doesn’t build a reliable source of revenue

A lot of businesses fail because they don’t have reliable revenue. Just making money isn’t enough. Most founders eventually need to draw a reliable wage. In addition, to grow a business usually you need a consistent income so you can invest in consistent expenses (i.e. staff, equipment, software etc).

Recurring revenue is the ultimate form of reliable revenue. However if your business doesn’t suit recurring, then it’s still worth thinking about how you can make it more reliable and consistent. Even if it means making less money now to spread out the revenue curve, I think it makes more sense.

It’s very difficult to grow a business with inconsistent revenue.

4. Doesn’t give you a good financial return on your time invested

Some business owners will just choose the idea that sounds the best, or the one they are most passionate about. But you can’t ignore the financials. Some things are inherently more valuable to people. Perhaps they are more specialized, or less competitive, or appealing to people who have more money.

In our business we’ve decided against offering various products because of the lack of financial return.

  • We could do conversion reviews but because the team can’t really do them, they aren’t really worth the effort for us.
  • We could offer PSD to HTML conversion but that space is crowded and customers are demanding. We’re better off offering more specialised services that we can charge more for.

It’s important to work on what you love, but if you can’t get an adequate return for your time, it means the activity won’t scale. And if that’s true then you won’t be able to grow the business.

5. Isn’t scalable in nature

This is one thing we are heavily focused on at WP Curve, and it’s been the focus since before started. We have a world class team of WordPress developers, so we could offer all kinds of services. But some things are easier to scale than others.

Doing small fixes and support means we can build out our team and the team can do 100% of the work (or close to it). If we were building new sites, we would have to be heavily involved up front and throughout, or people wouldn’t get the service they expected.

If we were doing consulting (which we get asked for frequently) it would rely on me and Alex, and there’s only 2 of us. Hiring a replacement for us would be expensive and difficult. So we don’t do consulting.

Some things by nature, are easier to scale than others. Software as a service for example. Services are harder to scale, but some services are easier than others.

When I started WP Curve, I  looked at about 5 different services I could offer. I was looking at things like content marketing services and conversion rate optimization. We chose WordPress support and small fixes because the others would have been much more difficult to scale.

6. Doesn’t serve a large market

I think if you are going to go through the (sometimes) hell that is entrepreneurship, it better be worth it. I don’t see the point in creating a job for yourself by starting a niche business. And I don’t like the idea of starting in a niche and the interrupting your momentum down the track, to go after a bigger market.

I much prefer the idea of operating in a large market to start with. Picking a market that is too small can result in an outright failure of a business. But more likely, is it will result in a business that quickly hits a ceiling and achieves moderate success.

I see a lot of founders who have started software apps like this and they are constantly questioning whether they branch out into new products or modify their offering. I don’t want this distraction as a startup founder. I want to be able to pursue the same thing for as long as I have to, in order to make it into a decent company.

7.  Isn’t something people are currently paying for

With the first version of my startup Informly, I tried to sell a simplified analytics dashboard to entrepreneurs and small businesses. I didn’t want to offer something to data junkies, it was to be for every day business owners who wanted to see simple stats that they could understand.

The problem was, this wasn’t something they were paying for, or had ever thought of paying for. Most of them used Google Analytics yes, but Google Analytics is free. I had to convince them that they should spend money on something new. And that was not easy.

With WP Curve, people are already paying for someone to fix their WordPress site. All we have to do is convince them that we are a better solution. That is infinitely easier than trying to create a market that doesn’t exist.

8. Is outside your wheelhouse

This mistake happens to people who think because they are entrepreneurs they can start whatever business they like. But they forget that there needs to be a fit between them and the business. This could manifest itself in a bunch of ways:

  • You offer something in a field you don’t have expertise in.
  • You offer something that doesn’t suit your current audience.
  • You offer something that contradicts what you are known for.

It’s cool to branch out, but it takes a long time to convince people that you are an expert. If you are known to be an expert in something, it will be much easier for you to start a business in that field than something new.

9. Doesn’t suit your marketing style

Every business has a different way of generating customers. In my last business, a local agency, the typical model is going out and meeting businesses on site and delivering them a proposal. The problem was, I sucked at that. And I hated it!

If I had Alex in my last company we probably would have killed it. But with just me it didn’t make a lot of sense.

With our business now we make sure that it suits our marketing style. What works for me is an audience based strategy with a free solution and a paid solution. I focus on the free solution which is giving away content, plugins, email courses, marketing guides, podcasts etc. For people who suit our service, we have it sitting there for when they are ready to come on board. This suits my style well.

If your style and the way the business needs to find customers is out of sync, you’ll have a problem.

10. Isn’t fun to work on day to day

I think every entrepreneur at one stage or another has made this mistake. Entrepreneurs are just inherently BAD at working on things they don’t enjoy.

I’ve made this mistake a few times myself. If you start a business that has you doing work that you don’t enjoy, you’ll only be able to put up with it for so long. If you can scale quickly enough to replace yourself that’s great. But if not, you’re screwed.

With me it doesn’t take long to get bored of something, and I sense a lot of entrepreneurs are the same. So make sure for your next idea, you can see yourself grinding it out day in day out for the long haul.

What have you learnt from your failures and successes?

If you’ve had a few wins and a few losses, comment below and let us know what were the indicators for you. Are they in line with mine?

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About

Dan Norris is a co-founder at WP Curve and a passionate entrepreneur with an obsession for content marketing.

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