Step 2: Ask yourself these 4 questions
It’s easy to sit back and come up with a list of random ideas. But without the right framework, you can’t say that these ideas will ever have weight.
That’s why we use this simple test to get the ball rolling.
The first part of this exercise is to ask yourself 4 questions.
Question #1: What am I paying for?
I would like to lead with this question because most of us can’t even fully understand that someone can pay them something.
But if you think about it, we already pay other people tons of random stuff.
For example, maybe you pay someone to:
- Clean your apartment
- Change the oil in your car
- Make your dinner
When you start making your list, you will quickly realize that you are paying other people every day.
That’s why I’m starting with this question. It opens your mind to the possibilities.
So take a second – right now – and think about the 3-5 things you already pay for. Write them down on a piece of paper and move on to the next question.
Question #2: What skills do I have?
What do you do well? Write those things down.
Remember, there are no bad ideas here. Your list of skills can include anything you want.
- Are you good at cooking?
- Do you speak Spanish?
- Are you an Excel wiz?
As you build your list, you’ll start to see what people can pay you.
Example: If you are good at cooking, maybe someone would pay you to be their personal chef?
If you know Spanish, maybe you can teach someone?
If you’re amazing at Excel, I know plenty of people who would happily pay you to make charts for them – right now.
I want you to push yourself to come up with a list of 10 skills that you already have. Write down anything that comes to mind. Do not filter any of your comments.
Once you get at least 10, you can move on to the next question.
Question #3: What do my friends say I’m the best at?
This is important to think about because it can be very revealing.
Maybe your friends always say, “Wow, you give amazing relationship advice. You are the only person I come to.” Or, “Your apartment is very organized. I wish my place looked like this.” Or, “OMG, you always wear the best dress! I am very jealous.”
You can turn all three of those things into successful businesses.
Sometimes it’s easy to forget that we have these skills because they come naturally.
That’s why I’m including this step.
If you find yourself thinking, “Ramit, I have no skills,” go ask your friends. It might seem weird, but I bet they’ll give you a list of at least 3 things you’re amazing at – right away.
Add these ideas to your list. Take at least 3-5 ideas and feel free to ask a few different people if you want.
Trust me, there are good things in them that you might not see.
Question #4: What do I do on Saturday morning?
This last question comes from one of my best friends, Ben Casnocha.
He said, “When you’re trying to come up with a business idea, think about what you’re doing on a Saturday morning before everyone else wakes up.
- What are you studying? Fashion magazines? Fitness books?
- What are you watching?
- What is one thing you can do all day?
Another way to think about it: If you were locked in a room with your friend, what would you talk about for 3 hours straight?
This is a great way to express ideas and passions. Things you would like to share with the world.
Writing down these ideas can go a long way in helping you find a successful business idea.
At the end of these 4 questions, you should have at least 20 ideas written down. If you don’t have 20, go back and try each question again until you do.
Once you get to 20, you’re ready for step 3.
Step 3: Use the Demand Matrix to ensure your success
Most people will just leave it there and say, “Make a list. Enjoy it!”
But I want to take it one step further. In our studies, we are always testing our ideas for profit.
That way we can ensure that they will succeed.
And with that, I want to show you a tool that we use called the “Demand Matrix.” Here’s how it looks:
The Demand Matrix is the easiest way to take your 20 ideas from step 2 and figure out which ones are worth your time.
Before we get to that, I want to explain how this chart works.
In the upper right corner of the chart, you have it Golden Goose. Ideas that fall under this category make good businesses. That’s because these ideas have the potential to get more customers and command a higher price. Think of companies like P90x and Apple’s iPhone – the more customers, the higher the prices.
Then, in the lower right corner, you will see Mass Market. Under a large market, you can still get more customers, but you will only be able to charge a lower price. Think of popular books you might read, such as The 4 Hour Work Week. There are many customers, but the price point is very low.
Next, in the lower left corner, you have A Labor of Love. These are business ideas that have few potential customers and can only charge a very low price. Any business idea that falls into this category will fail – before it even starts. This is your weekend of fun that no one else can afford.
Finally, in the upper left corner, you’ve found it The High End. This is still a good business option because you can charge a high price, but you will likely have relatively few customers. Think of companies like Rolls Royce and Prada. They charge a very high price but have relatively few customers.
I have mapped some products for my business. That way you can see where some of our business ideas fall on the chart:
High End: 6-Figure Consulting System course. Since this course helps successful business owners make a lot of money, we have fewer clients, but can charge a higher price. Successful business owners are willing to pay a higher price to increase their sales.
Goose Goose: Our Find Your Dream job lesson comes in here. This is a program where I show people how to find a job they love. Obviously the market for this is huge because 90+% of us have jobs. And because finding a Dream Job is something people really want, we can charge a very high price for the program.
Labor of Love: This is where we put all our business ideas that may never see the light of day. Some examples would include an ironing course or a class where I teach people about spicy food. Yes, those may be things I like and am good at, but there isn’t a huge market for those. And any market where there are people, those people will not really pay.
Mass Market: This is where my book, I Will Teach You to Be Rich, falls into place. Books are good mass market products because many people buy them, but the price is low.
Do you see how it works?
It’s a great way to test your ideas of (1) profit and (2) demand.
It is not intended to be high science. It’s just a step back to find out if the idea has a chance to make a profit.
There are no right or wrong answers.
To assess demand, simply ask yourself, “Do many people care about this?” If the answer is yes, ask yourself, “Are people willing to pay a lot of money to solve this problem?” to find out the price.
You will soon see where your different opinions fall on the chart.
It’s very simple, but I want to make sure you go through each step properly. Finding this out early can save you thousands of hours in the long run.