Entrepreneurship is how many “first-generation rich” millionaires got their wealth, according to Jamie Masters, author of “The Eventual Millionaire: How Anyone Can Be an Entrepreneur and Successfully Grow Their Startup.”
Masters, who wrote her book under the name Jamie Tardy, studied and interviewed over 100 millionaires to get insights on how to change her own life. She was 24 years old, over $70,000 in debt, and in a job she hated.
She learned that many millionaires did not want to be committed to working for someone else. And it wasn’t just about the money – it was about the lifestyle as a whole. So instead, they went on to be their own boss.
But millionaires didn’t just come up with one idea or one product they were passionate about to get rich. They came up with lists of things they knew and had skills for and knew there was a need for.
“A good business is something that solves a problem for someone that needs it solved. The value to the end customer is enough that they want to pay for it,” writes Masters.
So how do you know if you have an idea that could potentially earn you a fortune? Based on her research, here are the three tests Masters suggests to decide which of your ideas could be the one worth pursuing. By putting your idea through these three stages of evaluation, she explains, you can figure out which “fits best for your life, your wallet, and the market.”
1. Your life: the lifestyle test
“Some millionaires didn’t understand what commitments, schedules, and requirements were necessary before they started. If your business doesn’t fit within your life plan, then you may come to resent it,” writes Masters.
Recognizing the type of lifestyle you want is different from acknowledging the type you should want, writes Masters. For instance, she sees two ways a business generally fits into an entrepreneur’s lifestyle: working insanely and selling for a big payout, or creating a lifestyle business from the start.
Neither is better, but different people would prefer each.
In order to figure out what type of lifestyle might be best for you, she recommends you ask yourself:
What does your ideal day look like? Be detailed, from when and how you wake up to what you eat for lunch, what you see in your bank account, and what your attitude is like.
How does each idea fit into that ideal day? Write a quick synopsis of what that business would require of you, and rate it on a scale of 1-10, one being those that come closest to your ideal lifestyle. Now, you can cross off the ones that don’t fit.
“I know this sounds like common sense, but many of us start on a path and don’t realize where that path is leading,” she writes.
2. Your wallet: the circumstances test
Coming up with an idea is great, but it doesn’t predict whether you will succeed … or even able to afford it.
Masters suggests asking yourself two questions to estimate its impact on your wallet:
What are your start-up costs?
Consider factors such as:
• buildings/real estate/leasing
• equipment, location/administrative expenses
• opening inventory
• marketing/advertising expenses
• other expenses
• contingency fund
What does the industry look like for your business?
This is done through what’s called a SWOT analysis: predicting the strengths, weaknesses, opportunities, and threats to your idea.
Strengths are the characteristics of the business that give it an advantage over others; weaknesses are characteristics that place the business at a disadvantage relative to others; opportunities are the chances to improve performance in the environment; and threats are the elements in the environment that could cause trouble for the business.
Once you’ve done this for your idea or ideas, Masters suggests doing it for at least five of your top competitors, to get an idea of what they are and aren’t doing well, and how it compares to your prospective business.
3. The market: feedback
To pitch an idea, it’s important to determine the cost, revenue, and value of your product. You also have to identify your target to find your potential customer — someone who might need and would buy what you’re selling. These people should not be your family or friends.
After identifying your potential customers, you have to see what they think of your product. The questions she suggests to ask when you’re trying to get feedback from potential customers are:
• Under what conditions would you buy it?
• What price would you pay?
• Make-it-or-break-it question: When can I expect that you and I would sign a letter of intent for that purchase?
“As a new business owner, you need to know if a customer is willing to pay for the solution before you invest a lot of money or time,” writes Masters.
If you can’t get through all three tests, the product might not be a good one, she says. You’ll have to tweak it or move on to the next idea on the list.