All good businesses start with a good idea, so presumably a good idea must have value. “Can I sell a business idea?” is not such a silly question.
It is, therefore, a natural step to take – to believe that your business idea has value. After all, you have identified something the world needs, but no-one has thought of it up until now. Thankfully you did.
If you have managed to think of one particular idea, then you probably have a curious, fertile mind which has thought of other ideas. Let’s assume for a moment that everyone in the world is holding on to just one good idea. There will be some like you who have had several ideas and some who have never had a good idea and never will.
This conservative assumption suggests that there might be 7.6 billion good business ideas out there. You won’t be surprised to learn that there aren’t 7.6 billion new products or services under development at this time. But if a good business idea has value, why has the opportunity to benefit from this value not been taken up?
An idea in itself has no value.
That is, it has no value to anyone else at the moment, only to you. It provides you with the opportunity, motivation and focus to help foster its development into something greater than just an idea, to reach a point that might enable someone else also to consider that it has value.
That development could be a basic prototype of a product, some local market research supporting your idea or perhaps the preparation of some well-articulated science which proves why your idea is useful and unique. To achieve this might cost you a small sum of money, possibly to fund the cost of raw materials for your prototype or to pay an individual to help you with your research.
When a second person believes that your business idea has value and is prepared to invest in it, probably some modest seed money at this stage, then you have succeeded. Your idea now has real value. Someone has agreed to pay you some money to have a stake in your idea. You have effectively sold your idea, or at least sold the rights for someone else to share future benefits that your idea might realise.
The chances are that this investment will allow you to develop your product or service further, but not too far. Hopefully, you can get to a point, before the money runs out, where your product/service is that bit closer to being real, to being in a position to create revenue. It might be time to look for a whip-round from friends and family.
Your idea will need to be more robust than when you gained the approval of your first investor. Your friends and family may not grasp the notion of value in your idea straight away, but provided that they believe in you, a small leap of faith should put some further seed money in your direction.
Now, here’s the interesting thing. When it comes to setting a price for this second buy-in, your first investor will expect the new investors to pay more per slice than he/she did initially. After all, they invested earlier when the idea was a little more woolly, a little riskier. So your friends and family will pay a bit more for their slice. Regardless of how many slices you have managed to hold onto, your business idea is now demonstrably more valuable.
And so it goes on. The idea moves to concept, prototype, working model, a series of trials, and so on. At each stage, you may need to raise more money and, again, your current investors will expect the new investors to pay a little more than they did for the same reason as we mentioned above. Your idea is now looking more like a viable product and has value to many more people.
Don’t ask “Can I sell a business idea?” but “How can I grow my business idea?”
Any horticulturalist will tell you that when nurturing a seedling through the growth stages towards becoming a healthy, flourishing, flowering plant, one of the most critical factors affecting growth will be the size of the pot that you choose at each stage of development.
Too small and the roots will be cramped and constrained. Perhaps the soil will dry out too quickly. Either way, its growth will be restricted. But, too large and your pride and joy may also struggle. Perhaps it will hold too much water, leading to mouldy roots and disease. Maybe the soil will break away from the roots and make it harder for it to absorb those vital nutrients. You must be prepared to re-pot your plant several times along the way, marginally increasing the size of the pot each time. The result will be the biggest, healthiest and most robust plant that you could have imagined.
This is how you should look at the conversion of your original business idea into something of real value. Instead of re-potting a plant at each incremental stage to help it grow, you are representing your ever-bigger and stronger idea to a new round of potential investors. They will fund your aspirations to the next potting stage. At each round, your idea has reinforced its greater worth and brings you closer to realising real value when it starts generating revenue as an actual product or service.
But, don’t be tempted to go on Shark Tank or Dragon’s Den until you have a real product which works and has a growing track record of sales. Different investors will have different rules about when to invest in a start-up venture. However, as a golden rule, if you want someone to provide serious capital, they are unlikely to invest in just an idea or a concept. They want to invest in a demonstrably saleable product or service, which they believe could sell squillions of times more than currently. So keep hold of the image of the seedling, moving its way through a series of incrementally sized pots before you look to humiliate yourself on national TV with a half-baked product/service.
Focus on adding value to your idea, not trying to sell it.
So, can I sell a business idea? – In summary:
- You can try selling a business idea and might succeed. But it won’t make you rich. Instead, focus on the incremental stages that you will need to go through to reach your goal. Focus on adding value to your idea at each stage, not trying to sell it. Trying to sell something with no value has little value either. What do you need to achieve at each stage to germinate your idea, to bring it ever-closer to generating revenue and therefore allowing more and more investors to see the value that you initially identified?
- While you must maintain as much of the pie as you can at each step, be realistic. You have found individuals who are prepared to do the hard bit – part with cash. Don’t waste energy scheming how to conjure up a greater share of the pie, obsess how to make the pie as big as you can. Spend your time and energy converting their investment into something massive – i.e. create real value, a revenue-earning business that will inspire others to part with even more cash.
- The harsh reality of life is that the guys with the money hold all the trump cards. Ideas are just ideas. Somebody has to inject cash to give an idea a chance of being worth something. It is much harder to part with cash for a good idea than it is to have that good idea in the first place. Cash is King.
- Don’t worry if your investors end up with the biggest slice. Who cares? Would you rather own 10% of a multi-million dollar company or 100% of not very much?
- If you really believe in your idea, then don’t give up too quickly. But do be prepared to stop before you mortgage your house, wife and kids away.
“If at first you don’t succeed, try, try again. Then quit. There’s no point in being a damn fool about it.”