"What's next?" is a pretty common question for entrepreneurs. Especially if you've seen some initial traction with your company, it's natural to wonder what products or services you should add to the mix. One stream of revenue is good, so multiple streams must be better, right?
Not necessarily. As a serial entrepreneur, I've launched quite a few products—some winners, some losers—and I've learned the hard way that this quest for shiny new things can take a toll on your core business. In some cases, it can be a huge drain on your time and resources—the very opposite of that profitable path you were hoping for.
So before you bring that new offering to market, here are a few questions to ask yourself that'll ensure it's the right decision for your company.
Question #1: Is the new idea big enough to matter?
When you have one successful business, users often start coming to you with ideas of what could make the product better or what they'd like to see. This can be a great source of data, but it can also send you down a path of creating features that are nice to have, rather than solving a large problem.
For example, my first company, EasyBib, offered citation and bibliography tools for students. We started hearing from schools and universities that they'd like a similar offering, tailored just to them. My co-founder and I thought that an enterprise product like this could be sold to institutions across the country, so we decided to pursue it. But what we ultimately realized was that, for many institutional buyers, our product was a nice-to-have, not a need-to-have like our direct-to-student offering. The idea was big, but it wasn't big enough to matter in comparison to our existing business.
The lesson: yes, an idea might be good, but you also need to consider if it has the potential for being great. Specifically, you'll want to ask yourself: is your product a true pain killer that solves an urgent problem, or is it simply nice to have? And if it does solve an urgent problem, does it have a strong probability of being bigger, better, or more profitable than your current core business?
Question #2: Can you leanly test it and quickly find out if it's viable?
This is my #1 piece of advice for entrepreneurs: before you spend all of the time and resources required to launch something new, see if there's a simple, low-cost way to test it. No matter how good an idea is, and how much research you do, getting the product in the hands of your customer will allow you to quickly understand if you have product-market fit.
For example, at my current company, Solitaired, which pairs classic games with brain training, we had an idea that players might want to play with their friends. Creating a multiplayer version of the software was a pretty complicated build, so instead, we created a button that said Multiplayer that went to a "Coming Soon!" landing page.
This is called a "painted door" test—the idea being that you test demand for something before building it, to decide if it's actually worth pursuing. In our case, after only 2% of users clicked on our button, we realized it wasn't, and we scrapped the idea.
See if you can similarly test your idea as nimbly as possible. If you see some early success, you'll know it's worthwhile to invest in creating the product. And if you don't, that's ok too! You want to fail fast, so you can quickly move on to the next priority.
Question #3: What's your differentiation or competitive advantage?
Entrepreneurs get comparisonitis. It's easy to look at what others in similar spaces are doing and think you should be doing the same. If you find that your idea came from a sense of "we should be doing that, too!" it's time to think hard about why. What's your differentiation or competitive advantage? How can you stand out from the companies who are doing this already? Maybe that's simply doing a better job of marketing or creating a better product experience, but it does need to be something different.
When my co-founder and I started Solitaired, we knew we wanted to be in the gaming space. It's a pretty crowded world—the number of sites that offer card and solitaire games alone is massive. We knew we needed to be doing something different. We bootstrapped the company, so we knew we couldn't compete by launching world-class marketing campaigns or building the most dynamic product out there. But what we could do differently was positioning. No one was tying brain training to classic card games, but with our background in education technology, we could.
Doing something similar to other companies in your industry isn't necessarily a bad thing, but you do need to get creative about how you'll stand out. It's more important to be different than better.
Question #4: What's the opportunity cost?
Pursuing a new idea takes resources—and unless you have a bottomless bank account, those resources will come at the expense of your core business. So it's worth really considering: are those resources better spent on this new idea, or could they be used to double down on your current business, achieving the same level of growth, if not more?
Looking back, at EasyBib, we still had so much more room to grow in our core direct-to-student offering, and we would've had an easier time realizing that growth had we not shifted focus on our enterprise business.
I also often see founders who, instead of hiring new talent to manage the new idea, treat it as a "startup within a startup," leading the charge themselves for a while. And that's all fine and well, as long as you consider: How long will you run this new business? What will suffer about your current business in the meantime, and do you have the right leadership in place to lead the charge? Are you truly the right leader for this particular product? If not, how long will it take before you pass the business along or realize it isn't working?
Question #5: How will you measure success—and failure?
Remember what I said about failing fast? That matters, big time. At EasyBib, we unfortunately dragged our enterprise product on far longer than we should have. We really wanted the product to work, so we continued to push time and resources into it, rather than admit that it probably wasn't going to succeed and that we could better invest our resources in our main business. If we had been more critical with our thinking along the way and less emotional about our new business initiative, we would have realized that our efforts weren't worth it, and we should have doubled down on our core business instead.
Now, when pursuing a new opportunity, my co-founder and I ask ourselves, right at the outset, what success looks like. What do we want to achieve, at what timeline? We constantly measure our progress so we can understand our chances of success and expectations accordingly. And we're not afraid to pull the plug when we realize it's not working.
Most importantly, we celebrate that failure. Because it means we can move right along to the next idea—something that just might work.