ESYB2 011 - Different Kinds of Business Ideas
===

[00:00:00] In this video, I want to talk about the three different types of business ideas. And you may have thought, well, business ideas, they're business ideas. They're all the same, but no, they're actually not all the same. Let's kind of categorize them so that you can have some context of how to evaluate each type.

The first is what I call. And by the way, this is my categorization. This is something that I came up with. You're not going to kind of see this elsewhere, but I feel like this is easy to understand. So commoditized business ideas are things that we know and have seen many, many times. Local cleaners, roofing businesses, home repair, dentists, doctors.

There's a million such businesses throughout the world, every city has them. We know them. And the steps to pull them off are known a hundred percent precisely because they've been done a million times before. Even if you don't know the steps maybe, there are many people who do and your job is to find out what are the [00:01:00] steps.

Get that mentor who is super expert, usually a person who's done that exactly business before and follow those steps as accurately and in as as disciplined manner as possible so you get all the steps right and you execute exactly what's needed to make that business a success and the product and market risk can be minimal.

Because it's known if the demand is known, like if cleaning business, you know that it's needed long care business, you know that it's needed. So as long as you provide the service well, and you don't start it in an area that already has too many such businesses competing, then you should be just fine.

Precisely because it's, you know, it's a needed business. And there's no market risk and the product risk can be minimized by you. Just executing it. Well, the only problems are those businesses are not too cool and sexy. You know, they're not the [00:02:00] shiny new mobile app or whatever, and they're not too investable because you know, if you have a local cleaning business, that's not something that a professional investor might invest in because there's no high growth, there's pretty much no like billion dollar opportunity, but that's okay because those businesses make money.

themselves. They don't need investors for money. They can just make money through their own revenue. Now, there's another kind of business as opposed to commoditized business idea on the flip side of that. There are innovative business ideas, typically using some kind of a new technology that pops up. And these make up like new and cool startup ideas, like a new Uber things using AI, meaning artificial intelligence, VR, virtual reality, maybe drones, some things that are new, cool and unique that other people.

either haven't done or very few have done. These tend to be very risky because you are doing all the experimenting. In the commoditized businesses, there's no experimenting. They've [00:03:00] been done. It's known here. Very little is, is known. You are the inventor. You are making the discovery. So it's risky. Now it's okay to say risky, but actually it's more than just a word.

When you are on the wrong side of risk at the end of that. Not at the beginning when you're planning and you can say, Oh, yeah, I can tolerate risk. But when you experience the bad side of what you're risking and you lose money and the business dies, that feels absolutely terrible. So don't take the word risk lightly.

It's actually very serious. One of the most serious things that can be. And the biggest risk, of course, in these businesses is market risk, like the new Uber. Now, of course, we know it works, but like when it first started, we had no idea. So, There was a chance that the market wasn't going to adopt it. And that's the risk.

Also, there's a huge product risk in that it's often complicated to build, but the market risk typically outweighs the product risk. [00:04:00] Typically, product risk is manageable. You ultimately can launch the product. The biggest issue is, will the market adopt it? Nobody knows, because it's innovative. But these investable, typically.

And they're typically high growth, because you're Trying to dominate a whole new space and you have this tremendous opportunity. Now let's talk about a third type of idea. And that's what I would call hybrid ideas. Some combination between the two, for example, tutoring online marketplace, like, you know, tutoring is a commoditized business.

Every city, every neighborhood in the world has some sort of a tutoring business, maybe it's just individuals, maybe it's an office, but it's a thing. Now, tutoring online, where you can hire tutors online, that's kind of new and innovative, right? Same with online courses, kind of like what you're taking now.

Courses have been around for a long time, but the hybrid is the online part of it, where it's accessible online. Or something like Uber for cleaning services, right? So cleaning services have been around for a [00:05:00] long time, but Uber kind of for them. Not specifically Uber, but maybe like a easy order service where they just come to you and you order it through an app.

Okay, maybe that's a hybrid take on these two ideas. So, when you evaluate your idea, is it a startup business? Is it a commoditized business? So now you're aware of the risks of them and how to look at them. And what are the issues involved with them?

