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How do you know if a business idea is worth pursuing?

Sal answers the question "How do you know if a business idea is worth pursuing?" as part of its partnership with Bank of America on career and personal finance education (Better Money Habits).

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Video transcript

- How do you know if a business idea is worth pursuing? So my take on that is if you think about what you are going to uniquely bring to the table. Sometimes I've been at a restaurant with a friend and they're like, "Oh, this restaurant's doing so well. "I think I could do this," and they start thinking about maybe I'll open up another restaurant just like that across the street. Well, I think my friends in that situation are probably underestimating how much work that the restaurant we're in had put into it, how much thought they put into it. And also if you open up an identical restaurant across the street, well that's just going to hurt both of your businesses and neither of you might have a viable business. Another thing is you could look at a business that someone else started and you might see the cash register running and there's a lot of customers, but you don't realize everything, all of the costs, all of the risks that that person took on. Their rent might be a lot. You might just be going through during the busy time, and if you go the next day during lunch, there might not be anyone there. And so, it's very easy to always see things that the grass is greener on the other side. Most entrepreneurs will tell you that even the most successful ventures went through their dark periods and went through a period where it looked like it was going to fail. It didn't look like it was going to work out. And so what I would say if you have a business idea, is one, think about what you're going to uniquely bring to the table. Maybe it is an idea that no one's ever thought about before. But maybe it is an idea that people have thought about before, but you have a unique way of approaching it, or you have unique skills, or a unique team that can approach it right, or you kind of see the nexus of several of these things. And I would try to test the idea as well as possible. Can you put out some advertising for your business before it even exists and see if people respond? Can you build a prototype of a product and see if people want it? And the more that you can test it in that way and say, "Wow, there's actually a product market fit here, "or a service market fit here; "people really want what this idea is," then I think you might be on to something. Obviously the ideal is you even start the business on a small scale without necessarily going all in yet and seeing that wow, there's a lot of demand for this. So once again, no right answer here always. When you're starting a business, you really just have to prepare yourself mentally that there will be rough patches. But if you can come up with something and have a unique take on it and test it, and it's actually getting traction with folks, and you're able to get the capital, and you yourself have the capital you've saved up, maybe, if things get a little bit rough as you start your business, I think you might be in a good position to start it.