How to generate million dollar business ideas (and billion dollar ideas)

This article will help you get started building million (or billion) dollar businesses. It is geared towards startup entrepreneurs and aspiring entrepreneurs.

Before we start, here’s a quote from Steve Jobs:

"To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions.” (Source)

Startups as a whole are 90% execution, 10% ideas. Product management as a job teaches you to be an executor and more than an “ideas” person. I would highly recommend exploring PM roles at startups. As a PM, you need to come up with ideas, prioritize ideas, execute on ideas, empower your team members, and measure the success of your ideas.

Now, let’s dive into how you can generate business ideas to start a million or billion dollar business.

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As a startup entrepreneur, how do you come up with million or billion dollar business ideas?

Rule #1: you don't come up with ideas first.

Focus on the type of market you want to solve problems in. Within that market: focus on the types of customers you want to solve problems for. You need to talk to customers first before coming up with ideas.

If you do want to come up with ideas ASAP, follow what is listed further below in the article. If you do have specific knowledge or industry expertise, you can likely identify ideas immediately because you have been seeing these opportunities for years and years in your day to day work.

Rule #2: You start with the problem.

If you start with the solution, you might create a product that customers don’t want. To prevent this, you should talk to customers and conduct user research. The double diamond design framework (below) is a great way to visualize this.

Note: You do not need to follow it to a tee. At startup, you will often work so fast early on where you cannot follow every step of the process exactly. You have to define what works for you.

Rule #3: Great ideas must have great execution.

You can learn execution on the fly, but it is highly recommended you work at a startup before creating one. If there’s one role I would recommend at a startup, you guessed it: it’s being a startup product manager.

Rule #4: You identify customers with a high willingness to pay.

This is probably the most important lesson I have learned and the main roadblock I see when talking to entrepreneurs. How likely they are to pay and how much they are willing to pay are key.

For example, if you’ve watched Suits, clients are willing to pay thousands or millions on retainer for legal help because lawyers are solving challenging problems that encourage a high willingness to pay.

Customers that have a high willingness to pay are often businesses who have money. Consumer startups are not necessarily harder to grow, but once you get one business, you can contract them for recurring revenue. They likely will pay more than one individual consumer.

To learn more about businesses themselves, you have a few options: work for them, invest in them, talk to them, or study them. Investing or studying does not replace the building and iterating process of talking to customers. B2B models are dominant in venture investing, but there are several successful consumer startups that operate in great markets. The strategy for B2B can be to solve for one business well, repeat it, and adapt it to another business. The one caveat I have here is that a startup with great execution can succeed with any model, and learning to build a consumer business will help you with building a B2B business.

Rule #5: Break down the economics.

If you wanted to create a million dollar business, you need to generate $8k+ MRR at a 10x revenue multiple ($100k ARR). This is typically for a bootstrapped business. If you decide to be venture-backed, you can technically still have a million dollar business on paper with a venture round - but you’ll need to justify that growth and the multiple you raised at.

Rule #6: A simple solution to a big problem is better than an amazing solution to a small problem.

Focus on doing one thing really well. You will be judged more by how well you solve a problem than by how great your solution is to a problem. Your own judgement of the problem space you are in is important. You will learn it through trial and error, by talking to customers and understanding your market. Once you create a simple solution, you can layer it with other adjacent product lines or upsells.

Rule #7: Go for the mundane. Look for boring industries with a high TAM.

The larger the TAM, the greater the potential market you can capture, and the higher the willingness to pay by your target customer, the more likely you will have a billion dollar business versus a million dollar business.

You can create a great million dollar business. I would encourage that having a great million dollar business can lead to a higher success rate and higher return for most than aiming to have a unicorn. But what if you do want to build a unicorn? The journey of building a unicorn is immensely valuable.

Building a unicorn often requires venture capital investment. Ensuring it is “venture-backable” by VCs or private equity requires a much higher standard. It often means a startup must be able to reach a threshold of $100M ARR. This is at a 10x multiple again, but depending on growth, investors can have flexibility (25x-40x+). $100M ARR takes years and years to get to, so you don’t need it figured out by day one or year one.

Rule #8: Study trends and read.

If you have tailwinds helping you or headwinds impacting incumbents, these are keys. These could be trends like the baby boomer generation retiring, the great wealth transfer, remote-first work, vacant commercial real estate, and climate change. Find what people are talking about and take note of it. Also, do your research on trends that are less talked about.

Rule #9: Most importantly, distribution is the hardest.

Building a product is the first half, selling it is the second. Product, sales, and marketing all go hand-in-hand.

Rule #10: Build up your brand by offering value for free or at a low cost.

A distribution network can be made BEFORE starting a business. Especially if you have reservations with taking risk (starting a company) right now in your career or if you see yourself starting a startup later. Plant the seeds for your brand and organic growth now. You can continue compounding on this brand and value later. Also with paid growth later on, you can grow exponentially in the future.

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