(I went on Mitchell Cohen's podcast to talk about emotions & finance recently. Check it out!)

I recently sat down with my friend Sarabeth Lewis, an interior designer. Sarabeth has messing around in the entrepreneurial/creative space for a good portion of her career, and described her work in design as feeling qualitatively different from her previous ventures. More specifically, she experienced instant success. By contrast, her earlier projects—one of which was a tech tips newsletter for retired people—felt like pulling teeth.

I know from my own experience that good and bad businesses feel different. In what way, exactly? I think there are two dimensions to something being a good business: internal and external. External factors relate to the product or service, and the market itself, which I’ll discuss today. Internal factors relate to the entrepreneur, which will be in next week’s post.

External Factors

External factors can be mostly subsumed under what entrepreneurs often call “product/market fit.” Two of the criteria I’ll discuss certainly fit here: market demand and market “quality.” There’s a third criterion that’s not discussed as often in entrepreneurship literature and that’s the nature of the customers themselves.

Market Demand: Are People Forcing Me to Take Their Money?

A really good business is one where we don’t have to do much selling at the beginning—people are shouting at us to take their money. People telling us this means that we have identified a real customer problem, and the customer trusts us to solve it. It’s also the purest form of external validation.

This is what Sarabeth experienced when she started her interior design business, and what I experienced when I ran my first emotions & finance cohort. In Sarabeth’s case, upon hearing that she was starting an interior design business, friends instantly wanted to hire her. In my case, when I told people I would be teaching an independent finance class and it would cost money, 18 people signed up almost immediately with basically zero marketing or promotion.

Now Sarabeth and I probably both underpriced our services initially, but underpricing alone doesn’t create demand. If someone comes along and offers a lousy service, I’m not going to buy it, no matter how cheap it is. The prerequisite to get this kind of market demand without marketing is trust, which is a function of expertise, which we’ll return to later.

Market Quality: Is This Market Reasonably Lucrative?

I might be a trusted and credible expert on some topic, but if it’s not enough of a problem for people to spend significant sums of money on it, it’s not a good business. There needs to actually be money there.

Interior design is a high-value luxury service purchased by reasonably wealthy people. It’s a competitive market, but it is lucrative—the customer has money to spend. Areas of financial education are also quite lucrative, and finance in general, I mean, it’s always made people rich throughout human history.

This is where a lot of people go wrong. Teaching yoga, for example, is something that many people want to do but it is very hard to make a decent living doing it. There isn’t much money in it because it is pretty easy to do yoga on your own for free if you want—really hard to charge big premiums for it. (And I say this being a certified yoga instructor myself.)

The Customer: Is This Someone I Want to Serve?

The best business for me is one where I work with the people I am excited to work with.

This is important because internal excitement isn’t something that we can fake. When we’re excited to see our customers, they can feel it, and we do much better work when we want to be there. Sarabeth said that part of what she likes about her business is that she looks forward to meeting with her clients and understanding their desires and vision.

By contrast, being in a business where we resent or are drained by our customers is a recipe for misery and burnout. Business is hard. It takes a lot of work. It’s much easier to put in that work when we feel some kind of pull towards it—and as social creatures, one of the strongest pulls is people. But when we don’t like the people, the pull becomes a push, and it becomes that much harder to summon the willpower to do the work, on top of the parts of the business that generally everyone hates (like the admin).

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Next week, we’ll look at the internal factors that make a good business.

Exercise

Journal on the following or discuss with a friend.

1)      Reflection

Where in my life have I experienced other people “forcing me to take their money”? How did others perceive my expertise in this area? Was it an area that tends to be a major problem for people?

How does that experience compare to other projects I have worked on, where people are lukewarm or uninterested?

People coming to you for advice is a possible indicator of a skill set like this. Ideally, it’s some sort of specialized knowledge, not “my girlfriend/boyfriend broke up with me” type of stuff that just means you’re a good listener.

2)      Noticing

What kind of people do I like to work with? What kind of people do I resent being around?

How does this map to projects I’ve felt good working on? Where do I feel a “pull” towards working, and where do I have to overcome a “push”?

3)      Experiment

If I have experienced excitement from others about a skill set, product, or service I can provide, how can I run an experiment to see if that interest is still there?

In Sarabeth’s case, this was making it known that she was available for interior design work. In my case, it’s reaching out to places where I can get my message out (like news stations, for example).