The key to profits. Supply and Demand.

The hacker says “What can I build that a large number of people will want?”. The entrepreneur says “What do a large number of people want that I can build?”.

And guess what? Both can actually grow into highly profitable businesses!

The trick is simply to understand how to properly evaluate the profit potential of an idea – regardless of how you came to the idea.

How do you do that?

Well the key is to step back and try to be as objective and honest with yourself about your idea’s true supply and demand.

Here’s the very basics of what I believe you need to evaluate for each.

Supply:

1. Controllable. Can you ensure the market won’t be flooded with supply?

2. Scalable. Can you ensure enough supply to meet growing demand?

3. Defendable. Can you ensure demand remains directed at your supply?

It’s very easy to think you control supply, especially in the world of software, but the truth is that software and processes are very easy to copy.

What about your supply is truly controllable, scalable, and defendable?

Demand:

1. Large. Is there really a massive need for this?

2. Strong. How badly do they need it?

3. Anxious. How quickly do they want and need it?

Most people over estimate the size of true demand and incorrectly assume they will be able to generate or grow demand easily. Growing demand (marketing and branding) is *very* expensive and often *very* time consuming.

Does true demand already exist or will you have to generate it? How large, strong, and anxious is the demand really?

If you step back and think about these things honestly for any idea you’re evaluating, I believe it will become a lot easier to determine if an idea has a large potential for profit or not.

So - how does the supply and demand look for your latest idea?

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This is the personal blog of Kevin Marshall (a.k.a Falicon) where he often digs into side projects he's working on for digdownlabs.com and other random thoughts he's got on his mind.

Kevin has a day job as CTO of Veritonic and is spending nights & weekends hacking on Share Game Tape. You can also check out some of his open source code on GitHub or connect with him on Twitter @falicon or via email at kevin at falicon.com.

If you have comments, thoughts, or want to respond to something you see here I would encourage you to respond via a post on your own blog (and then let me know about the link via one of the routes mentioned above).