9 questions to help you evaluate your business idea
How do you evaluate your idea(s)?
There are a couple of different low-budget approaches, that you can use to assess your idea and see whether it's got potential.
I take the approach where I start off with figuring out my riskiest assumptions, turn them into hypotheses then designing and iterating tests which allow me to measure whether I’m on the right track or not.
To test an idea, you have to be sure that your solutions (tests) are low cost and quick to implement as this will allow you to quickly evaluate your ideas.
You could also interview experts of the industry which allows you to quickly get an idea and understanding of your customers, the problems they're facing and the processes that may need changing.
While evaluating your idea, there are a few questions that you want to look at answering.
Firstly you have to be sure that you've identified a real problem or need in the market.
Once you've done that, you want to figure out whether you've built the right solution and whether you can provide actual value to your customers.
To scale this business, you really want to understand whether you can reach our customers and can do so cost-effectively.
Other questions you may want to consider are:
Can you protect your intellectual property?
Can you protect your business model?
And can you create a sustainable business model that can generate revenue?
Let's have a closer look at these questions and see whether you can answer them.
1. Can you define the need or problem that people experience?
Have you got three bullet points to explain the problem your target audience has? Once you understand the problem, do you know all the alternatives that people use to go about solving this currently?
If you're unsure about any of these questions, what you need to do is interview people that you think may experience this problem and ask them about how they currently go about solving it. A good way is to start by creating a persona.
Once you know this, you can tackle the next question.
2. There are enough people in the market that have this problem?
Once you've identified the problem in the market, you want to determine the customer segments that experience this problem. As we mentioned earlier on, a narrow target market will make it much more effective when launching a product.
Can you identify that narrow market?
3. Are there enough people for you to create a sustainable business?
Here you want to determine your market size and the drivers of your identified trend/ need or problem. Once you have done this, you want to look into the channels that you will use to reach your total addressable market.
After identifying the channels, you will then look into early adopters that you can target early on.
These are the low-hanging fruit that you can target with cost-effective marketing strategies.
4. Are you unique and can you provide value to your customers?
Once you've determined what value you are offering (that is the clear reason for why people would purchase your product or service), you want to have a look at competitors and see how you can differentiate yourself from competitors to make it easier for your customers to identify the value you offer.
The key is to have a customer-centric focus, to have empathy and put yourself into the shoes of your customers. Look into what they would expect from a new product or service offering and give it to them.
An essential tip to remember is to try not to change behaviours. Look at existing processes and existing alternatives. Once you understand what people currently do, build on it. Incremental, small innovations will make it much quicker for your product to be adopted by the market.
5. Are there any significant barriers to entry in your market?
Barriers to entry can be useful, as you can use them to defend yourself against new market entries. However, they can also prevent you from establishing yourself and keep you out of the market.
Have a look at whether there are contracts that people are locked into and hard to get out of. If so, you might have to come up with new strategies to acquire your customers. Have a look at regulatory requirements, perhaps certifications, have a look at market domination.
Your industry could be very monopolised which will make it hard for you to get the entry.
6. Can you protect your advantage and your intellectual property?
Entrepreneurs often believe that they can create new companies and protect their intellectual property from being copied by competitors.
The problem is, that to do so comes with a high cost and when a case does go to court, the costs are so enormous that entrepreneurs and their companies will run out of money before they can successfully defend their intellectual property.
An excellent way to maintain your competitive advantage is through speed and innovation. The faster you create products, the quicker your speed to market, the higher chance of success you will have.
Move fast, innovate and create a brand that people will love. This will make it much harder for anyone to copy you.
7. What are the risks and dependencies for your startup?
Do you need external licensing? Have you got access to all the key resources, and can you maintain shipment of these resources? Also, what does your cost of delivery look like, and can you send products to your customers at low risk?
8. Is there a business model for the future?
You need to make sure you have a scalable and sustainable process that you can repeat over and over again. This is finding your customers, keeping your customers, making sure that you maintain your margins as well as shipment and control over your costs.
9. Have you identified the right revenue streams?
Lastly, all entrepreneurs should ask themselves whether they can maintain and grow their revenue streams. Have you tested for price sensitivity? Have you got a strategy in place that will allow you to gain critical mass and adopt more users to lower your cost?
We've just covered 9 simple questions you can use to evaluate your ideas. Have a look whether you can answer all of them. This could be helpful for you to know if your idea will work or not.