How do you know if your business idea is a win-win or a waste of time? By going through this 8-question brainstorming session, you will face reality and be able to figure out if your business idea is a viable option.
8 questions to evaluate business ideas:
1. Is there a market for a business idea?
Sometimes, your business idea can seem like a great solution. But it won t work if you re the only one who thinks so. If you cannot identify your customer base other than yourself, this is a warning sign that your idea is likely to fail. To assess the competitiveness of your business idea, you need to conduct extensive market research and find out if people will be interested in the product or service you offer.
First, you need to give precise answers to these questions:
- How big is the current market for the proposed business idea?
- Is it an emerging market or a mature one?
- Who are your potential clients?
- Do they really need the product or service you are offering?
- Why do they need this product (maybe there is already a similar one on the market)?
It is important to answer these questions as fully as possible through online research, meeting with industry players, networking with other entrepreneurs, and attending trade shows. Your answers will give you a big advantage in seizing opportunities in the market. They will also help you figure out if your initial assumptions about the product or service you are offering are correct.
As brilliant as your business idea is, only paying customers can validate it and determine if it has a good chance of success. Your “brilliant” business idea remains “just an idea” until paying customers join it. While anyone can discredit a simple idea, nobody can discredit paying customers.
2. Does your idea solve the problem?
If there is a certain problem affecting you and your friends, relatives, colleagues, acquaintances. There is a high probability that this problem will affect many other people whom you do not know. And if your business idea can solve a problem for you, then it can solve the same problem for other people. This is a basic, easy way to test the relevance of your business idea.
But there are many other metrics you need to look at to see if many people have a problem you are going to solve, and if your product can actually solve it. The demand for similar products is a very good indicator. But how often people face a problem is another.
The market may already be filled with products or services that solve the same problem. You should focus on how to solve the problem even easier with your own suggestion. If your idea is an easier way to solve a problem, you will quickly gain attention and make a profit.
3. Is your business idea unique?
You have a unique business idea when you try to research a concept and find that no one else has ever done it. On the one hand, having such an idea means that customers will readily accept your proposal, and you will not face any problems from competitors.
However, the uniqueness of your business idea does not necessarily mean a high chance of success. In fact, it can be a warning signal that there is no market for a product or service you are offering, or that the business is not profitable.
Should your business idea be unique? The answer is no.
Your concept doesn t have to be unique. But you should be able to add uniqueness to that by examining the weaknesses of your competitors and improving them. This could be adding more value for the same price, offering a premium version of your product, or another strategy. If you cannot differentiate your business idea in this way, you will not stand up to the fierce competition in the market.
So if your business concept isn t your original idea, that s okay. The most important thing is to find a unique perspective on a product idea and spice it up with unique selling points that can destroy competitors.
4. What is the price of the product?
The issue of price is extremely important. While most business ideas address specific problems, only great and promising ideas do it in a less costly way than the market can handle. After making sure that your business idea solves one or more problems, you still need to determine not only the value it brings, but also what people are willing to pay for that value.
If your product isn t priced right, your customers simply won t buy it. Therefore, research the needs of potential customers to determine how much they will pay and how often they will buy. Several factors to consider when pricing a product.
As a new entrant to the market, you will need to start by offering your product or service at prices that will greatly excite your competitors. This is one of the strategies you can use to quickly attract customers to your business. However, if your costs are too high, it will be difficult for you to break into the market and you will not make any profit. So, start small and keep your overhead to a minimum.
A good example of an entrepreneurwho successfully applied this strategy was Henry Ford. He was not the first automobile manufacturer, and his design was not the most beautiful. Before Henry Ford came, cars were reserved exclusively for the wealthy. But Henry Ford came with a mission to “Democratize the car” and make it accessible to the masses. Today Ford Motors is a billion dollar global auto company. Ford s success stemmed from niche selection and a single, sensible pricing strategy.
5. Will it be interesting for investors?
This is important because it ties into your mission to fund your startup. One of the best indicators of the potential of your business idea is the interest it generates from outside investors. If business community starts talking about your idea, this is the first signal that it is of interest to the business community and, probably, investors can make you a lucrative offer themselves. But this is ideal and does not happen very often.
Although your business idea may be promising and will be discussed by the media and business people, as the idea is presented as “wild and crazy”, a breakthrough for the market. But you will not receive funds from investors if your idea cannot demonstrate to them that it is profitable. So, if you seem to be the only one who understands the marketable appeal of your idea, you should strive to make it obvious to investors as well. Or no one will invest in your idea.
6. How difficult is it to replicate your business idea?
If your great business idea has low barriers to entry, you can be sure that imitators will soon appear and you will face huge competition. It is possible that your competitors will simply add your idea to their promoted business. It works constantly in today s business world. A typical scenario for companies competing with stolen ideas can be found in the software industry.
A business idea must have strong barriers or differences to avoid competition. If your plan is not very good in this regard, abandon it or think about how to make the business idea and product difficult to duplicate. Consider legal options for protecting a business idea (patent for an invention, trademark).
7. Can your idea scale?
The most successful business ideas are those that serve people over a long period of time. You need to present your business in two, three, five, or 10 years to determine if your product or service will be relevant.
Never chase trends and fashion trends, because they can disappear in the blink of an eye. If you are confident that your idea will remain relevant, will remain the best answer to your customers problems for years to come, and will continue to generate growing revenue for your business in the years to come, then you have a great idea.
8. What is your driving force?
Your determination to solve customer problems should be your driving force. While it is natural for you and any other entrepreneur to start a business for profit, you should not start your business just to make money.
You must be absolutely passionate about your business idea and product and strive to get it through the good times and the bad. If your focus on profit masks this, then the chances are high that your business idea will fail.
The best indicator of a good business idea is a proven marketplace with room for growth, with an audience that is willing and able to pay for something unique or unusual that helps people make their lives better, easier, or happier.
A great business idea is an idea that promises to do ordinary things in an unusual, unique, or other way that attracts customers and keeps them coming back for new ones.