How to determine whether your business idea is good

2013-07-20 00:58

Many people dream of starting a business. Dreaming is certainly exciting, but execution is incredibly difficult. There are many challenges and pitfalls that come up during the execution of the business, and those pitfalls start as early as choosing your business idea, and making sure it is the right one. For that reason, in this article we will focus on what you can do to determine whether your business idea is a good one.

General considerations

There are a few common considerations that almost every entrepreneur should ask themselves. They are:

1) Does the business ideas offer some benefit to anyone? If it doesn't, then who would be the customer? You must answer who the business will be for, and how it will help them. If there is no good answer to these questions, then maybe the business should not exist.

2) Does it help in a substantial way? If the benefit the business provides is small, then people may not be willing to pay for it.

3) Is the target market big enough and lucrative enough? If the target market is too small, it may be difficult to generate sales.

4) Is this something you have a background in? If you have no background in the field of business in which the business idea is in, the first 3-9 months may end up being very expensive learning from your mistakes.

Can you pull it off?

Is there a good founder-to-idea fit? There are many ideas that are good for some people and not great for others. For example, creating Google was a great idea. But for people who were not savvy in technology, this would have meant spending time on a product that would not be competitive in quality with other search engines. The same is true with other kinds of businesses. For example, starting a restaurant can be a good or a bad idea depending on whether the entrepreneur can create and run the restaurant at a very high level of quality.

Asking for opinions

Once you have answered all the theoretical question such as the market size and how lucrative it is, and have considered whether you can realistically pull this off, the next step is to try as best you can to estimate whether the actual business will be a viable one. This is an extremely important part of determining whether your business idea is a good one.

What you need to do is talk to people about your idea. First, you need to determine whether you will be open or secretive about your business idea. If you are not sure about the correct strategy, here is an article about protecting business ideas.

If you are protective about your ideas, it will be less likely that you will get interesting feedback and engage in productive conversations. So for the sake of this article, let's assume you will be able to discuss your idea with others.

Who to talk to

The people you need to talk to are people who are the target users of your product as well as experienced business people. You can talk to friends and family, but if they are not business people, it will be unlikely that they will be able to provide advice that is deep, savvy, and insightful. Additionally, your friends want the best for you and do not want to disappoint you. So they may just tell you that the idea is good to make you feel better.  But don't rush into things because at the end of the day, it will be your time, money and effort that you will need to put into the business. Try to talk to experts.

How to talk to experts

When you do find experts who can give you great feedback and advice about your ideas, make sure you use their time as well as you can. Before you talk to them, learn how to explain your business quickly and clearly. That will enable you to spend as little time as possible explaining the business, and leave most of the time they give you to listen to the expert’s opinions and feedback. Here is a brief tutorial about how to pitch your business with a few business pitch examples.

Once you can explain your business clearly, during your meeting with them, ask the experts or potential users whether they would use such a service, how they would like to use it, and what may prevent them from using it. And here is a tricky question to ask them. If they say they like it, ask them whether they would buy such a product or service when you made it available. If you can get their handshake on that, then you may have just made your first customer, and can trust their advice a little bit more.

Get guidance and mentoring

If the expert you are talking to is helpful and knowledgeable, if you can, try to get them to become a mentor or an advisor. That way, you can keep getting help. And there is nothing like having a great mentor. One piece of their advice can save you months of work, or money you may have lost going after a poor business decision.

If everyone likes your business, should you build it?

Not so fast. Creating the actual business is expensive in terms of your time, effort and the money you may need to put into this business. One way to lower your risk is to try to test the business concept in the real world by putting a small version or a prototype of the product into the market.

If you have a big website planned, try to only launch with the minimal viable product to test how people will respond to the core features of the site. If you are making a physical item such as handmade jewelry or designing clothing, try to make a few items, and sell them at fairs or local markets. That way you can get to see how potential customers respond to those products, and you can also talk to those people to get their opinion on why they like or do not like the product.  If you are getting real positive actions from those people such as actually buying your products, or using your site and coming back to it, it then makes sense to go ahead and pursue that business idea.

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