After you come up with a great business idea, you probably tend to get over excited, consider yourself a genius and want to implement your idea immediately. Well…Hold on. It’s important to make sure your idea has a potential to fly before you start to put more serious efforts into it. In this article, I will show you a few questions to evaluate the feasibility and potential of your idea and to turn it into a solid business plan. If your idea can survive through all these questions, it will have a better chance to succeed. If your idea can’t pass any of the steps, it probably makes sense to stop wasting time on it.
1. What is the size of your market?
Make sure there is a real and sizable demand for your product or service. If your tool is only going to be adopted by a few geeks (like yourself) who don’t like paying for tools at first, don’t try to make such a tool. This is a common mistake made by some software-programmer-turned-entrepreneurs. Make sure to get outsiders’ views. Go out of your office or garage and talk to your friends and people in the relevant industry. Ask for people’s opinions.To have a high probability of success, your idea must be able to solve some serious pain points overlooked by existing players. Don’t develop something that only offers minor additional convenience. People wouldn’t bother to switch to your new solution. On the other hand, as a new startup, don’t attempt to address a market that is too big in size. You will not have enough resources to support your customers or directly compete with the mega players. Choose your angle properly to focus on a specific market segment that matches well with your product.
2. Who are your competitors?
This is probably the most important one among all the questions. Stop being an ostrich and take a serious look at all your competitors. Analyze your competitors with fairness and hardness. Don’t let your ego get in your way. Go over at least the top five competitors. Going over the top 10 would be better. Analyze the strength and weakness of each player just like profiling the character of a person. After that, try to correlate the characters of the players with their performance in the industry. Studying your competitors is the single best way to enrich your domain knowledge and locate a right spot for you to enter the market. Your competitors are your best teachers. Try to learn as much as possible from them.
A common mistake made by some novice entrepreneurs is that after spending several months working on a product perceived to be unique, they found the same product already available on the market for a while. Avoid such costly mistakes by analyzing all your competitors as early as possible.
3. What is your competitive advantage?
The sole fact that a market is red hot and attracts a lot of investment doesn’t necessarily mean it a good place for you. If a market is red hot, there will be crowds of people who want to work on the same thing. If you don’t have some competitive advantage, you will have little chance to stand out from all players. Instead, choose to work on something which you have advantages not commonly possessed by your competitors. If you have rich domain knowledge in a particular industry and are also very tech-savvy, you possess a great competitive advantage. If you are only a good software developer with no domain knowledge at all, don’t attempt to work in that particularly unless you can locate a right partner with the required domain knowledge to establish your competitive advantage. Other competitive advantages include your location, the languages you speak, your connection, or your vision and insight. It is usually a combination of a few qualities.
There are exceptions to this rule, though. That is, you somehow find an area with strong demand and no competition.
4. What is your unique selling point?
You probably would like your product to be omnipotent and do everything. But as a startup, you can’t really sell yourself in that way. People will easily shrug it off as too good to be true. In addition to offering most bells and whistles offered by your competitors, you should give your product a unique selling point which targets a core group of customers. For these customers, your product and service will be the clear top choice. A unique selling point will give your business a clear image that people can memorize and talk about. Otherwise, your business will be brushed off by your audience like a me-too or wanna-be.
5. How do you plan to define the scope of your product?
Now that you have studied all your competitors and made sure you have your own competitive advantage, it is time to define the scope of your product based on the audience you are going to target. Define the scope of your product based on the principle of maximum return on your investment in terms of money and development efforts. Focus your resources on the angle where your competitive advantage coincides the most with strength of demand and ease of reach from your audience. In segments where there’re weak demands or you have to deal with some hard-to-please audience, do the bare minimum or avoid it completely. Don’t try to attack on all fronts or even worse to attack the toughest stronghold where you have no edge over anybody else. Planning on what not to do is as important as planning on what you will do.
6. How do you plan to reach your customers?
If you have a great product but have no idea on how to reach your customers, your chance of success will be thin. If your customer base is within easy reach of daily lives, that’d be a super big plus for the survival rate of your business. It is even better if you are such a sensitive customer of your own product that you can better understand what your customers are thinking and what they truly need. Understanding your customers is as important as understanding your competitors. Profile your customers in terms of age, gender, life style, income level and hobbies. Based on that information, try to derive the physical location and online sites where your customers will hang around.
If after doing all the due-diligence, you still find your customer base very scattered, hard to define and difficult to reach, you’d probably have better luck doing something else.
7. What is your plan to gain initial traction?
Some people will call the process of gaining initial traction “0 to 1”. The first step is usually hard and critical, especially when your business is targeting individual consumers. You should prepare for the initial launch of your product as early as possible. Build a website for your product even if you have not written a single line of code. Use the initial website to measure customers’ interest and collect the emails of people who are strongly interested in your upcoming product. These people will be your first batch of core customers and they will spread the words for you if you serve them very well. If your product needs to reach a critical-mass to catch up the market trend, do your math and plan the initial marketing cost. If the initial marketing cost is too much for your risk appetite, you might want to look elsewhere. This step actually needs a dedicated post about it. Therefore, I will not talk too much about in this post.
You can ask yourself other questions in order to validate your idea, depending on the specific industry you are trying to tackle. My advice is, follow a strict methodology to verify the feasibility of your idea and take your time to do a best homework. When you do the verification, try to play the role of an experienced investor and challenge yourself with these questions. If you are willing to bet a lot of money on your idea as an investor, you can pass the idea-verification phase and start assembling the team.