You have finally found a start-up business idea that you believe in, are passionate about and want to know if it will succeed.
Perhaps you even used our tips to finding a start-up idea.
To be fully confident that you are onto a successful business, it helps to screen your idea in a number of different ways.
Being an aspiring entrepreneur, evaluating your business idea allows you to develop and improve upon it in the long run. Fair and uninhibited screening can adequately prepare you for business life, ready a business pitch for investors and customers and work out if it is feasible enough to sustain a full business.
It also helps to eradicate confirmation bias where we look at our ideas with rose tinted glasses.
How do you avoid the pitfalls of most underprepared start-ups?
How can you give yourself reassurance that your business idea is the best version it could be?
Does my Start-Up Idea Solve a Problem?
Almost all businesses exist to serve a need within a market or solve a problem experienced by customers. It is this demand for a solution that necessitates the business.
· What problem are you solving?
· What is the solution you are providing?
· What alternatives are already present on the market?
· How does your idea serve the need better than current solutions?
· What is different about your business?
· What are the benefits and features of your business?
Adapting these tenets of the Lean Canvas and answering the questions shows the existence of a market you could serve. Put simply, if nobody is looking for your solution, there is unlikely to be a market.
Test Your Idea Early
For most young entrepreneurs understanding that you have a bias toward your own idea is a lesson in humility. You should never assume you are correct and funnel as much money as you have without conducting any research.
Can you describe it easily?
Putting your idea to the test at an early stage can eliminate considerable risk but also greatly improve the idea and business itself.
Can you describe your idea in 25 words or less? Of course, there are expert complexities and nuances you are proud of but if you need an hour long presentations to explain your idea you will struggle to get customers, potential venture capitalists or investors.
Fast forward to marketing your business and imagine how difficult that may be.
Ask the Opinions of Your Network and Potential Customers
Speak to your network. Better yet, speak to people who are receptive to ideas and can progress it.
Many do not have the imagination to understand how to fill a need differently so be careful who you speak to.
Ask friends, mentors and especially potential customers what they think of your idea and how they might improve it. If they all love it and give small tweaks, you are off to an amazing start.
SWOT and PEST Analysis
You may have already heard of these tools because they are used everywhere.
Strengths, Weaknesses, Opportunities, Threats = SWOT.
Most types of businesses with foresight will be aware of what a SWOT analysis of their business and market looks like at all times.
The best are able to leverage the potential threats and weaknesses to improve their business or turn them into opportunities.
Be honest with yourself while assessing your idea as you need to know which elements work and what you need to improve.
Political, Economic, Socio-Cultural, Technological = PEST.
There are other elongated versions of the PEST analysis but these are the main pillars to assess the environment you will be operating in.
What factors on each of these fronts may help or hinder your business potential?
Are there any laws you need to be aware of, stimulus packages in this area, improved technologies making other solutions redundant?
Create a list under each heading of the factors you should be aware of when starting out.
Who are your Target Customers?
To have a business, you have to have customers.
It is imperative for any business owner to know who their potential buyers are and numerous details about them.
Who needs the solution?
Learning who the buyer is gives you ways to reach them, what they are willing to spend and what the Serviceable Available Market is. This is the section of the entire number of possible buyers that you could realistically reach.
Create a buyer profile. Give them a name if you want but gather details on their age, gender, location, income, marital status, lifestyle and more.
The more you know, the better you can serve them.
Companies now need to know where their customers hang out digitally.
Are they Facebook, Instagram, TikTok users or how can you speak to them?
Is this Idea New to the Market?
If your potential market is only emerging and there are very few players operating in this space then it can be useful to provide the same service as others.
However, most markets are established with numerous players offering similar but slightly different products and services.
To enter this type of market and gain a customer base, the provider needs to offer something different. This is known as your unique selling/value proposition (USP/UVP).
If there is an established market,
how are customers currently satisfying the need?
Who are the direct and indirect competitors in the market?
What will your product or service improve for them?
Is there a reason this hasn’t been done before?
How much of the market could you possibly capture?
Finally, are there other markets you could also succeed in?
What Barriers to the Market Exist?
Barriers to entry are obstacles for a start-up entering a new market.
They can be legislative, regulative or market based.
Are there standards certifications or licences you need to attain?
Do you need to be a member of an organization to serve a certain target market?
Beyond regulations, significant competition barriers may exist.
It is important to understand how new entrants to the market are treated.
Some competitors react aggressively to new entrants by lowering prices to make the new entrant comparatively expensive. They may do so as a result of the economies of scale which are financial benefits of buying in bulk.
Customers must know what exactly the new entrant is offering to consider switching as there could be cost of switching over from their previous provider.
Other barriers may include the capital investment required to set up, patents, exclusive contracts with materials or technology suppliers or more favorable locations. Being aware of the barriers and having a detailed business plan saves a lot of time and hassle.
How Feasible is My Venture?
A feasibility analysis calculates the potential expenditure on set-up, capital investment, legal, technical, staffing and the finance and income available to determine how many sales are required to break even and turn a profit.
To do so, you need to know how you will finance your business.
Will you invest your own money or will you look for outside sources such as venture capital?
How long will your initial investment sustain your business before it starts to make money?
How will you support yourself while getting your small business off the ground?
Getting to grips with the viability and sustainability helps plan exactly where you need to be financially and by when. This will also help to allay some of the financial concerns every start-up experiences.
Conduct a Personal Assessment
A personal assessment could be the first or last thing you do in your evaluation but is always beneficial. Having expertise in your industry of choice is a major asset but not the only skill set required. Similar to the business idea, you can conduct a SWOT analysis on yourself.
What are your strengths and what do you need to improve upon to be successful?
Knowing you are not interested in certain tasks mean you need to hire.
What tasks will you absorb, what you need to hire for and what outside help will you need along the way?
Are there any tricks of the trade you can learn from mentors or competitors that will ultimately make your life much easier?
Finally, are you excited about your idea? Have you got a passion for it?
Having excitement and passion will often mean you are motivated and willing to do everything it takes. Being honest with yourself about the work required and your determination to succeed, will tell you what you need to know about your drive to succeed.
Starting your own business is an exciting adventure with much learning along the way. The key to success is to prepare honestly and effectively and work hard. By evaluating your idea and passing it through the rigours of the above evaluation, your confidence in your idea will soar.
Honesty and hard work can overcome any evaluation set-backs and a true successful entrepreneur will always find a way!
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