The first sign of entrepreneurship is constantly thinking of new ideas and ways to improve existing … [+]
The first sign of entrepreneurship is constantly thinking of new ideas and ways to improve existing solutions. Some of your ideas may be good but then comes the one that sounds just right. If you found that idea, here’s a 5-point checklist for evaluating if it is as promising as you thought and is it worth pursuing?
1. Are There Competitors?
Competition signals potential and opportunity. If there are competitors, not only do you have a benchmark for evaluating the market and idea based on whether existing companies are successful but also, it’s an easy way to learn what works and what doesn’t. The journey of competitors can be used as a roadmap for you to learn from and base your execution on.
If no one solves the problem today, ask why. Usually, it is either because no one has thought of a similar solution or more likely because the opportunity is not worth capturing. To answer this question, research if your future buyers are perhaps hacking a solution together that just gets the job done. This is best done through customer interviews. At the end of the day, your goal is to make sure there is a need for your product in customers’ lives.
2. How Important Is Your App Idea For Your Target Buyers?
Does you idea solve a big problem or address an urgent need? Does it make or save your customers money? Does it save them time? In other words, is your idea a must-have solution? This is probably the most important idea evaluation question you should answer.
The easiest way to quantitatively answer this question is by researching whether people are spending money or time on alternative solutions and the frequency of their spending. Alternative solutions don’t necessarily have to be competing products. As noted earlier, it could be an inconvenient way people used to solve the problem due to lack of good solutions.
3. Is Your Product Worth Abandoning Existing Solutions?
Must-have solutions, especially in a competitive market, don’t guarantee startup success unless the product delivers superior benefits worth of people’s attention and adoption. This is the part where you start thinking about your competitive advantage.
To be unique and convincing, you don’t necessarily need to compete on features. If competitors target everyone, you can differentiate your product by creating a solution to an underserved segment with specific needs and goals. Even if you aspire to build a startup that serves multiple segments, the first target can be your way into the market for validation, revenue and growth foundation.
4. Is This The Right Time?
Entrepreneur and investor Bill Gross gave a TED talk about what makes startups successful. He found that while the right ideas, a good team, a viable business model and funding significantly contribute to startup success, it is the timing of the business that matters the most. His study shows that timing accounts for 42% of the difference between success and failure.
5. Do You Have The Needed Resources?
None of the above matters if you don’t have the funds to turn your idea into a successful venture. If you’re going to raise funds, are you willing to commit to the business full-time? If you’re going to work on your idea part-time, do you have the resources to self-fund the business?
Start by researching how much you will need for the first two years of business. In this period, your focus will be on validating a business model through a product people use and pay for. You will need funds mainly for product development and marketing.
One of the biggest mistakes many founders make is secure only the funds they need to take an idea to market. This is a tiny stage in the journey and doesn’t guarantee future success through a customer-funded business. If you’re going to raise funds, make sure you have enough cash that can cover several iterations and potentially pivots in the business model on your way to validation. If you’re self-funded, make sure you allocate enough cash to the venture beyond the launch stage.
Other important idea evaluation checklist points include size of the market, defensibility of the solution, regulation and entrepreneur’s background. Ultimately, even if you don’t check all the boxes, remember that your hustle will take you where you need to go.
For instance, you may realize your idea is a good-to-have solution but that’s how you’ll start identifying what’s must-have for the customer and change direction accordingly. Also, you may start with a little bit of funds but the traction that you can build with your limited resources can attract investors and partners. The most important lesson from this post is to do your homework but more importantly, be open for change.