Starting a small business is no easy feat. There’s work to do even before a new business gets off the ground. Before a single product gets built or service gets rendered, you have to know what makes a good business idea, and how to evaluate that idea to decide if it’s worth pursuing.
Every entrepreneur has asked the question, “Is my business idea viable?”
Instead of just worrying about whether it is or it isn’t, you can conduct a business idea assessment that will help you see whether your business has a good chance of finding success.
To evaluate a new business idea, we recommend you start here:
Successful entrepreneurs are full of ideas, but not all of them are great. It’s a great feeling when the lightbulb goes off in your head and you think you discovered the best business idea ever.
These questions will help determine whether this is indeed the case:
The very first question to ask yourself about any new business idea is whether it meets a need of potential customers. An idea can be cool or interesting, but that doesn’t necessarily mean that it can meet an existing need in the market.
If the answer is no, you should probably head back to the drawing board. While some businesses introduce an entirely new idea, most successful companies tend to start with a new solution for a long-standing problem.
Think about whether your business can solve a problem, meet a need, or satisfy a desire. If it can do any of those three things, you might be onto something and it’s probably worth more consideration.
Okay, don’t get too excited just yet. Just because you have a great business idea that meets an existing need doesn’t necessarily mean it will succeed. Now you have to consider whether your business idea will be accepted in the current time and place. External factors can have a huge impact on whether a business succeeds.
For example, think about the gig economy. The rise of sharing and gig economy apps gave consumers more affordable ways to get around (Uber), walk their dog (Rover), complete jobs (Task Rabbit), and get food and items delivered directly to their homes (Postmates). In turn, it also gave people an opportunity to earn money on their own schedules.
Based on the current economy and new technology, it was both the right place and time for these apps to become successful. Is there a similar opportunity for your business to find success in the here and now?
Finally, think about the limitations and drawbacks your business might face.
Maybe it will have high start-up costs. Maybe you’ll need to educate your potential customers and encourage them to change their behavior before they’ll be ready to use your business. Maybe there are already multiple competitors solving the problem your business would address.
Every business has challenges. The key to successful entrepreneurship is finding creative ways to overcome those challenges. However, this is the point where you must decide whether the limitations your business will face outweighs the potential benefits.
If there are more pros than cons, though, you might have a great idea on your hands.
If your answers to the above questions all seem to point to a viable business idea, it’s time to dig a little deeper. Have you thoroughly researched this idea enough? Let’s find out:
You’ve heard the old adage: There’s nothing new under the sun. So look for businesses that have already had the same idea as you, because they are probably out there.
Find out what’s the closest thing to your business idea already in the marketplace and ask yourself, “Why is my business idea better?” It’s a tough question, but if you have a good answer, you might just have a good idea.
Researching your competition will also help you determine if there are unaddressed needs in the market that your business can solve. Maybe there are already other businesses doing what you want to do, but there’s a subset of the population they aren’t serving.
There’s your opportunity.
Market analysis is a huge part of starting any business. This is the part of the process where you’ll learn a ton about your business viability because you’ll be looking at things like:
Market analysis is a great way to come up with the beginnings of your business plan. It will help you hone in on your target market and really be able to make the call about whether your business will serve that market.
So after answering all of these questions, you’ve determined that you have a solid business idea that will meet a need within an accessible target market.
You’re ready to launch, right?
Well, not so fast.
Starting a business can be pretty costly, so the next step is determining whether you’re in the financial position to get this business off the ground.
What will the start-up costs be for your business?
If you’re offering a service, start-up costs might be lower. But if you need to do research and development and then mass-produce a product to sell, it’s going to take a significant amount of time and some serious cash.
Besides for the product itself, there are also the costs of creating a business plan and a marketing strategy, as well as the time investment you need to make in order to build and implement these plans. Entrepreneurs are known for the long hours they put in — starting a business is a full-time endeavor.
Now you have to ask yourself whether you have enough savings to do it, and if not, do have investors that are willing to back your idea?
This is definitely not a step you can afford to miss. No matter how good your idea is, there is no telling what challenges you may face that you could land with no business and a whole lot of debt.
Next, think about how your business will generate income, and how long it will take to get it to a point where it can sustain itself. And more importantly, will you be able to keep it afloat until it reaches that point?
Here’s the final part of evaluating your business idea. All the questions you’ve already asked yourself may point to you having a great idea for a new small business.
But the last (seriously, last) issue to address is: Are you the right person to start this business?
Starting a new business will take long hours, hard work, and sacrifices. You’ll have to pour money and time into getting the business off the ground, possibly at the expense of time with your family and friends and financial security. The bottom line: You’re going to have to be committed if you want to pull this off.
So think long and hard about whether this business idea speaks to a passion you have. If you don’t actually want to do it, you’re putting yourself at risk for burnout or outright failure.
Not everyone is an expert at everything. So when evaluating a new business idea, you have to ask yourself whether you have the right skills to pull off launching and running the business. And even if you do have the skills, does this business idea utilize your personal strengths? Is it something you’re good at, something you enjoy?
If not, again, it’s not necessarily a bad business idea. It just might not be a good business idea for you.
Starting a new business is really tough, and if you’re not dedicated to the idea, it might not be the path for you.
So, consider how truly passionate you feel about the idea. Consider a scenario where you have spent a lot of time, money, and energy into getting the business off the ground, but things aren’t just working out. Will you still feel determined to make it work? Or will you feel like you’ve wasted your time?
This one is actually the hardest to answer because sometimes it is time to give up, but sometimes it’s important to keep pushing. We recommend that you ask yourself this question just so you are prepared for all possible scenarios.
While it might seem that we asked you all these hard-hitting questions to deter you, but what we really want is to help you decide if you’re ready to take your dream business to incredible heights.
If you’ve answered these questions and it turns out that this is not the right opportunity for you – don’t give up! Hold out for something that you are truly ready for. You want your business to be successful, after all, and these questions will help make sure you’re in the best possible position to launch a business. Good luck!