5 Questions You Should Ask Yourself When Evaluating a New Business Idea
1. Is there really a market for your new business idea? Or to rephrase the question -- do you think that people are willing to pay for the product or the service? Just on this site, I can probably name a couple of inventions that won't make the cut. Conduct the proper market research, find out how much people are willing to pay for your product or service--or if they're even willing to pay for it at all.
2. How simple or difficult is it to implement your new business idea? The reason why most people have their ideas mothballed in their brains is that they are simply overwhelmed by the number of steps required in implementing it. There are lot of things to consider such as the starting capital, manpower, research & development, licenses, barriers to entry, and exit strategies. If you're leaving your job to start this new business, you will have to take that into consideration as well. Is this idea worth it?
3. How passionate are you about this new business idea? In a previous blog post, I kept harping on how it isn't important that you're passionate about your business. That's still true. But in choosing a business idea that you think you can be equally good at and has equally good return, choose the business idea that really gets you excited. You see, if you don't feel particularly passionate about your business, there will always be somebody who does. And because he is passionate, he will probably run it better. On the flipside, hiring a competent and passionate manager will work, too.
4. Will it be difficult to sell your idea? Do you need to educate your market? Educating your market can work for you or against you. For some very radical products or services, educating the market and growing your audience can be a long and costly process. The World Wide Web itself can be seen as a prime example of this concept. Or the personal computer which initially was only in the possession of big corporations (used for their R&D or crunching numbers). Bill Gates' big dream was to have a personal computer in every home. This was not an easy feat and this took him tens of millions of dollars to achieve. When other competitors came in the market, they no longer had to work as hard to market their computers--but they did have to differentiate it. Often it is the second entrant who benefits from entering the market second. Because it is more mobile and more lean compared to the already bloated first entrant who can no longer move as quickly.
5. Who is your competition in the area? How can your company differentiate itself from them? Are you just a me-too product or service? Or are you a me too with a twist? Make a list of your competitors. Discover their strengths and weaknesses. If you sell a generic product such as lemonade, differentiate yourself with the level of service or add-ons.