Before moving forward with your newfound concept, you’ll want to make sure that it’s worth your cherished time, money, and other resources.
Follow these eight exercises to evaluate the future success of your startup idea.
1. Verify whether the idea solves a real problem
Every lucrative business idea evolves into a successful product or service because it fixes a real-world problem. Uber solves the dilemma of finding a taxi. Netflix gives us an alternative to going out to the video store to rent a movie. Rent the Runway saves us from buying expensive clothes that we would otherwise wear only once.
Once you can place your finger on the problem your product or service is solving, you are one stride closer to being ready to go to market. If you can’t decipher a market problem, you need to spend some more time analyzing your solution.
Pro Tip: Try listing out the benefits of your product. The more benefits you can think of, the more likely it is that your idea is solving a real problem.
2. Gauge the market size
After you have determined that you are solving a real consumer or business issue, it is vital to check whether there are enough people who endure this predicament. This exercise involves developing a target market.
Your target market is a group of consumers with a problem that your product will (hopefully!) be solving. A target market must be more than just “anyone and everyone interested.”
People within a target market share qualities such as age, geographic location, income, career, and other lifestyle attributes. You will want to be reasonably specific in choosing a target market. For example, “pet-owners between 28 and 34 that earn over $60K and rent their homes.”
Once you’ve established your target market, do some research to decide if there are enough people in your niche to turn a profit. You can find this info online through:
- Market research & industry trends
- Industry blogs
- Surveys & studies
- Investment activity
3. Understand what resources you have available
Once you have determined the problem in which you are solving and whom you are solving it for, take a good look at the resources you have available. Resources fall into three significant categories.
You probably won’t have all the skill sets necessary to start a business, so it’s essential to have a support system to back you up. These can include co-founders, mentors, and partners as well as potential investors, early customers, and distributors.
To turn your startup idea into reality, you will need to put some cash behind it. From hiring your first employees to research, production, marketing, and sales, you need to have money saved up. Alternatively, at least have an idea of how you are going to secure funding.
Starting a business is a great deal of work, and you are unquestionably going to be putting in considerable time around the clock to get it up and running.
If you have some combination of relationships, time, and money, you are in an attractive position to act on your startup idea.
4. Seek feedback on your idea
Ask your family and friends for their sincere feedback on your product or service. Then ask everyone else you know. Then ask strangers.
You’ll want to observe reactions from a wide range of people to determine if your idea is worth pursuing.
- Does the product or service solve a unique problem for them?
- Is it something they would use?
- Would they pay for it?
Share your business idea, and if people are very excited about it and want to know how they can get it in their hands right away, proceed with confidence.
5. Conduct a SWOT analysis
A SWOT analysis is an activity used to help determine if a business idea is worth pursuing. The four elements the SWOT examines are:
- Strengths: What makes this idea stand out against others
- Weaknesses: What places this idea at a disadvantage against others
- Opportunities: What market opportunities and trends will help you succeed
- Threats: What external threats and obstacles may stand in the way of your success
Here are the step-by-step details.
6. Test your product or service with actual people
Create a prototype, or minimum viable product (MVP), with just the essential features, to test with early customers for initial feedback. Keeping the features limited to the bare minimum has a variety of benefits, including:
- Testing the idea with minimum resources
- Reducing wasted production hours
- Evaluating if people will want to use it
- Screening your product ideas
Once you start to receive feedback from users, you will likely refine the project over and over again. You may eliminate features that seemed like bright, exciting ideas, but turn out not to be necessary. Likewise, you may discover elements that you didn’t think about initially.
Testing your prototype will ensure you don’t end up creating something that no one wants to use.
7. Establish the Price
Once you have fiddled around with the bells and whistles of your product or service, it is a good idea to establish a market price. There are a few considerations to make:
- What price point would it take to break even?
- What income would you need to generate to make a profit?
- Can your target market afford these prices?
Setting an estimated price for your idea early on is imperative. Once your plan starts to gain traction, you will need to determine how you will handle finances. If you need to hire a team, you’ll need to think about paying employee salaries. If you need to entice investors to give you money, you’ll need to explain to them how they will benefit.
8. Re-evaluate your level of passion
Last, but unquestionably not least, once you have taken a deep dive into your startup idea, pause and take a step back.
Do you still have a burning passion for continuing?
Before embarking on this mission, make sure it is something you genuinely care about, not just something you think will make a staggering amount of money.
Creating a business is no comfortable journey. It would be best if you are prepared and willing to put all of your resources (time, money, energy, sanity) into the full pursuit of your dreams. Stay grounded and realistic as you spend some serious time going through each of these exercises.