People get business ideas all the time. But how does one decide which business ideas are good, and which are not worth pursuing? Here is a checklist with explanations on how to inform your thinking to determine whether a business idea is worth going for.
1) Do you have experience or expertise in the industry in which the business idea is in? If no, proceed with caution because it will be very difficult to determine whether various aspects of the idea will work out as you assume. Too many important details will be unknown, and that is quite dangerous.
2) Is the idea in a good market? A good market is one which is on the rise and expanding. While a bad market is one that is stagnant or is in a decline. For example, the mobile phone market is a good one because it is growing rapidly. But the print publishing market is not so good because it has been in a steady decline for a number of years.
3) Does the idea go after a big enough market? Is the market for this idea in the billions, millions, or less? If the market is too small, it will be difficult to make enough money to support a business. And if a market is too big, competition may be too fierce. Big markets are considered a good thing, but it is up to you to determine how competitive you can be with existing companies in that market.
4) Can you execute this idea? Many ideas out there are good. But you need to have the skills to pull them off. For example, creating Google is a good idea, but who could have done that? Even a business as low-tech as a restaurant is very difficult to pull off. So you must make sure that you can actually execute the idea well.
5) Will this business have natural ways in which you will be able to promote it? Some businesses are easily discoverable, and are something people search for. But some types of businesses are not naturally discoverable at all. To determine whether your business will be easy to market and promote, you must gain a deep understanding of marketing. To learn about marketing, take a look at our introduction to marketing article.
6) What demographic does the business idea target? Is the demographic lucrative? For example, if you make high-end jewelry, then the demographic is lucrative because it targets wealthy people. But if you make something consumed by people who are below middle class in terms of financial status, then they may have a difficult time affording your product.
7) Will the business require more resources than you have? Resources are time, money, and skilled labor. Do you have a way to get all the resources you will need? Or would this business require more resources than you can realistically put together?
8) Is the business proven, or something new and innovative? If the business is something that has been done before with success, then it is considered to be proven. But if it is something innovative, that can be very good, but the burden of proof for whether this business should exist is up to you. And that means extra risk that accompanies the extra potential reward. Here is an article where you can learn about different types of business ideas that there are.
9) Are there competitors in the space in which the idea is in? How well would you be able to compete with them? Are they strong? Or are they weak? Be careful not to compete against loved and strong companies. That is the most difficult kind of company to beat.
10) Is it something you want to be doing for a few years? If you are successful, you will be a part of this business for a long time. Is that something you actually want to do? That is worth considering.
11) Is the market you are in heavily regulated? If so, you may have legal challenges that will slow the business down.
12) Does the business idea solve a real need or make someone's life materially better or easier? Or does the business provide some great value somehow? If so, then there will likely be demand for the business. But if not, you may have a difficult time generating demand.
13) Has this idea been tried before by many companies which have all failed? If so, you must research why that happened and make sure that you do not repeat the same mistakes they did.
14) During your business planning process, one thing you should consider is which business niche to get into. Here is a tutorial on how to get into the right business niche for you and your business.
15) When you talk to your friends and family, business peers, business experts, and potential customers, do they like your idea? What feedback do they give you? If you are not sure whether to openly discuss your business ideas with other people, here is an article that talks about how to protect your business ideas and whether that is a good thing to do or not. I'll give you a hint. I am not a fan of protecting your ideas.
A part of the business idea validation process is actually the process of business planning. Many of the issues raised above are issues that you have to cover in your business plan. If you are not familiar with the business planning process, here is an article that will help you get started with writing a business plan. And below is a very comprehensive video tutorial on how to write your business plan.
If you feel that you might need some one on one business coaching, I also offer that service. Here is a page where I explain how my business coaching services work, and how we can get started.
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