Hit or Miss? 5 ways to evaluate your startup idea
If you’re reading this, then chances are one day you woke up with an idea that seems like your golden ticket, like a million dollar check, or to be precise like an opportunity to make a ridiculous amount of money. If that’s the case, well… congratulations! You’ve made the most important step for every entrepreneur!
But before you start playing an all-or-nothing game, before you quit your 9 to 5 job, before you spend all the money from your savings account on building a prototype of whatever you’re planning to sell, take a few minutes to read this short post. LogotypeMaker has gathered 5 most efficient ways to evaluate a startup idea. Try all of them and make sure your idea is really worth your time and effort.
If it’s simple, then it’s good
The first and probably the most important test is the “simplicity check”. No doubt you understand all the twists and turns of your concept but will it be clear enough for the investors and the potential customers?
They say, if you can’t fit your idea into 10 words, it’s not good enough. Well, 10 words may be an exaggeration but 20-25 words will be exactly enough. Can you explain your idea to a total stranger using just 25 words? Did (s)he get it? Was your explanation clear enough?
Try and explain your plan to a child. If a child has no problem understanding it then you’ve completed the “simplicity check” successfully. But if people react to your explanations like
….then you either need to work on your concept a bit more or switch to another idea.
Some may think: “What’s the point in all those explanation limits? Who cares if I describe my concept in 50 words, not 25? I’m fine as long as people understand me”. Unfortunately, that’s not how business works. You’ll need to meet numerous investors, you’ll need to convince the customers they need to buy your product or service. No one has time to listen to your lengthy commentaries. You have one minute, one shot to get all of them interested. Keep it short and clean.
Be a problem solver
So, you’ve survived the first challenge. You’ve already made sure your idea is simple and clear enough. That’s great! But do you know what customer’s problem your business is going to solve?
The best (and the most profitable) business ideas work out because they make people’s life easier, they solve a problem. So asking for the audience’s opinion seems like the right thing. But the trick is the customers usually have zillions of voiceless wishes and cries for help they’re unable to express.
As an entrepreneur, you have to “hit all the right spots” fulfilling the audiences wishes and unobvious needs. Do you already know what kind of problem your idea will solve? Make sure you have an answer as all of the investors you’ll about to meet will ask you about it.
If your future startup doesn’t have any problem-solving background, keep brainstorming as this particular idea won’t bring you money.
Make it fit your personality
We bet you can recall a dozen inspirational quotes a la “Do what you love, and you’ll never work another day in your life”. For the most part, those sentiments have nothing to do with real life. But when it comes to the business idea that may become a lifetime career or at least a long-term commitment, it’s vital to make it fit your personality!
Are you proficient (or at least have minimum experience) in the business area you’re planning to launch a startup? Do you have the contacts needed to build an experienced team? Can you learn and master the skills needed? If the answer is negative, the idea is not that promising as it seems and you’ll have hard times putting it into practice.
Before proceeding to the next step imagine your startup is successfully launched. Write down all the tasks you’ll be responsible for. Are you comfortable with all of them? Are you ok with the new working pattern? Does your new role require a lot of communication? Will you be able to manage it?
Answer honestly. Continue pursuing the idea only if it doesn’t force you changing who you are. Even the most commercially successful idea doesn’t cost your mental health.
Think of the revenues
This method is probably the most important and the most complicated. If you’re a virgin entrepreneur with no business skills whatsoever you may need some time to get through it. But it’s all worth it, we promise!
You need to come up with a revenue model to evaluate a startup idea. In the simplest terms, you need to understand how your potential business will earn you money.
Will you sell some kind of product using the markup revenue model, grow the profits using the paid subscription or maybe launch a freemium service? Give it a good deal of thought. Any tiny little detail may crash your future success.
Don’t forget about such aspects that may affect your business plan like returns, seasonality, equipment leasing etc. How quick will the investment return? Does the income amount still look alluring after all the expenditures and taxes?
Spend some time and create a realistic business plan. Ask for professional help if you need it. A strong revenue model is a must. If you can’t create one, the idea will never pay off.
Ask for a feedback
If you’ve tried all of the four methods listed above and your idea still remains pretty attractive, you have one last thing to do — test the possible market response. Basically, that’s how you’ll understand if the customers want what you’re selling.
Of course, you may interview friends and colleagues of yours (and that’s a great idea) but such an approach won’t be able to replace a real customer’s feedback.
There are several ways to get an accurate market response. First of all, you may create a landing page with a clear call to action. If you plan to create some kind of software, it might be a good idea to build a prototype and give the target audience an opportunity to interact with it. Don’t hesitate to use the popular crowdfunding platforms like Kickstarter or GoFundMe. That’s the perfect way to find out whether your sales pitch is convincing and interesting enough.
If people will interact with the landing page or a prototype you’ve created, if they will donate to make your project happen, that means your idea is brilliant and is definitely worth trying. Don’t blow such a chance away!
One last important note!
Every idea you come up with will eventually grow on you. The more time you spend working out the kinks the more biased you become. So don’t be afraid to ask for a third-party opinion. It can be anyone whose opinion is important for you or (if you’re not scared of the harsh reactions) even a poll created online.
If the first business concept you’ve created didn’t really work out, keep your head up! Use the experience you’ve gained to take another shot! Sooner or later you’ll get there! And that’s for sure!