Making sure your idea is viable

Few things are as exciting as coming up with a new business idea. You lie awake all night thinking about the opportunities as results that the new idea will bring into your life. The mind is an interesting thing and one idea leads to the next and soon you are running your own business empire. But of course you have to start with the basics, and the basics for almost every entrepreneur I know is establishing a need for the business or concept after which you can start thinking of the business plan. You can of course come up with an entirely new product idea for which there may not even be a need as of yet, in which case you will need to invest heavily in marketing to educate your potential clients on why they should be buying your product. If yours is not the next iPad though, chances are that you need to start with finding out if clients will be interested in buying your product and the actual terms related tot heir interest.

So how do you go about testing your own business ideas?

Well there’s several approaches, ranging from asking friends, family and anyone down the pub for their opinions (not recommended) to actually going out there and doing it – if it succeeds it’s a good idea, if it doesn’t it’s not (again not recommended as it’s a very expensive way to test a business idea). Instead I favor testing any ideas for your own business in several ways. Firstly desk research and when it comes to that in a recent post ‘The 2-Minute Opportunity Checklist for Entrepreneurs’ on the Harvard Business Blog, Prof. Daniel Isenberg (of the The Isenberg Entrepreneur Test) described a pretty good test:

   1. Does your business idea soothe someone’s pain, discomfort, frustration, or dissatisfaction?
   2. Are there lots of those people out there?
   3. Do these people (or companies, or governments) have money to pay for it?
   4. Will they be able to decide quickly to buy your product or service?
   5. Does your idea exploit something about you that is outstanding or unique?
   6. Are there important assets you have that no one else has? (money, access to customers, technology, leadership skills, execution, location, salesmanship, etc.)
   7. Can you think of at least two people who might join you?
   8. Do their skills complement yours?
   9. Do they have the same values as you do?
  10. Do the majority of people whose opinion you highly respect think your idea is a good one?
  11. Does at least one person (and not more than three people), whose opinion you highly respect, think your idea is a bad one?
  12. Is there something about the idea or its implementation, that compels you to really devote yourself to it?
  13. Can you sneak by the big competitors without them noticing you for awhile?
  14. Can you find a potential customer who will take your calls, give you feedback, try a pilot out?
  15. Can you start up without huge gobs of money?
  16. Can you keep your fixed costs low during launch?
  17. Does your idea lend itself to small incremental steps that can inexpensively generate valuable information as well as at least a little cash?

He suggests that if when you evaluate business idea against this criteria it scores 16 or more ‘yes’ answers then you should get on and start a business around your idea. He expands on a few points noting that great ideas are those that attract detractors, explaining:

    …unless you have at least one major detractor, then you are probably not on to something big. In fact, if everyone thinks it is a wonderful thing to do, then probably a legion of competitors is on the launch pad.

Then provides a great description of a good business opportunity:

    Opportunities consist of:

       1. the alignment of a market need,
       2. a personal competence,
       3. values or motivation.

If your business idea passes that desk research stage, then it’s time to start failing fast, failing cheap! By which I mean find cheap ways to develop prototypes and test your ideas. Where cheap doesn’t necessarily mean low cost, but rather that they use a relatively low proportion of your start-up capital. The point being that you will make mistakes and get things wrong in the early days of any business and if the first mistakes uses all your capital it’s game over, in contrast if the first mistake costs you just 10% then you have nine more chances to get the idea right and start a successful business.

Once this is done you can start to put your business plan together and ensure that your knowledge of the product and market is expressed in such a way that you can attract business finance, should that be needed. In every step of the way the excitement will of course be growing and the better you know that the demand is really there for your forthcoming business the more confidence and excitement you will take in to the next stage.