10 Ways to Tell If Your Business Idea Has Low or High Risk


Mark Zuckerberg and Larry Page are perfect examples of people who successfully transformed noble ideas into multibillion-dollar businesses. However, it’s one thing having a business idea and it’s another building it into a moneymaking empire. In the early stages, it is normal to experience feelings of uncertainly, mainly because you don’t know whether your idea will yield positive results. Before you can begin pumping money into your idea in a bid to make it a reality, you ought to evaluate whether it is high risk or low risk. Here is how to do it.

See Also: How to Get an Investors’ Attention

1. Are You Solving a Problem?

Ideas that lead to the development of products or services that solve real life problems are not likely to fail, and are therefore considered low risk. The average consumer is likely to purchase a product that can help him or her get something done. If your business idea isn’t going to solve any problem, consider abandoning it.

2. How Big Is the Market?

You could have a potentially profitable business idea, but if the market size isn’t big, you will not raise a lot of money in sales revenue. Ideas that lead to the creation of highly specialized products with a small consumer base are often very risky.

3. Are There Established Businesses Based on Similar Ideas?

Sure, a unique business idea has the potential to grow big. However, it is too risky investing a lot of money into an idea that no one has tried out. If your idea is a more innovative version of an existing successful business model, you have the best shot of succeeding. On the other hand, an idea that is too similar to that of a failed business is very risky.

4. What Do People Think About Your Idea?

Sometimes our best sources of information are only an arm’s length away. What do relatives or friends think about your idea? If many of them think it isn’t valuable, then you can consider it highly risky.

5. How Much Are People Willing to Pay?

To run a business, you must offer a product or service. With your idea in mind, you could develop a prototype and have a few people use it, and determine how much they are willing to pay. If their price is way below your expectations, you have a highly risky idea there!

6. What About Launching Costs?

Ideally, you want a business idea that doesn’t need a lot of startup capital. If you find yourself pitching the idea to serious investors or borrowing huge amounts from banks in order to get the business rolling, it is highly risky.

7. How Flexible Is the Idea?

In business, diversity is essential. Although many successful businesses have core products, they often venture into other industries. For instance, Google’s main product is Internet search but it also develops operating systems for mobile devices. Ideas that can easily be tweaked to produce other services are low risk.

8. What Is Your Knowledge Level?

Warren Buffet, one of the richest men in the world, has a master’s degree in economics. No wonder he is good at making profitable investments. If you are highly knowledgeable or educated, then you can be able to develop a low-risk business idea. Potential investors will also find you credible.

9. Go to the Experts

Business consultants are professionals who have the experience and knowledge to evaluate your idea and render expert recommendations. Should a consultant come to the conclusion that your idea is very risky, it is advisable to drop it.

10. Try It Out!

No matter what anyone tells you, you can trust your guts and start the business. If it fails, you will no doubt learn from the experience and come back stronger. Before starting the empire that is Microsoft, Bill Gates started Traf-O-Data which failed miserably. Should your idea succeed, then you will prove everyone wrong, and inspire several other aspiring entrepreneurs sitting on their ideas.

See Also: 5 Simple Ways to Start a Small Business

These are some of the best strategies you can use to assess the feasibility of your business idea. Remember that your idea doesn’t have to agree with all of these strategies. If it agrees with at least five, you could consider implementing it.

Have you evaluated the riskiness of a business before? What was your experience? Please feel free to share in the comments section below.

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