Everyone likes to believe that their business idea is a game-changer, but the reality is very different. Many new businesses fail in their first year, anywhere from 30-60% of them (depending on where you find your stats).
To avoid that, you need strong business planning and more than a little luck (or whatever other name you prefer for that intangible element). And before you get too far invested in it, you must evaluate your idea. Also keep in mind that the idea itself is only one part of evaluating your idea. You need to step back and look at the big picture.
Think About You
Consider your idea. Is it really something you could see yourself doing for the next 10, 20, or 30 years? Everyone talks about the importance of passion for a reason. Getting into something for purely financial reasons usually doesn’t work out in the end. You have to like - love - your job when you’re trying to build something. So, do you? Beyond whether you want to do it, ask whether you can do it. Do you possess, or can you acquire, the necessary skills and knowledge?
If you answered “yes” to these questions, things are looking good.
Think About Your Product/Service
Next, consider the idea itself. What exactly is it? Be specific. Look at it under a microscope. Write up a brief description or explanation. Make it short and to the point (often called your “elevator pitch”). Then, run it by some people - friends, family, strangers on the street, internet forums and discussion boards. What do people think? Would they buy/use it?
You need to know explicitly just how your idea is better, faster, more efficient than the existing similar products/services. Does it improve upon something that exists already, and if so, how so? Is it a completely original product or service, and if so, why would people take a chance on it? What problem or need does it address/fix?
Think About Your Market
Who is this idea primarily for? Draft a customer profile - age, gender, income, likes and dislikes, location, education...as much detail as you can generate. Then go looking for them (in real life, online, or ideally both) and ask them about your idea.
Consider the geographical location for your product/service. Where are you going to sell, and is that dependent on where you are, or where your ideal customers are? Look at the direct and indirect competitors in that area. Try and locate company profiles on them, including their average market share and average price. Can you and your idea realistically compete with them on price?
Finally, evaluate the potential for growth. If your ideal customer base is too small or niche (people who collect teacups shaped like cats), your idea - no matter how good - doesn’t have much room to grow. A good idea needs a sizeable market to really have a chance.
Think About Your Finances
Money. A necessary evil. And even more so when starting a business. You need to crunch some numbers: how much do you have to start (savings, loans, grants), how much will you need to get up and running (overestimate EVERYTHING), and how long can you survive without steady income (better to underestimate here). How long do you think it will take to become profitable? If you can’t do this yourself, seek help from a friend or colleague, or hire a professional. You need a comprehensive and correct financial analysis.
If you’re producing a physical product, this would be a great time to contact some local suppliers and manufacturers to talk about prices, bulk discounts, and exclusive deals. Can you save money using one over another without sacrificing quality (never give up too much quality for the sake of the bottom line)?
Other Useful Links
A great idea is only one part of what you need, and when you evaluate yours, you need to consider everything. It’s all connected. You need a fantastic idea (product/service) - something that you love and can do - that addresses an existing problem or improves something in some way for a target market that is large enough to support you and your competitors. If everything is present and accounted for, and you have the financial backing you need, you’re in a good position to make it work.