Many budding entrepreneurs come up with business ideas but rarely do they act on them, many ideas die on notepads while the minority who are bold enough to take action reap the rewards. But before acting on ideas we must understand whether or not these ideas are worth pursuing, luckily there are many things we can do to validate business ideas before jumping into the deep end and it’s very important to do so when starting. This article will look at how to determine whether your business idea is worth pursuing or if it’s better left scribbled on a napkin.
Develop and Brainstorm Your Business Idea
If you want to start a business you should spend more than a few minutes developing your business idea, this means really sitting down to determine your plan of action and what your ideal business looks like. This stage isn’t about developing the business structure so much but really honing in on what kind of problem you’re solving, the target markets, and details on your product or service offering.
Most people jump from an idea and then go straight to menial tasks like looking at legally protecting business ideas before truly thinking about them further. The point of this stage is to ensure that the solution you provide solves a burning problem in the marketplace and will likely meet a high level of demand. You will soon find out if there is a market of consumers for your business and then from here, you can proceed.
Perform Market Research
Now that you know what your business idea plans to solve, what customers you’re looking for, and how it will come to fruition you can start to perform research on the sectors or audiences you plan to attack. Performing market research into these sectors will help you to define the needs of a certain product by looking at the current data regarding the niche and customer avatar. The goal is to have an understanding if you will or will not be able to cater to the needs of the marketplace.
To determine this you will need to look at similar products or services and see how well they’re performing in their respective markets. If there are similar products, don’t give up entirely as you can also look at how you can improve the existing offering and take over some of the market share. Then, you can look at your competitors and see what sets you apart from them as a business and what you can offer in terms of positioning, customer service, and impact.
While these are brief examples of what kind of research businesses perform as market research it all depends on the industry as they all will vary depending on what you choose. But the important thing is to look at all the factors and gather as much current data as possible, this will help you predict whether or not you’ll be set up for success.
Customer Validation & Testing Your Concept
This is where the rubber hits the road, doing testing on your ideas will give you the best indication of whether or not it’s worth proceeding on your plan. Since all businesses serve customers the process of validation will begin with them, depending on your business type this can be carried out in a number of ways from surveys, interviews, samples, or even launching limited-release products. Conducting a conjoint analysis survey can provide valuable insights into customer preferences and willingness to engage with your proposed offering. Researching a variety of example conjoint analysis survey options can provide you with a strong idea of if this method of market analysis would be beneficial for your business. Most businesses decide on a minimum viable product to test the waters and gather data from an appropriate sample size.
From this sample size, you’ll be able to adequately gauge demand for your chosen product or service reasonably quickly and use the data to either iterate or completely scrap the business idea you created. The key is to listen and learn from the customers’ experience and preferences whether you continue with the idea or not, this kind of information is valuable regardless.
After performing your preliminary tests and getting an idea if there is demand in the market you will need to spend a little more time crunching the numbers before jumping all in on your business plan. This is because whether we like it or not, numbers matter in business. Going through this step isn’t only important to determine profitability but to ensure survival in the initial phases of your business.
You will need to evaluate the financial feasibility by estimating all the involved costs in greater detail, these can vary on business but will generally include the startup costs, potential revenue, expenses, and overheads of operations. Do these for a specific period then calculate the return on investment to see how much risk you’re willing to put up front. Feel free to hire an accountant or qualified business financial planner to help with this if you need.
Determining the worthiness of ideas can be overlooked when entrepreneurs get overwhelmed by the excitement of starting a new venture. Still, it is very necessary to put emotions aside and go through the process. When we conduct proper market research and test the products and services we not only see if our concept holds up but we can gather important data to improve and iterate on what we already have. All in all, the testing phase is integral for all business ideas so make sure you don’t forget to do the preliminary work before you begin. Good luck.