5 ways to evaluate your startup business idea
At 2 am, you had a flash of genius and came up with what sounds like a great idea for a new company. But now that daylight has dawned, you’ve got to figure out whether your concept can really fly.
Here are five ways to determine whether a new business idea is worth pursuing:
Start with yourself.
Evaluate your strengths and weaknesses as an entrepreneur, suggests financial writer Gary Crum, who is also an instructor in the University of Phoenix MBA program.
For example, if you want to start a business that requires making a lot of outside sales, and you’re not good at or interested in sales, then that type of business would probably not be a good fit for you.
“You have to know yourself and be able to honestly assess whether this business idea appeals to your particular strengths, because you don’t want to go into an enterprise that appeals to your weaknesses,” Crum says.
Appraise your proposal on its own merits.
“A startup idea is only a good opportunity if someone else is willing to pay for what you are offering,” says Julie Sanborn, a business program instructor and director of marketing for a travel company.
“It’s not enough for you to love your idea and the product or the service it provides,” she says. “You have to separate yourself from the concept and ask yourself whether it adds value to a consumer and whether or not it fills a person’s needs.”
Determine what makes your business different.
Take a look at the competition, Crum suggests, to see if other companies already offer the same type of service. If you still want to move forward with your plan, he says, your business will have to stand out in the market to entice consumers to choose your brand over others.
“Ask yourself, ‘Are you providing something entirely new, something at a lower price, or are you adding a service that is notably different from what is already available?’” Crum advises.
Research the market.
Identifying popular consumer trends can help you decide if your business idea is feasible, Sanborn says. “You can obtain customized forecasts and trend analysis reports from trade organizations to be sure your idea makes sense for the market you’re targeting.
“Often, trade organizations, such as the American Marketing Association, have already gathered market information that they will share with members for free or a nominal fee, and memberships in trade organizations are often free,” she adds.
Consider the state of the economy.
“Consumer spending patterns fluctuate over time,” Sanborn says, “so it’s important to ask yourself whether this idea can weather the storm in a variety of economic times.”
Think ahead, she says, noting, “When consumers have extra money to spend, your product may sound great, but when things are tighter, is this an idea that people would still want to buy?”