Business ideas are exceptionally abundant, but, Will My Business Ideas Work?
If you have your mind tuned into becoming an entrepreneur then it’s easy to have hundreds of different business ideas a week. It goes without saying that not all business ideas come to fruition. In fact, very few do.
Sometimes it’s because the idea comes to the wrong person, or comes at the wrong time when other things (maybe other ideas) are taking priority, so a lot of business ideas follow Bob Dylan’s melodies, and are forever fated to keep blowing in the wind.
Other reasons business ideas don’t come and join the real world is because…
They just plain suck.
Out of those 100 business ideas you had the other week. 99 of them sucked. Maybe even all 100 of them sucked.
Business ideas are abundant. Good business ideas are scarce.
“But how do I know which business ideas are good? I can’t afford to finance every business idea to see if it succeeds or fails to know if it was a good idea or not.”
Good question, boss.
The Esoteric Gentleman’s Club is here to answer that for you.
How To Evaluate Your Market
Of the following 10 factors, give each a rating out of 10. Where 0 is the most unattractive and 10 is the most attractive.
How badly do people need your idea right now? For example, renting an old movie would be low urgency, whereas tickets to a showing of a blockbuster movie on opening night would be more high urgency.
2. Market Size.
How many people are out there actively trying to purchase things like your idea? For example, the market for arts and craft materials is a lot smaller than the market for coffee.
3. Pricing Potential.
What is the highest price the average potential customer will be willing to pay for your idea? For example, sweets sell for a small amount of money whereas aircraft’s sell for huge sums.
4. Cost of Customer Acquisition.
How easy would it be to acquire new customers? How much time and effort would it requite to make a sale? For example, Restaurants built on high-traffi c interstate highways spend little to bring in new customers. Government contractors can spend millions landing major procurement deals.
5. Cost of Value Delivery.
How much would is cost, in both effort and money, to create and deliver your idea? For example, an e-book is low cost and easy but the need for a large factory could cost millions.
6. Uniqueness of Offer.
How unique is your idea in comparison to direct competition in your market? How easy is it for competitors to copy you? For example, coffee shops are a dime a dozen but there are not many companies offering private space travel.
7. Speed to Market.
How quickly can you develop your idea and have it ready to sell? For example, going door to door washing cars can be done within minutes but it’s going to take years to set up a bank.
8. Up-front Investment.
How much will you have to invest in your idea before you’re able to start selling? For example, you don’t need to invest much to go around washing cars but you’re going to need millions if you’re serious about setting up that bank.
9. Upsell Potential.
Are there any related, secondary offers you could also suggest to purchasing customers? For example, if you’re selling a razor you could also sell shaving cream and extra blades, if you’re selling Frisbee’s that’s all you’re pretty much selling.
10. Evergreen Potential.
Once the initial offer has been created, how much additional work will you have to put into it in order to keep selling? For example, lawyer services can require ongoing work but once you’ve written a book that’s you done.
Assign Marks Out Of 10
…Now, when you’ve completed your assessment and given each one of the ten a mark, add up your score.
- Kaufman recommends that if the score is below 50, your business idea is not so good and you should move onto another one.
- If the score is between 50 and 75 you have a promising idea and will likely pay the bills but not bring in the big bucks.
- If your total score is above 75 then stop reading this and start building your empire! Just kidding, there’s more you need to do…
Once you have done the ten ways and have a good score, then it’s time to move onto the SWOT Analysis.
The SWOT Analysis
The SWOT Analysis stands for Strength, Weakness, Opportunities and Threats and it is a way you can evaluate each of those categories.
Then, once you know each of your SWOTs it allows you to cover up your weaknesses, focus on your strengths, take advantage of your opportunities and protect yourself from your threats.
It also allows you to take an objective view of how good your business idea is. You may have bossed the ten ways but if your weaknesses and threats outweigh your strengths and opportunities, you don’t need me to tell you you’re in trouble and it’s probably an idea not worth pursuing.
Here’s what the SWOT Model looks like:
Now what you have to do is go through each of the boxes and write down what your Strengths,Weaknesses, Opportunities and Threats are.
It is worth noting, when you’re doing it that strengths and weaknesses are usually internally based, whilst your opportunities and threats are usually from external factors.
For further help using the SWOT system, there is a great in-depth article on it over at Mind Tools.
Once you’ve completed both exercises, you should have a good idea of whether your business idea is worth pursing, I hope it is!
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