Is your business idea the next unicorn waiting to be launched? Or is it just another also-ran with no growth potential?
These questions can lead to sleepless nights for any aspiring entrepreneur. Luckily, there is a way to know if your idea will be successful or not, by validating it before you begin.
Here are 15 questions to ask before building your startup and commit significant time, money & resources.
- What problem does your idea solve?
You should have the ability to clearly describe in one or two lines the problem your product or service will solve for potential customers. You might even use it as the tagline for your business. For example, “Our product helps people [the problem it solves]”. There are plenty of nice-to-have products & services in the marketplace, but unless your solution can solve their problems, they won’t pay.
- Has anyone tried to solve it before? Why did they fail?
With a little market research, you can identify who has tried solving this problem before. Analyze what worked well for them, what didn’t. Learn from their mistakes and avoid the costly errors previously made. As you identify deal breakers, you may re-assess your idea. For example, is your idea ahead of its time, with no suitable technology to support it?
- What are the benefits of your idea?
In this case, ‘more’ is better and the more likely you will be successful. Benefits solve real problems and fulfill a need. With at least two or three benefits, you will have a better pitch.
- What are the features of your product or service?
Try to list at least four to five clear features your product or service offers. Highlight them on your website and other marketing assets. However, if you’re unable to identify the features, invest more time in your idea. Think from the point of view of future users.
- Is there a similar product or service already in existence?
Many have an ‘original idea’ only to learn after investing time and money that similar solutions are already available in the market. If so, how is yours different? For example, although email marketing is a crowded space, Campaign Monitor launched a new email marketing tool built specifically for designers and within six months, they had thousands of customers. If you are unable to substantially differentiate your product, then it’s better to wait for a new idea.
- Who are your competitors?
A few competitors are expected as it proves there is a demand for your idea. However, if it is too crowded or one of the competitors is way ahead of you, then it is better to move on to your next idea. Even if you break into the market, you will have difficulty competing with more mature businesses in the marketplace. Your prospects will choose your competitors simply because they have more features, are more trustworthy, or simply because of popularity and reviews.
- Do you have a competitive advantage?
Does your product or service have a particular feature that can’t be copied easily by others? This will give you a competitive advantage and a good reason to pursue your idea. Otherwise, as your business grows, the market will become crowded and you will be tempted to undercut your products & services in order to survive.
- Have you done a SWOT analysis of your idea?
A SWOT analysis is an amazing framework that enables you to quickly evaluate your idea’s strengths, weaknesses, opportunities & threats, and have a better understanding or risks and potential for success.
- Do you have the resources to launch a startup?
Although you don’t need to be rich to start a business, you do need time, money & other resources to get started. For example, will you have the time to build your product, after your day job? Do you know how to build your product or service? Do you know anyone who can? Make a list of all the things you’ll need to get your idea off the ground and figure out how you can arrange them. If you’re unable to get everything you need, it’s better to wait till your situation changes.
- Who is your target customer?
Defining your potential customer, buyer personas, may be the most important task. You need to have a clear image of your target customer - their age, demographic, location, gender, interests, habits, likes, dislikes, problems, and more. Be as detailed as possible. A general idea is not enough. If you don’t have a clear idea, observe what your competitors, or other companies in your industry, are doing.
- What is the market size for your product or service?
Make an estimate of how many people will actually need your product and what they’re willing to pay for it to know if your idea is financially feasible. Reference trade journals, magazines and industry reports to get an idea of how many people face the problem you’re trying to solve. If you have completed the competitor research, look at whom they’re targeting and for what pricing.
- Have you reached out to potential customers?
Getting feedback from prospective customers is one of the most effective ways to test if you’re headed in the right direction. Be ready to make a course correction early on. Many B2B startups begin by doing a pilot project or consulting work that uses their idea to solve prospects’ problems. This allows them to test their idea on a small audience, get feedback and improve their prototype.
- How soon can you build a minimum viable product?
Most entrepreneurs think they need to build a polished final product to launch their startup. The key is to get something out of the door, measure people’s interest and iterate as you go. First determine how many days, weeks or months it will take to create the first version of your product or service, even if it is a little rough around the edges. The longer it takes, the costlier it will be and the more likely it is to fail.
- How soon will you break even, or start generating profit?
Some ideas take a large initial investment to get off the ground. If your business requires a serious capital investment, think about how you will manage your daily expenses until your startup gains traction, until the cash runs out.
- Can you get prospects or paying customers even before launch?
This might sound unbelievable but there are ways to attract potential customers even before you are ready with your product or service.
One of the easiest and most inexpensive ways is to simply create a landing page about your idea, with a sign up form to gather email addresses of interested people. If you get a large number of sign ups, it is an indication that you are going in the right direction.
You can even go a step further and accept pre-orders before launch. If people line up to buy your product or service even before it is available, then it’s an even stronger sign that you’re onto something.
It may take you some time to know the answers. You may reach out to your friends and family for advice. Take care to understand that family and friends are not experts or investors. They may not be your best resource. If your startup idea passes all these tests, you should surely give it a shot. In case of questions where you don’t have clear answers or good answers, keep a time limit (1-2 months) to do some research and figure out how to proceed. If you run out of time, be patient and keep thinking. You might be able to strike it big by modifying some aspects of your idea, or simply waiting for the next one.
For more than 8 years, Sreeram Sreenivasan has worked with various Fortune 500 Companies in areas of Sales & Marketing Strategy. He is the CEO of Ubiq BI and regularly writes at the Fedingo Blog about a wide range of business growth topics.