Many of us are very impulsive when we have a new business idea. The lightning bolt of inspiration strikes us, we get excited and we get to work! We buy the domain, start designing the product, begin to build a website, and imagine the promotions and partners we’ll connect with.
The ball starts rolling. Then, a day, a week, or a month later, we wake up and start to see the holes in our plans. Or we see the competitors who are already dominating in our space (and actually have some pretty good ideas we hadn’t thought of). Or we realize that we don’t know if anyone really wants what we’re selling.
If it has happened to you, then you may want to do these four things:
Collect your ideas in one place and document why you were excited about them
Sit on them for a few hours or days before starting to invest and work on them
Get feedback from people who have some understanding of the customer
Evaluate each idea against the same set of questions to help you think through the true business potential
15 Questions to Vet Your Startup Idea
Is the solution well-defined and easily understood by the target customer?
Is the solution, as you dreamed it up, going to be clear for your target customer? Is it clear what it will do for them, how they use it, or why they need it? If not, define!
Is the solution aimed at a very specific customer profile?
Are you aiming for a specific customer, or are you going broad? Having a very defined persona helps you get input from them, develop features for them, and find them (when you want to market). Going too broad can mean that you’re building a swiss army knife to solve everyone’s problem and makes it very hard to market.
How motivated will customers be to buy and use this product or service?
Is the problem you’re attacking a major pain point for your target persona? If it’s just “nice to have”, chances are they won’t pay for it.
Is this solution 10x better than all other alternatives on the market?
Most startups will have some form of competition in the market. In fact, the competition can show that the market has potential, especially if people have been around for a while. You’ll have much more success if your solution isn’t just slightly better than those of the incumbents.
Is your solution within the budget of the target market?
One problem with some ideas is that, while they are 10x more effective, they are sometimes 2x-10x more expensive than current solutions. It’s like comparing an LED bulb to an incandescent bulb. If people can’t stomach the upfront investment (even though the long term savings are there), then you can have a problem scaling up.
Is the sale complex, requiring buy-in from several people in the target company?
In the past, software companies that started selling to larger and larger companies would need to build out bigger and bigger teams to close the transaction, to implement the solution, and to support the enterprise client. These large, multi-year contracts with heavy implementation and support costs would require untold numbers of people to be involved in closing one of these deals. Today, some SaaS startups can get traction and grow but selling first to one person in an enterprise or to just one team. From this beachhead, they spread into other departments and eventually (based on evidence of internal demand) can move from multiple smaller deals in an enterprise to a larger deal. If your sales process requires fewer people to sign off, you’ll have a better chance of scaling fast within companies.
Has there been a test or example of customer willingness to pay for a similar solution?
Has there been proof that customers are willing to pay for this (or a similar) solution? Talk is cheap, so if pilots have been run or if competitors are able to sell their solutions, then this helps validate the fact that there’s a willingness to pay.
Is it clear how you’ll make money? Is there a clear business model?
Is there a clear way to make money? Or is this another social network where “you’ll figure it out after your massive”?
Is the purchase one-time, recurring, or periodic?
Is this a product or service that lends itself to periodic and ongoing billing (e.g. security software, storage, analytics, insurance)? Or is it a product or service that is a buy one-time thing (e.g. wedding photographer, home purchase, TV, banquet hall rental, etc.)? With the one-time purchases, you need to find a new customer to make another sale (which is where referrals and increasing the total deal value for each sale become very important). With periodic products or services, retention and increasing customer lifetime value (e.g. by upgrading or adding services) become important.
Is there a massive market opportunity for this solution?
Is this a large market? Is the market growing? If it’s massive and you have a much better solution, the potential is obviously huge.
Is there a possibility to be the top player in this space?
Is it within reason that you could (at some point) become the top player in this space? Can you be one of the tops, with the right investment? Or, will you be one of many players fighting for your small share of the market?
How defensible is the product or service?
Do you have any unique intellectual property (IP) related to your solution? Have you (or will you) made significant investments that will help create a barrier for competitors? Do you have a unique market position due to partnerships, contracts, or geographical location? The more defensible your solution, the better. If competitors (especially big, well-funded ones) can quickly replicate your products or services, then you need to think about how you’d counter that.
Are there major technical, design, adoption, or manufacturing hurdles to be solved?
If there’s one major miracle that needs to happen to make your solution a reality, that can be overcome. If there are two or three miracles, then you really need to consider this idea very deeply. For example, if there’s a major technical hurdle, that’s one. If there’s a government approval or exemption needed, that could be another miracle. If there’s the need to get millions of people aware of your solution to make it work (e.g. a social network), that’s the third miracle. This may be too many for you to overcome.
How dependent are you on partners, providers, regulators, manufacturers, or other companies?
On a related note, are you dependent on a particular partner, regulator, customer or manufacturer for this business?
Do you have clear ways to reach your target market?
If you have a clear customer persona, that may lead you to very obvious ways to reach your customer base. For example, if you’re selling toys or games, there are buyer’s conventions that would need to be a key part of the distribution of that product. If you have alliances with companies that are already reaching your target customer (e.g. selling software through a big IT consulting company), that can also be a way to reach your market. If you’re selling to everyone (e.g. “small business”), the path to the individual customers is less clear.
Did the questions help you evaluate your idea more deeply? Are there other questions you would add?