A business idea can come at any time. It might be while you’re in the shower. While you dream. Or maybe when you’re walking down the street. Whenever or however, the idea comes to you. How do you know if it’s good business idea? One that is worth pursuing and has what it takes to go all the way.
Start by asking yourself the following questions.
#1 Does my idea solves a problem or fulfill a need?
From your local Italian restaurant to a Space X rocket, all businesses, no matter how big or small, have one thing in common. They solve a problem or fulfill a need in the market place. Your idea should too. Once that lightbulb goes off in your head and a great idea springs to mind, this should be the first question that you ask yourself.
#2 Is there is a market?
You might have the best idea in the world. However, if there is no market for it – people willing to pay money – then your idea is dead in the water. There are different ways to confirm if there is a market.
- Look for similar businesses already on the market
- Use keywords tools to determine if people are searching online
- Check if similar products are selling on Amazon
- Interview people who you consider your target audience
- Create an MVP (Minimal Viable Product) and market test
- Create a fake door landing page and test interest
#3 Are people willing to pay?
For a business idea to be worth pursuing, it has to deliver the income you desire while also covering your operating and business costs. This means you have first to determine how many people are willing to pay for your service or product. If you have already determined there is a market, then you should have the answer to this question.
If there are similar businesses already in existence, you will know how much they charge. The same is true if there are similar products that are selling on Amazon. During interviews with your target audience, you can ask how much they would pay. And if you create an MVP or fake door, you can market test price points.
#4 Can I differentiate from the competition?
Unless your business idea is truly unique, you will likely have competitors, and if you want to stand out in the market, you will need to determine your UVP (unique value proposition). A UVP is what differentiates your product and service from your competitors.
To determine your UVP, conduct competitor research. The goal of this research is to identify the strengths and weaknesses of the competition and identify what you will do differently or better.
#5 Do random strangers think it’s good idea?
Most people, when they have a business idea, pitch it to their friends and families. And while this is a good start, it’s also not so accurate. Your family and friends love you, and they might not tell you the whole truth. However, random strangers won’t have any such inhibitions.
So, where do you find these random strangers? You can simply walk into your local town square and ask passers-by. If you belong to Facebook groups, you can pitch your idea to them and see what they think.
With this approach, it’s not just enough to pitch the idea. You want to get feedback that will help you develop it. Don’t ask for yes or no answers, instead ask people why they like it or dislike it.
#6 Can I get funding?
Depending on the business idea, you might be able to bootstrap it. However, if not, you will require funding. If this is the case, before you get too far into developing the idea, you should confirm if banks or potential investors will provide financing.
Before you seek funding, first write a business plan. As you are still at the idea stage, write a simple one-page business plan. You can use this to pitch the idea to banks or investors. If they think your idea has potential, you can create a more detailed plan.
#7 Is this an idea I’m passionate about and truly believe in?
Taking a business idea and turning it into a successful business is incredibly difficult. It requires hard work, dedication, and nerves of steel. Basically, you have to be willing to give it your all to make it work. And it’s a lot easier to give it your all and stay the course if you’re passionate about the idea and truly believe in it.
When you have an idea that you want to pursue, ask if you can see yourself doing it five years down the line. Also, ask yourself how much you’re willing to sacrifice to make it work in terms of time, energy, money, and quality of life. These are questions you should honestly answer. If you’re not 100% sure, then maybe this is not a good idea for you.
Over to you
I hope this post helps you answer the question – how do you know if you have a good business idea? If your idea ticks all the boxes, then it’s got legs. However, coming up with an idea is just the first step, now you have to go and start turning that idea into a reality.