If you’re like most entrepreneurs, you have new business ideas all the time. Entrepreneurs like you and I see the world as a place that can be constantly improved—we know we could make products and services that make things better.
The problem is, not all of our ideas are great ideas. They might seem like good ideas at the moment, but not all of them are worth turning into real businesses.
So, how do you figure out if your ideas are any good? How do you separate the good ideas from the bad ones?
Let's look at a step-by-step method to find out of your business idea is any good.
1. From idea to pitch
The key to figuring out if your idea is any good is to take a few minutes to figure out some of the details. You need to get your idea out of your head and onto paper so you can take the next step to figure out if your idea is any good.
The good thing is that you don’t need to write a complete, detailed business plan to figure out if your idea is good or not. That would take too much time and be a pretty useless exercise at this early stage of turning your idea into a business.
Fortunately, the first step in this process is much easier than that. The first step is to create a “pitch” for your business—a simple, one-page overview of your business. Here’s what you need to include:
- Start by writing down your value proposition: one sentence that describes the value your company will give to your customers. Here at Nimbl, our value proposition is to provide “Tools and advice to make having an eCommerce Business available to everyone without the need for expensive developers or designers.” It’s critical that you keep your value proposition to one sentence. Imagine that you have to describe your business on Twitter and use that 140 character limit to help you distill your idea to its core essence.
- Next, describe the problem you are solving for your customers. Again, one sentence or a few bullets are plenty. Keep this as short as possible. For Nimbl we describe our customers’ problem this way: “eCommerce websites are confusing and expensive, we find a way for this to be available to everyone without an entry price barrier related to costs”
The natural counterpoint to your customer’s problem is your solution. Use a few bullet points to describe how you solve your customer’s problem. This is basically a short description of your product or service. What does your business do?
Now that you’ve defined the problem you are solving and your solution to the problem, you need to write down your target market. This is a brief overview of your ideal customer. Who are they and what do they look like? Are you targeting busy executives or maybe working parents? Perhaps your target market is iPhone owners who want to take better photos. Whatever your market is, take a few minutes to jot down some bullet points that describe your ideal customers.
Of course, your customers probably have a way that they solve their problem currently. This is your competition. Every business has competition and it’s important to understand how you’ll compete against them. Is your solution better? Cheaper? Faster? Maybe a combination of all three? Take a few minutes and jot down a list of your potential competitors and how your business might be better.
The next step is to think about how you’re going to sell your product or service to your customers. Write down a few bullet points about how your sales will work. Separately, write a few notes about your key marketing activities. Again, this doesn’t need to be detailed. All of this information is going to fit on a single page, so two or three bullet points for each topic are all you need.
Finally, you need to spend a few minutes thinking about how you’re going to make money. Write a quick list of the ways you’ll generate revenue. At the same time, think about your most important expenses like material, rent, and other important costs. Don’t worry about writing down actual numbers at this stage. Just list the key ways you’ll make money and the biggest expenses you’re going to have.
That’s it! If you’ve followed along so far, you’ll have a one-page pitch—a simple overview of your business idea.
2. Your pitch is your set of assumptions
Now that you’ve written your pitch, you’re ready for the next step—turning your pitch into a set of questions.
Basically, your pitch is just a simple document of all the things that you believe about your business—it’s your set of assumptions. What’s in your pitch isn’t really a set of facts at this point, it’s just a collection of guesses. You’ve guessed that your target market has a problem and that they’re willing to pay for your solution.
Now you need to figure out if your assumptions are correct. Did you make the right guesses? To figure this out, you need to turn your pitch into a series of questions. Here are a few examples:
- Does my target market have the problem I think they do?
- What does my target market think of my proposed solution?
- What is my target market willing to pay for my solution?
- Do I have the right target market?
- How does my target market like to buy things?
- What marketing messages does my target market like? Where do they shop and what do they read?
Now, go through your pitch and create your own question list. What are all the things about your pitch that you need to prove?
After all, your pitch can’t become a real business if your guesses aren’t correct. So, take the time to figure out what all your assumptions are and what you need to prove in order to move forward with your business.
Taking this step now can save you a ton of pain and heartache later on. The simple step of separating guesses from facts will be your guide for the next step.
3. Get out of the building and validate your idea
Now that you have your pitch and your initial list of questions, you’re ready for the next step in the process of turning your idea into a business reality: getting out from behind your desk and get answers to your questions.
This sounds incredibly easy, but it’s the one step in this process that entrepreneurs have the most trouble with. Getting out and talking to your potential customers isn’t as easy as it sounds. You have to be ready for some rejection and you have to be comfortable getting people to talk to you.
While this step may be a bit difficult, it’s the most important thing you can do to figure out if your business idea is any good. You need to get the questions that you outlined in the previous step answered or you won’t know if you should move forward with your business idea.
As you get feedback on your questions, make sure you write everything down. Document every conversation you have and organize the feedback in the same format as your initial pitch: write down your notes about the problem you’re trying to solve, your solution, your marketing strategies, and so on. Getting all of this information organized is key to the next step.
4. Refine your pitch and add more detail
Now that you’ve done the hard part of getting feedback on your business idea, the next step is to go back to the initial pitch that you created in step one and refine it.
Chances are that all of your guesses and assumptions from your initial pitch weren’t quite right. If they were 100 percent correct, just move forward and start your business! But, for most of us, our guesses won’t have all been accurate.
The feedback from step three gives you two choices: Toss your business idea completely, or revise it and try again.
Hopefully, not all of your feedback was negative and you can refine and expand your pitch based on everything that you’ve learned.
You’ll also want to take some time now to expand your pitch to include a little more detail than you did in your first pass. Here are a few areas you should consider adding:
- Budget and sales goals: How much do you think you will sell and how much is it going to cost you to make your product or deliver your service? What other key expenses will you have when your business is up and running? Now it’s time to go into a little more detail and perhaps even put together an initial sales forecast and expense budget.
- Milestones: What are your major goals for the next few months?
- Team: If you’re moving forward with your business, what kind of team are you going to need? What kind of funding will you need for the initial payroll? What key roles do you need to fill?
- Partners and resources: Do you need to work with other companies or organizations to make your company a success? If you do, start putting some lists together of who you need to talk to for your business to work.
- Funding needs: This is optional, but if you need to raise money for your business, how much do you need and what will you use it for? It’s good to start thinking about this early, as a reality check on what it’s going to take to get your business up and running.
That’s it! The beauty of using a process like this one and using the pitch format is that it’s easy to use and doesn’t take much time, money, or effort to figure out if your business idea is worth pursuing.
The pitch is your guide—it’s an overview of your business that spells out the questions you need to answer to decide if your idea is any good.