3 Ways to Find Out If Your Start Up Idea Is Worth the Investment
Most of us with an entrepreneur’s mindset always have a business idea lingering in our heads that just doesn’t seem to go away. You are wondering if it would actually work and if it would be worth the investment you are going to make. At the end of the day, just wandering will not get you anywhere.
That’s when you decide to go ahead with it at any cost. This could actually work – only sometimes! The reason is that the execution of not every business idea is as straightforward as it looks. That’s why it’s important to find out the actual workability of your idea before you go ahead with it. Here are what we believe to be the three most important factors that you should consider in understanding the true potential of your business idea.
- How will your customers react?
You will need to understand if your business idea is something new or something that is already existing. If your business idea is disruptive and something that doesn’t currently exist in the market, then you will need to understand how the target customers are going to perceive your product. For that, you will need to know what others think about your business idea.
Simply talking to your best friend or family about the idea and getting their feedback isn’t going to help you. Your best friend or family might not be one of your target customers. You might have taken 30 minutes to explain the idea to your best friend but your customers are not going to be that patient. It should seem obvious how the business idea will make their lives better in a very short time frame.
In order to do this, you have to have a very thorough understanding of your customer and the specific needs of your customer that your product or service is going to address. The best way to gather this data and understand the likely reaction of your potential customers to your product or service would be to conduct a market survey. This could be a costly exercise but surely much necessary thing to do, especially if your product is stepping into a blue ocean and is intended to create a disruption. As you execute your business and later when you develop your marketing strategy and launch promotion campaigns, you will find out that every riyal spent on understanding your target market is well-spent money.
2. Look for competitors and think about a differentiation strategy
Don’t worry if you’re not the first mover. Successful competitors are the signs of a strong demand for the product you intend to launch. Early entrants and existing players have already done the risky work of validating the idea. The only thing left for you is to think how you can compete with them effectively. Even though the demand is proven, you should have a competitive advantage over your competitors – may be a new location or focussing on a niche market or new features or best prices. Knowing your differentiation strategy gives you an added confidence when entering a competitive industry.
It is also important to constantly keep up with your competitors while focusing on your key competencies and differentiation points. Your differentiation strategy could be cost-focused or about superior quality; both could equally work depending on the type of your product or service and your target market. What is important is to continuously re-evaluate your strategy against the changing market factors to make sure it still gives you a competitive edge in the market. However, these are things you should remember as you have started off with your business. For now, you are good as long as you have thought of a sustainable differentiation strategy that would give your product or service and edge in the market.
3. Having the required resources in place.
Be honest with yourself about the business model and the plan. The execution capability of the business idea is determined by the plan and the availability of resources. Simply having an idea is not enough if you do not have a great business plan in place. You cannot start your business and then figure out your business plan. Strategic planning has to be done prior to actual execution of your business. As you finish with your planning, you will be in a position to clearly understand if your business idea is actually workable, if it is worth the risks and the money you are going to invest.
Having the required resources to execute the business is also much important. Resources include your money, time and your team. You can only start your business if you have access to capital or funding. Having half of the money you require is not good enough. Of course, you can start off small. Then you have to plan your business according to the funds in hand and expand later. Without appropriate level of funding, your business will be incomplete and it will be very difficult to add value to the customers with an incomplete business. If you don’t have the money, you will have to look for an external investor who could provide the required capital either in the form of debt or equity. Therefore, it is always good to satisfy yourself that you have the required level of resources before you venture into your business rather than with half the required amount in hand and not spending it well.
The three quick and simple ways we have shared with you will certainly help you find out if your business idea is worth the risk you are taking with your funds. However, you are not to lose confidence since there are so many other tests that you can run. And as mentioned earlier, it is also possible for an idea that fails one of these tests to ultimately succeed.
These tests do not guarantee success or completely eliminate the risk of failure, but they will give you more insight, empowering you to invest your time and money more wisely.