How to Know if Your Business Idea is a Good One

October 9, 2018 saramolnick 0 Comments

When I met up with a former coworker and a good friend, we started talking about a business idea she had. I was immediately intrigued. She came up with a solution to a problem I was currently experiencing myself. I don’t want to give too much away but the idea included developing an app. After thinking through it a bit more and digesting the idea that night, I thought wow, this is actually a great idea. I’m all on board. I thought….is this a eureka moment?

The Eureka Moment

You always hear about successful people who have had serendipitous or eureka moments that eventually resulted in them in creating a multimillion-dollar company or improving science.

  1. The proverbial apple striking Newton’s head when he discovered the science to gravity
  2. Ikea founder could not fit a table in his small car, so he thought to take off the legs.

Then I asked myself – is this truly a good idea? When an idea comes to mind does one try to build it as quickly as possible to get it launched and in the marketplace? Or should you develop some sort of business plan and strategy before bringing the idea to life? What’s the balance between action and planning? If you take action too quickly without a plan, I suppose you can risk coming to a roadblock you didn’t think of. on the contrary, of you’re spending all your time planning and not building, you can risk other competitors coming into the space, making it even harder to break through the noise; Or you can simply lose momentum and motivation in bringing your idea to life.

Questions to Ask When Evaluating a Business Idea

So how do you know if your idea is a good one and worth investing time and money into?

Here’s what I’ve learned after reading articles by Guy Kawasaki an evangelist who helped launch the Macintosh computer and speaking to leaders in the fintech space, such as Remy Serageldin, CEO of Honeyfi who I met at a fintech meetup.

When you have a business idea , Some initial questions to ask yourself include

  1. Why do I want to start a business?
  2. What are my goals?
  3. Who is my target customer/ is there a demand for my product or services?

Evaluating a Demand for Your Business Idea

But how do you measure if there’s a demand? Google offers a nifty tool called AdWords Keyword Tool, where you can type searches into the tool and Google will essentially tell you how many people are searching for the word. This could indicate what the level of demand is for your product.

But you can also argue, well what if there’s no demand yet but I can create the demand. I doubt when Elon Musk comes up with an idea, such as building tunnel in underground Los Angeles, he’s thinking wait, let me check to see if there’s a demand for this. Probably not the case. But he’s a visionary and an exception. However, what he does try to do brings me to the fourth question you ask yourself when evaluating if you have a good business idea. Elon Musk is simply trying to solve the traffic issue in LA.

4. What problem does your business idea solve?

My friend is currently frustrated with her situation and has an intuition that she’s not alone…hence her idea for an application.

The fifth question

5. What resources do I have?

Generating Resources for your Business

This is where I sought advice from CEO of HoneyFi, Ramy Serageldin and other people very in touch with the startup space – PR professionals and C-level individuals.

I told them, Warren Buffet said this is the best time to take out a small business loan with interest rates being as low as they’ve ever been. Is that how you should go about starting a business or building an app?

Everyone I asked said the same thing – Don’t do that. Don’t go to a bank to borrow money. One, the bank probably won’t lend you money. 2. It’s extremely risky because you’ll always have to pay them back. When it comes to borrowing money I heard two major buzzwords get thrown around:

  1. Seed investors
  2. Crowd funding

 

  1. Seed investors – seed funding or seed capital , is a form of securities offering in which an investor invests capital in your startup for exchange of stake in the company.
  2. Crowdfunding – the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet. Crowdfuncing will also allow you to evaluate whose willing to pledge money in your startup.

With a small investment, you’ll use the money to create an MVP version of your app or the minimum viable product. An MVP could be as simple as a landing page to a site along with an email capture. A prototype can be an actual functioning product with the core features offered. Once you have your MVP, you’ll want to have people use it, test it and try it, give you feedback, where you can then go and continue to iterate the app or product, continuing to make it better for your users.

The last piece of advice

  1. Research your competitors –It just so happens my friend’s idea for an app already exists. And there’s also over 21k users. But that’s ok, this means that there’s a market for this! And there’s an opportunity to evaluate what this app has to offer and how we would make it better for users – how we would make it unique

Some tidbits I picked up from reading about Warren Buffet, the Worlds’ richest investor:

  1. Management is vital is to grow a business – It takes an entrepreneur to successfully start a business but it takes a competent management team to sustain and grow that business.
  2. Think Long term
  3. Act with integrity

So if you find yourself experiencing a eureka moment, here’s somewhat of a process for going about bringing your idea to life.

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