How to evaluate a startup idea?

How to evaluate a startup idea?

Entrepreneurs all over the world come up with hundreds of ideas every day. But is every idea worth a kick off? Each of them is worth a deeper thought - that’s for sure, although not all of them are worth development. How to evaluate a startup idea? How to build basis for starting business? We’ve met quite a few startups’ founders and by the way they measured their chances of success we would like to share with you some tips.

1. Idea

Startup ideas we’ve worked with were usually a result of their designers’ or their communities’ need. As they were part of the community, it was easier to understand their prospective users/ customers, what are their likes and dislikes, what annoys them and what they love. The basis is to listen to people’s needs. Talk to them about the idea. Maybe you’re missing something very important.

If you’re just starting in business be careful with ideas which are not so much connected with who you are or what you do. You’d probably need some advisors’ help.

2. Target audience

The first step is intuition, then you just ask people around and collect all the answers. The best way is to meet and talk to people (face to face contact make people more honest). Introduce them to your service/ product. Talk about it’s features, functions, let them test it if you have a beta version. Observe and listen carefully to their reactions. Remember, the answer: ‘great idea’ at this stage is not enough. Flattery feels good but what you want to hear is more like: “Shut up and take my money!”

If you’re more an introvert here’s tutorial how to make use of mTurk to do this kind of research at home. You can also conduct a survey with tools like SurveyMonkey.

Don’t forget about easily accessible data in a web browser or a library. There are quite a few sources you can make use of like industry associations, state agencies, periodicals and so on. You should choose narrow target and test it. If it doesn't work change the assumptions and test it again. The most difficult is to realize when to stop.

3. Competition

Rule nr 1 in business world is to keep your competition close. Sit down and google all of them. Observe, analyse their target and the core business model. The best way though, is to try them out:

  • buy their product or try their service,
  • set up a meeting and talk to them.

People love sharing the knowledge and teaching others. However, you must remember you can't create an identical product. You should find something which will be your differentiator, something that will make your customers/ clients see you unique against a background of your competitors.

Another way is to make a research among their customers. You can find them on competitors’:

  • Facebook fanpage,
  • Twitter fanpage,
  • Twitter, under competitors’ hashtag,
  • website etc.

Observe their Tweets and comments or ask them how do they feel about the product or service. What annoys them and what could be possibly better.

Don’t get discouraged if there’s many similar businesses on the market. It means product is selling well. As I mentioned above try to figure out how to do better than what they’ve accomplished so far and what would be your differentiator.

4. Start small

According to the lean startup methodology (build-measure-learn) the best way is to start small. Noah Kagan proved that it’s possible to earn 1000$ in 24 hours on beef jerky starting with nothing. Just implement the idea step by step and test it as often as you can. Evaluation is the key here. Constantly observe customers/ clients behaviour, what works well and what seems to be a fail. If only two features out of ten in your app works just get rid of the remaining eight.

Keep in mind you should make sure you’ll be able to unwind it at any time without unpleasant consequences.

Since you have a general idea of what you should do, you’re ready to prepare the Business Canvas Model (here’s free online tool).

Now off you go and do brilliants staff! Remember that the key is to make it measurable and constantly monitor progress.

Cheers!

PS If you’re a bit overwhelmed with the amount of work I recommend you to read this.

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