I am often asked by budding entrepreneurs if their new startup idea is any good. But rather than do that, I tell them how to check it themselves. This is what I tell them:
It doesn’t matter what the business idea is – the discovery process to determine its validity is always the same. It is a simple set of questions to answer. They need to be answered before anything is made or a dollar is spent. Firstly:
Is anyone already doing it?
You’d be surprised how shallowly people dig to find out the answer to this question.
If yes:
- Why didn’t you know about it already? Are you in the target market? Is it poor promotion or just that the market for this is actually quite small?
- Is the business doing well or poorly?
- If it is doing well, do you think you could compete and do it better in some way? If the answer to this is no, stop here.
- If it is doing poorly, find out why. Is it poor execution, underfunded, poor location, no scale, bad business model, too early for the market or for other reasons? Or is the idea just not as good as it seems?
If your idea is already out there and it isn’t setting the world on fire, it’s probably a warning sign.
If no:
- Have people tried it before and failed? Who, when and why?
- Have people decided the idea isn’t any good or that it doesn’t have a good way to earn money doing it?
- Or is it that your idea is actually quite novel, exciting and worth pursuing? If so, only then is it Go Time.
While this list isn’t particularly long (it certainly isn’t exhaustive), it’s a human and business-centric model of understanding demand, opportunity and complexity. It’s a model which forces us to think through a business supply chain. It’s a reality check.
Go Time: The worst mistake we can make when starting a business is actually by starting a business. Instead we need to run some experiments first – find the quickest, cheapest way possible to test if your idea solves the problem of your target customers. It doesn’t require a business or an infrastructure, just a hacked together solution that replicates the potential of the larger idea. A test. At this point you need to ask for money from the customers you seek. Asking for the order – real money – is a kind of commercial truth serum. By doing this, we often discover what people say they’ll do and what they actually will do are two very different things.
If all of this seems a little too arduous for a new business idea, then just remember it’s far more arduous going into a venture that was dead before it was even born.
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