When you come up with an idea for a new business, the first thing that comes to mind is how great it will be. You have a vision of your company being successful and turning into a household name. But before you start writing the business plan, what should you do?
The how did you know when you had the right idea is a question that has been asked many times. It’s difficult to answer this question, but there are some signs that your idea is good.
If you’re like most entrepreneurs, you’re always coming up with fresh company ideas. Entrepreneurs like you and me view the world as a place that can always be bettered, and we know we can change things by creating goods and services.
The issue is that not all of our ideas are excellent. While they may seem to be excellent ideas at the time, not all of them are worth developing into viable companies.
After all, establishing and operating a company requires a significant amount of time and effort. It takes a lot of effort and should not be taken lightly.
So, how can you know whether your concepts are sound? How can you tell which ideas are excellent and which are bad?
In the years that I’ve spent operating and expanding companies, I’ve definitely encountered this issue. I’ll have a fantastic idea, work with my team to start working on it, just to find out later—after I’ve wasted my coworkers’ time—that my concept wasn’t all that amazing.
To assist you overcome this issue, I’ve devised a method that allows you to distinguish between excellent and poor ideas. It’s a simple procedure that you may start using right now. Here’s how to do it.
1. From concept to presentation
Take a few minutes to work out some of the specifics if you want to see whether your concept is any good. You must get your concept out of your brain and into paper before proceeding to the next stage of determining whether or not your idea is viable.
The good news is that you don’t need to create a comprehensive, thorough business plan to determine whether or not your concept is viable. That would take too much time and be a pointless exercise at this level of developing your company concept.
Fortunately, the first stage in this procedure is a lot simpler. The first stage is to write a “pitch” for your company—a one-page summary of what you do. Here’s a list of things you’ll need to include:
Begin by composing your value proposition, which is a single phrase that defines the value your business will provide to its consumers. Our value proposition at Bplans is to offer “tools and guidance to make establishing a company simple.” It’s essential that your value proposition be limited to one phrase. Consider how you’d explain your company on Twitter, and how you’d utilize the 140-character restriction to help you reduce your concept to its essence.
Then, explain the issue you’re resolving for your clients. One phrase or a few bullets will enough. Make it as brief as possible. “It’s hard to get easy-to-understand, trustworthy guidance on establishing a business,” we say about our clients’ issue at Bplans.
Your answer is a natural contrast to your customer’s issue. To explain how you address your customer’s issue, use a few bullet points. This is essentially a synopsis of your product or service. What is the nature of your business?
You need to put down your target market now that you’ve identified the issue you’re addressing and your solution to the problem. This is a quick rundown of your ideal client. What are their names and how do they appear? Are you trying to reach out to busy CEOs or working parents? Maybe your target market is iPhone users who wish to improve their photography skills. Take a few minutes to write out some bullet points that define your ideal consumers, whatever your market is.
Of course, your consumers are likely to have a current solution to their issue. This is your opponent. Every company has competitors, and it’s critical to know how you’ll compete with them. Is your solution superior than mine? Cheaper? Faster? Maybe a mash-up of all three? Make a list of your prospective rivals and how your company might be superior in a few minutes.
The following stage is to consider how you’ll offer your product or service to your target market. Make a list of bullet points outlining how your sales will be conducted. Separately, make a list of your most important marketing efforts. Again, there’s no need to go into great depth here. Because all of this material will fit on a single page, each subject will only need two or three bullet points.
Finally, you should think about how you’re going to earn money for a few minutes. Make a brief list of the methods you’ll make money. Consider your most essential expenditures, such as rent, wages, and other significant charges. At this point, don’t bother about putting down exact figures. Simply create a list of the most important methods you’ll earn money and the most significant expenditures you’ll incur.
That concludes our discussion. If you’ve followed everything so far, you should have a one-page pitch—a brief summary of your company concept. You can get a template for all of this right here if you need one.
2. Your pitch is a collection of assumptions that you make.
You’re ready to go on to the next stage, which is converting your pitch into a series of questions.
Essentially, your pitch is a short document that lists all of the things you believe about your company—a it’s list of assumptions. At this stage, your pitch is simply a collection of assumptions rather than a set of facts. You’ve deduced that your target market is experiencing a problem and is ready to pay for your solution.
You must now determine if your assumptions are accurate. Did your predictions turn out to be correct? You’ll need to convert your proposal into a series of questions to find this out. Listed below are a few examples:
- Is my target market experiencing the issue that I believe they are experiencing?
- What does my target market think of the solution I’ve proposed?
- What is the price range in which my target market is prepared to pay for my solution?
- Is my target market the correct one?
- What are the buying habits of my target market?
- What kind of marketing messaging does my target market respond well to? What do they read and where do they shop?
Now look through your proposal and make your own list of questions. What exactly is it that you need to show in your pitch?
After all, if your estimates are wrong, your proposal won’t turn into a genuine company. So, before you go ahead with your company, find out what all of your assumptions are and what you need to prove.
Taking this action now will spare you a lot of grief and suffering in the future. The following stage will be guided by the basic process of distinguishing assumptions from facts.
3. Get out of the building and test your hypothesis.
You’re ready for the next stage in the process of turning your concept into a company reality now that you have your pitch and your first list of questions: stepping out from behind your computer and obtaining answers to your inquiries.
This may seem to be a simple task, but it is the one stage in the process that most entrepreneurs struggle with. It’s not as simple as it seems to go out and speak to prospective consumers. You must be prepared for some rejection and confident in your ability to persuade them to speak with you.
While this stage may be challenging, it is the most essential thing you can do to determine whether or not your company concept is viable. Whether you don’t receive the answers to the questions you stated in the previous stage, you won’t know if you should pursue your company concept.
Make a note of anything you learn in response to your inquiries. Write down your notes about the problem you’re trying to solve, your solution, your marketing strategies, and so on. 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. The following stage requires you to arrange all of this information.
4. Refine your pitch and provide additional information.
Now that you’ve completed the difficult task of obtaining feedback on your company concept, you must return to step one and improve your original presentation.
There’s a good chance that all of your original estimates and assumptions were incorrect. If they were completely right, go ahead and establish your company! But, for the most part, our predictions will not have been quite correct.
Step three’s feedback offers you two options: discard your company concept entirely or modify it and try again.
Hopefully, not all of your criticism was negative, and you can use what you’ve learned to improve and extend your pitch.
You should also spend some time now expanding your pitch to incorporate a bit more information than you provided in your initial pass. Here are a few things to think about adding:
Budget and sales objectives:
How much do you believe your product or service will sell for, and how much will it cost you to produce it or deliver it? What additional significant costs will you face after your company is up and running? Now is the time to go a bit further and perhaps create an initial sales estimate and cost budget.
What are your main objectives for the next months? Now is the moment to start planning your company’s future moves. At this stage, if you’re working with business partners, you’ll need accountability and timetables.
What sort of team will you need if you want to go ahead with your business? How much money will you need for the first payroll? What critical positions do you need to fill?
Resources and partners:
Is it necessary for you to collaborate with other businesses or groups in order for your firm to succeed? If you do, start making a list of people you need to contact in order for your company to succeed.
This is optional, however if you need to raise funds for your company, how much do you need and what will you do with it? It’s a good idea to start thinking about this early on to have a sense of what it’ll need to get your company up and operating.
That concludes our discussion. The benefit of utilizing a method like this and the pitch format is that it’s simple to use and doesn’t need a lot of time, money, or effort to determine if your company concept is worth pursuing.
The pitch is your road map—a it’s high-level summary of your company that lays out the questions you’ll need to answer in order to determine whether or not your concept is viable.
Don’t forget to start with a free one-page pitch template, which you can get here. Please let me know if you utilize this method or if you have any questions in the comments section or on Twitter at @noahparsons.
The what makes the business idea work is a question that many entrepreneurs ask themselves. It is important to know what makes your business idea work, before you start it.
Frequently Asked Questions
How do you know if your idea is good?
If its good, youll know.
How do I know if my startup idea is good?
The best way to figure out if your idea is good or not is to test it. If you cant test your idea, then youre probably not going to get very far.
How do I know if my business idea is viable?
If you have a business idea, there are many different ways to find out if it is viable. You could start by finding out how much money the company has made in the past and if they have a profit margin that will allow them to continue making money.
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