Have a great business idea that you think can make money? Operating within an existing business but thinking of expanding with a new product or service?
Often when we find ourselves in this space it is typical to get very excited about the product or service itself, how wonderful it would be if it existed, and how much money we could make because it is such a great idea — but it can be challenging to think through the basics without getting too caught up in the details.
From my point of view, there are a few simple questions one must ask:
- What is the problem you are trying to solve?
- Who are you trying to solve it for?
- How does the business make money?
- Is your solution unique and defensible?
- What is the most efficient way to create a minimum viable product to test the market?
Now let’s dive a bit deeper to understand what I’m getting at here.
1. What is the problem you are trying to solve?
Step back from the excitement about the idea and the product itself and outline the specific problem or unmet need/desire it is that you are focussed on. How big of a problem is this? How much pain or frustration exists because of the lack of a solution to this problem; or to what extent do desires for this product exist?
2. Who are you trying to solve it for?
More specifically, who are the individuals/organisations you can address with your product or service? Think micro-niche, how specific and detailed can you get with this description? Once there, how big is the addressable market — how many people/organisations are there who might need this solution?
If the focus is on an organisation, what type of organisation is it and who within that organisation might be the buyer? Does this person have access to sufficient budget? If so, how would such a purchase increase that person’s success inside the organisation?
If instead the focus is on an individual, can this person afford to buy the product? Have they demonstrated this capacity through other purchases?
3. How does the business make money?
How much can you charge for the product? What will it cost to deliver it? Can you do some simple, back-of-the-envelope calculations to determine whether this business could turn a profit? How many customers do you need for that to happen?
4. Is your solution unique and defensible?
How easy, or difficult, would it be for an existing player in the space with more money and more resources than you to come in and crush you before you can really start to fly? What expertise, experience, or team, do you have that means you can deliver something sufficiently unique and compelling that it would be difficult for others to steal your customers with a similar product?
Before getting too carried away with fear, think back to question 2 — is the addressable market big enough for that big player to care about? Understand that what might be a great business opportunity for you may be too small for a large company to care about, so you could theoretically co-exist in that space.
5. What is the most efficient way to create a minimum viable product, or MVP, to test the market?
The term MVP is widely used in the startup world thanks in large part to The Lean Startup book, a simple google search will yield plenty of further reading on the topic. The idea is essentially to consider what is the most basic version of your product or idea you could create which would allow you to present this, or deliver it, to potential customers to see if they might actually buy it if the product existed in all the great glory with which you can imagine it. If you can demonstrate customer demand exists, and potentially even pre-sell the product, you’re way ahead of the curve and can create with more specific knowledge, and will have a much easier time raising capital.
Much of the above is in simplified terms — there is no substitute for your own detailed analysis based on the specific product/service you’re working on — these may or may not be the exact questions to ask for every business idea, but I find the exercise to be sufficiently adaptable to most ideas I’ve had or heard from others over the years.
There are many fantastic resources available for business model creation and testing of new ideas, Steve Blank has compiled a great list here, my hope is that the above set of questions provides a simple method to provoke thought or get a meaningful discussion started around your next big idea.
PS — Feedback is always welcome so please do add thoughts or questions below.
I believe that success comes at the intersection of passion and value, and that a strong mind and a clean body are pillars of that success. Build mental strength with yoga, integrate flow state hacking via adventure sports to develop creativity and a solution oriented mindset, and amplify your success.
Originally published at https://chrisruby.squarespace.com on 24th March 2017