Big businesses come out of great ideas. However ideas, whether big or small, need to be thoroughly evaluated before they step out to become businesses. As many successful entrepreneurs would tell you, in order to succeed, your product should be unique, solve a real need, and offer the quality of functionality to your customers. Here we will talk about how to evaluate a business idea before planning further.
Table of content:
- Does your idea solve an existing problem?
- What is your target market like?
- What is your product’s competitive advantage?
But how will you know that your product serves all these things without launching it in the market? How to evaluate a business idea?
Pretty simple! Answer the following question before you go ahead to launch your product:
Does your idea solve an existing problem?
No matter how good your product’s features are, they are often secondary to the reason why a customer chooses to buy it. The reason is simple; the user purchases the product to solve a real-world problem for themselves.
When a customer buys your product, they expect it to do certain tasks for them in a meaningful and more valuable way. Take a smartphone, for example. A smartphone can be able to run a number of apps at once but its primary use is to communicate. If the phone is unable to make calls, send texts, etc., its features are of little to no use.
Similarly, if your product fails to solve a problem for an end-user, everything else falls apart – even the best of its features.
Therefore, the first step is to identify what real-world problems are you solving with your product. If your product chooses to solve a problem that doesn’t exist, it is going to be worthless in the market.
There are two ways most founders come up with a product idea. The first being when the founder themselves have faced the problem and try to solve it with their product. The second way is a thorough study of user experience.
Focus on the key factors by going through a SWOT analysis (strengths, weaknesses, opportunities, and threats) of your idea. This will help you understand where your idea stands as well as the potential risks it might entail.
What is your target market like?
You cannot wing your business solely with an idea – it just doesn’t happen that way. In order to stay afloat in the business world, you probably want to take time out to plan and research the market you are targeting. Consider the following things before you take the plunge:
- The Market Size
This is the total number of users within a given market who face the particular problem you’re trying to solve with your product. This is a major factor that shows if your idea is viable.
If you skip this step, chances are you could conduct business in a market so small that it becomes next to impossible to make any money.
This will help you create a viable business plan or be taken seriously when approaching potential investors.
- Your Potential Buyers
Given the importance of defining your target customer, it is wise to set aside enough time to do a proper analysis. Who are your potential customers? Their location? Buying Habits? Average Income? Will they be willing to pay a price that can give you an acceptable profit margin?
- Your Competition
Your market can be full of businesses selling products similar to yours. Identify how crowded is your industry, and what types of companies are at the forefront? Conduct competitor analysis and benchmarking to see how these businesses are working.
What is their market strategy? How much are they selling for? Does their product have distinct functions? Examine and learn from them. Since you and your competitors are locking horns for the same pool of customers, you can learn a lot from their experiences and strategies.
What is your product’s competitive advantage?
When focusing on the question of how to evaluate a business idea, it is important to evaluate how your product differs from your competitors and provides additional advantages to your customers.
Marketing strategies are based on differentiation. It tells customers how a product is different and better than any other in the market. Even customers, when purchasing a product, understand its value and superiority to any other competitive offering. This is called a product’s competitive advantage.
To survive and thrive in the market, every product must have a clear and distinct competitive advantage.
There are many factors that influence a customer’s purchasing decision. These include word of mouth, perceptions created by advertising or promotional campaigns, etc.
So how to make your product the “better choice” in the market? Identify your unique selling proposition. Your product can be more robust, visually appealing, cheaper, or easier to use than most in the market.
Once you identify your USP, make it the heart and core of all your advertising and marketing efforts. This is the single message that you strive to convey to your potential customers in every way possible.
Once your product has achieved the perception of being superior in the market, you’ll be able to sell more and at high prices.
So here is how to evaluate a business idea you plunge into making your idea a reality.
Take time out to research and analyze your data objectively before you test your business idea. First, make sure that your product addresses a real-world problem that customers are ready to pay for it for the value you are offering.
Next, examine your market and analyze your potential buyers and competitors. Is there a large demand for your product? Is the competition fierce?
Lastly, identify your unique selling proposition. Consider the ways you can make your product “the better choice” in the market.
Once you have the right answers to all these questions, you’ll be ready to take the next step in your entrepreneurial venture!
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