How do I know my startup idea is a good one?
After being involved with various start-ups over the years, you get to hear your fair share of ideas. From the completely insane, to the impractical, and then the odd bright spark. But how do you differentiate them, since this is really a subjective process, and more importantly how do you filter your own ideas?
Not to claim that I have some silver bullet theory of coming up with good ideas, but I have used a fairly consistent methodology (for lack of better terms) that has treated me well. I guess it is not so much as a methodology as it is a set of check points, and here they are;
- The Invention
- The Review
- The Worthiness
The Invention
The Invention to me is that first eureka moment; when you come up with the phrase “Wouldn’t it be great if…….”, and this is how I usually find these ideas come to you. You must remember the purity of your first idea – THIS IS IMPORTANT. Because no matter how much you work on and evolve your idea, there was something in that initial moment that made you think that it is a good idea. The trap that many people fall into is that they evolve and work on that idea, and then forget the objective that the first eureka moment satisfied.
The “Wouldn’t it be great if….” moment is important because this is what is essentially your elevator pitch, and you will be hearing a lot more about these in future posts if you haven’t heard of these before. Usually this phrase summarises the whole idea, and that is something that you will struggle with in the future.
Once you have the Invention clear in your head (make sure you write it down too – you’d be surprised how quick you will forget these things), it is time to start evolving it. Start thinking about how it is going to work, how it will come across, and how your customer (whoever they may be) is going to interact with it. Since we are essentially talking about Web start-ups, start thinking about how this thing is going to make money – kind of important, and often a point that is missed.
At this point, I like to have a story in my head that I can tell friends, from start to end. Once I have that, I am ready to take it to the next level.
The Review
In the Invention stage, what you really are doing is convincing yourself that you have a good idea, if you are a pessimistic person, you tend to talk yourself out of the idea, if you are optimistic, you just can’t get out of your head how great this thing is! The next stage is to get your peer’s review on this idea. This is where you get your closest friends, and tell them about this great new thing.
I like to pick a variety of personalities here, but I focus on two things; people with different personal traits to me (ie/ I often think I have the greatest ideas, so I need to talk to people that I know will poke holes into it), and people that may be potential customers or users of the product. The purpose of doing this, is to see what objections people might have. The pessimistic friend will have dozens of questions and reasons why it won’t work. If you have answers to all the questions you are doing good – but don’t be discouraged if you don’t have the answers as yet. As long as you can answer the question, or solve the problem at some stage, you are still doing good.
I like to talk to people that could be potential customers, because they are the ones that are going to wholeheartedly subscribe to your “Wouldn’t it be great if….” phrase. These are the people that will either get it and be as passionate as you, or not. And if not – then I would be seriously asking the question whether there is a customer for this product (or am I thinking about the right type of customer?).
The Worthiness
So if you feel that you get through the first two stages, and you haven’t talked yourself out of it (and no one else has), and you are still getting the sense that this is a great idea, you get to what I call the Worthiness test. This is where you determining if there is a real business model here. Now, I am assuming that your idea is going to want to turn a profit at some stage, but even if that is not the case , you still need to work out what your sustainable model is. For example, it would be a great idea to sell people cars for 10% of what they are worth – sure, you will get lots of customers, but how are you going to do that? You can’t buy the cars at retail and then lose 90% – you still need some kind of model even if it was to break even. I am not a huge fan of the, “Lets build it and work out how to make money later” model – it can work, but is much harder to make work.
I would even go as far as wanting to know what my exit strategy is. Now, I know a lot of people will be disagreeing or wondering what the hell are we talking about exit strategies when we don’t even have a product or a solution? I think it is important because it helps determine how you are going to do things. For example, if you are planning to make a passive income from your idea, then you have a totally different game plan than if you intend to be acquired or want the thing to go public on the Nasdaq (I will talk about this in future posts).
So this is the stage that you break out your spreadsheet and work on some numbers on how you are going to develop and in turn, sustain your idea. In the first instance I am talking about a Profit and Loss Sheet. Work out what it is going to cost to develop and run, versus the potential revenue that you may bring in. I will handle the details of this in a post this week, but in general make sure you take a pessimistic view on this; ie/ what if it takes twice as long to take off, what if I can only get half the customers that I am hoping? Also, make sure you take note of your assumptions. If you are going to make 10,000 sales in your 6th month, and you need 1,000,000 visitors in that month to make those sales, where are they coming from?
These questions are the hard questions you get asked if you talk to Venture Capital or Angel Funding, but they are good for you to know.
Conclusion
So there you have it. Its not the only way, but its my way to work out if the idea I have is a good one. It helps you keep your emotions out of it, and still allows you to be pragmatic and objective about your thoughts. I can’t say that I have personally taken anything I have down this path to unlimited success, but I have found that this method has help iron out the quality from the crap – and that has worked.
Nice writeup though a very incomplete list. For me as a developer I also pretty early ask myself; “will this give me flow”. If the answer is no I ditch it. Normally this is connected to your five primal motivators;
* Does this make me angry
* Can I use my best skills
* Can I learn a lot here
etc…
Is the idea selling vitamins or snake bite antidote? Thats the big one.
If it’s not snake bite antidote, then the only thing that makes the business go is $$$ or luck.
@ben nice try
No its neither – but hey, please stay with me. I think it its a pretty good idea, once I have worked it out a bit more, I do want to get others across it…
Rob, unsure what you mean by nice try?
Oh now I get it – I was using metaphor.
There are two types of “ideas” – ones that solve pain and ones that dont. Thats what I meant by vitamins vs snake bite antidote – vitamins aren’t needed by people, but snake bite antidote: its the perfect metaphor for a great business idea.
Nice writeup! Although I think that the extent of competition one might face is hardly foreseeable, but some sort of pre-planning must be taken into consideration before diving in the swift river with numerous big fishes around.
@ben that is a good point, and I think many people miss that when working on their idea. I speak to VCs a lot in my current job, and they always want to know if you are trying to create a new market vs exploit an existing one. I guess a different spin on the vitamins and snake bite antidote.
Thak you for the news
Nowadays, you must be super creative to have a good business idea that works.”,:
it is easy to get Business ideas, just look for a product or service that has demand and fill it~.’
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