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2015-07-06 19:58:23Starting UpEnglish Ways to Analyze Your Business Idea Before Taking the Leap

5 Ways to Analyze Your Business Idea Before Taking the Leap

3 min read

If you’re about to launch a startup, you’re likely convinced your business will achieve great things. In reality, though, the odds are probably against you. Over 80% of startups fail. To give your startup the best possible chance of success, ask yourself these five questions before you take the leap.

1. Does the Product or Service Fill a Genuine Need or Solve a Problem?

You may have the best idea in the world, but if it doesn’t solve a problem or fill a need, consumers may not buy it. Theodore Levitt, who was an American economist, professor at Harvard Business School, and the editor of the Harvard Business Review,once said, “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole.” In other words, people don’t buy products, they buy what the product can do for them. If your product or service makes consumers’ lives easier, it may be a good idea.

2. Is the Potential Market Large Enough to Support Your Business?

One mistake entrepreneurs make is assuming everyone will want to buy their product, but it’s important to accurately determine whether there is enough demand to support your business. Having a clear vision of your expected customer base will increase your business’ chances of success. You’ll first need to create a demographic profile of your ideal customer. To do this, identify their characteristics, such as their age, gender, occupation, household income, ethnicity, marital status, and whether or not they have children.

From there, and with a little online research, you’ll be able to estimate how many of your ideal customers live in the area you want to operate your business in.

3. Is Your Product Easy to Use, or Will It Create Problems for Your Customers?

It may sound obvious, but even Microsoft failed to heed this advice when it launched its Windows Vista, which turned out to be a disaster because there were so many flaws and usability issues in the software. If you’re launching a product, be sure to test it repeatedly to ensure it’s easy to understand and use. And if you’re planning a service business, use the service yourself or have friends or family use it anonymously to get a true idea of how a customer will experience it.

4. Have You Sought Out the Opinions and Feedback of Neutral Consumers?

Another way to determine if your product will appeal to consumers is to ask for direct feedback about it. You can use surveys, both online and off, gather your own focus groups, or use online focus-group companies like Ask Your Target Market and GutCheck. Your goal is to ask specific questions to people who share the characteristics of your ideal customer profile. What do they like or dislike about the product? Would they buy it? What improvements would they like to see?

5. Are You Passionate Enough to Sell it?

Once you have proof your product or service offering is viable, you need to ask yourself if you believe in the product enough to sell it. As the owner of the business, you will be its main spokesperson, and you will spend countless hours developing and promoting the company. A study conducted by TAB shows that only 1 in 5 business owners work less than 40 hours per week. The remainder work over 40 hours, and 19 percent of those work more than 60 hours per week. If you don’t love and truly believe in your business, you will quickly burn out.

Launching a business is an exciting time, but don’t let that enthusiasm blind you to the steps you need to take to ensure your business will be a success. Instead, think carefully about the recommendations above and give yourself the best chance at achieving your goals.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.
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