You may have one ‘killer idea’ that’s going to take over the world, you might have lots. One of the most critical steps in the entrepreneurial journey is deciding which idea is the one to invest time and money into (and remember, time is money).
Here are the questions I ask myself about an idea or prospective investment, before I jump in.
Do I know anything about the industry / market I’m looking at?
It’s easy to spot perceived gaps in the market. The next question you must ask yourself is, ‘why hasn’t somebody else done this?’
The difficult truth is that your idea isn’t original; lots of people have had the same thought. You’re not the only genius in town and you’re probably not the most suited to exploit the gap either.
So, what’s the good news? You may be the most motivated. The above points are serious though. If you’re going to launch a business you need to very quickly become an expert in your field. You need to understand what has gone before you and failed, what has succeeded and most importantly, why?
If you’re not at least an expert-in-the-making on the industry/market you’re looking at, you’re not ready to dive in.
Are you solving a problem (that needs to be solved)?
Every time someone is purchasing your services/products they are actively making a decision to delay a holiday. That £5, £5,000 or £50,000 that you charged them, could otherwise have ended up cocktails on the beach while enjoying a massage.
People pay for an easy life, more money (services that turn £1 into £2), luxuries and essentials.
Which one do you fit into? What need are you solving? If it is not a need, it’s a luxury. If it’s a luxury, are you better than a beach holiday, mojito and massage?
If you’ve identified a need, who are your direct and indirect competitors and why is your solution better?
Try and sell it.
Create a presentation / flyer / one page website / etc and go and sell your product/service before it exists. If you can sell it, great. If you can’t, ask your audience why they won’t buy your product or service.
The greatest businesses are designed by their customers and arranged by their executive to be profitable.
Aim at money, not users
Seen the silicon valley companies gain huge investment and valuation without making a penny? Ignore them. These are by far and away the minority of funded and valued businesses. Businesses are about making money. Anything else is a hobby.
Will you enjoy the work?
Running a business is a tough, all-time and all-emotion consuming process. If you’re not going to enjoy it, do yourself a favour and don’t do it!
Does your idea stack up?
How much does it cost to make/deliver? How much will you deliver for? Are you in profit? How many people will buy? Therefore, how big will your profits be? What niches can you expand to after your original target?
Then … Cash-flow, cash-flow, cash-flow. You may be a billion dollar company in year five, but if you can’t pay your bills in month six, you’ll never get there.
The most common mistake when putting start-up spreadsheets together is not valuing the founders’ time. Remember, you won’t always be fulfilling that role, so what will be the cost of someone replacing you? That’s the sensible figure to project with, even if you anticipate paying yourself pittance in the beginning.
Lastly, it always costs twice as much as you expect.
After all the above … are you convinced?
If after all the above you’re convinced then you’ve crossed the chasm from excited and enthusiastic to informed and ready. One of the most frequent traits of entrepreneurs in their first few startups is that they continually kid themselves. They can be realistic and sensible about everything other than their own venture. Don’t be that person. Be your biggest champion as well as your biggest challenger.
Do you want this to be the biggest part of your life for the next two years?
If you’re reading this, you’re already smarter than most. You can do anything. Starting a business is a commitment that is deep and far reaching. Ask yourself truly, do you want this idea to be the biggest thing in your life for the coming two years? If the answer is ‘yes’, go for it!