However exciting your new business idea might seem at first sight, make sure to take your time for its evaluation. To be a success, your product should be unique, address a real problem, and offer incentives for customers. Those incentives can represent the price, or quality of functionality improvements, for instance. How to know whether you are on the right path?
Ask yourself the following questions before investing in your idea to test its true market viability.
Does your idea solve a real need?
A good product is not only some material concept but a combination of the problem and a solution to it. When a customer buys your product, they plan to entrust it with doing certain tasks for them. Therefore, the value of the product should be enough that they want to pay for it. After all, your product is developed not because engineers want it so much, but with the aim to address a certain need of the end-user.
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Many entrepreneurs believe that applying successful companies’ models (eg. Uber, Facebook, Airbnb, etc.) to a local market will be enough to start a thriving business. This approach rarely tackles the real need, though. The best ideas usually originate in two ways. The first one is when the founders themselves have faced the problem they try to solve. The second way of successful idea origin is the result of a long study of user experience.
Take a finance app for example. One of the aspects that impact user satisfaction with an app is the onboarding procedure. Everyone wants to spend little time on registration and perform safe operations with their funds. Yet, such kinds of software must comply with certain legislative requirements. The developers choose a proven way, asking the user to enter a variety of data on multiple steps. This approach allows users to achieve the goal – perform an operation. However, it is clear that reducing the amount of data users have to enter for accurate identification is a way to solve an existing problem better.
Go through a SWOT analysis (strengths, weaknesses, opportunities, and threats) of your idea to see the bigger picture of your product as well as potential risks it might entail.
Is there a market for your product?
It is not enough to have just a cracking idea – if you want to make your venture big, it should have a market.
Analyze the potential demand and buyers for your product: their social status, age, location, buying habits and disposable income, internet presence, and the channels to reach them. Will your customers be willing to pay a price that can give you an acceptable profit margin?
The market size – or the number of users who face a particular problem – is a major factor that shows whether your idea is viable. If your solution is relevant only for a small market segment, your idea is doomed. In turn, if you can interest a large market group, there are chances that the niche already has many competitors with similar offerings.
It is also important to understand that the problems the users face are changing slowly, so it is almost impossible to find a problem that was not somehow solved. If the gap between the problem and existing solutions is large, then there is room for a new product. Think of the finance app example: no one has proposed a quick and safe onboarding yet.
Depending on the way the product is implemented it may be better or worse subject to replication. For example, it is harder to replicate a self-made food delivery product, cause the “food” part requires hiring staff, renting, purchasing ingredients, etc. Meanwhile, a standalone delivery of food through an app is easily replicated on Google Play and AppStore. It is recommended for startups to make a product that is easy to replicate.
Conduct competitor analysis and benchmarking to see how similar businesses work: marketing strategy, pricing policy, functionality set, etc. Think about what you can learn from their experience and what competitive advantages do you have. Your product can be more robust, visually appealing, cheaper, or easier to use. Novelty is one of the most important factors. Understanding your unique selling proposition will help you effectively promote your product to the target market.
What is the financial burden involved with the product?
It is no secret that you will need business capital to launch a startup. Whatever source of funding – personal savings, financial institution loans, crowdfunding, or their combination – create a small (or not-so-small) business plan that outlines how you intend to spend the money and how much you expect to earn from the investment. Map out all expected profits and losses including start-up expenses, projected growth milestones for the next few years, development and maintenance costs as well as sales targets to see how viable your idea is on paper.
Think of your product lifecycle. Tech product life cycles tend to shorten as new technologies that allow for more robust solutions constantly evolve. If you plan to attract third-party investments, you should demonstrate your readiness and ability to update and refine the product to ensure its longevity.
Dependence on other products or systems (such as software that requires certain hardware to run on) could affect its marketability. Market failures and unforeseen tech changes of linked products or systems may undermine your financial well-being.
Product safety can also affect the technical and market feasibility of your idea. If your product has any security-related issues, it will be hard for you to attract investors and market your product. Therefore, check whether your idea meets industry standards and complies with all relevant laws and regulations.
Key takeaways:
- Make sure your solution addresses a real problem. The value of the offering should be enough that customers want to pay for it.
- Analyze your market size and competitors. To succeed, you should have a unique selling proposition.
- Think of the financial viability of your idea. Consider the ways to prolong the life cycle of your solution, decrease the dependence on other products or systems if possible, and ensure the utmost product safety.
