How to Determine if Your Idea for a New Business is Viable?
Entrepreneurs often grapple with the viability of their new business ideas, and to shed light on this crucial step, we’ve gathered twenty-one insights from Founders and CEOs. From embracing data-driven market analysis” to engaging your community for idea feedback, these seasoned professionals share their singular tips for assessing the potential success of your entrepreneurial venture.
- Embrace Data-Driven Market Analysis
- Refine Products Based on Feedback
- Assess Idea Scalability for Success
- Invite Critiques with Reverse Pitching
- Conduct a Comprehensive SWOT Analysis
- Conduct Surveys and Focus Groups
- Consider Regulatory Impact on Viability
- Distinguish Between Pull and Push Businesses
- Evaluate Market Resonance Thoroughly
- Seek Expert Advice on Business Plan
- Align Business With Personal Passion
- Develop Comprehensive Product Suites
- Perform Detailed Feasibility Study
- Solve Significant Customer Pain Points
- Conduct Pre-Launch Market Research
- Test Market With 3-5 Potential Buyers
- Use “Business Idea Validator” Tools
- Build a Conservative Product That Undercuts The Competiton
- Gauge Interest with a Waiting List
- Analyze the Market Using SEO Tools
- Engage Your Community for Idea Feedback
Embrace Data-Driven Market Analysis
To determine if a new business is viable, you simply must make data-driven decisions.
Many new entrepreneurs get excited about an idea they have, especially when nobody else is doing it. However, this is a big risk, as the market isn’t proven. Instead, try to find markets and opportunities that have proven demand but where the current offerings can be improved upon.
For example, Apple didn’t invent cell phones; they improved upon what was available within an already proven market and became the market leaders with billions in revenue.
This data-driven approach has a far lower risk and usually a far higher upside.
Ben Donovan, Founder, Brand Builder University
Refine Products Based on Feedback
To be frank, new entrepreneurs should focus on industries where there are already players operating and turning a decent profit.
There’s always more room for another competitor, as long as your angle resonates with the market.
To figure out if your differentiation is viable, look at what people—especially customers—are already saying about products and services. What do they like, and what do they wish was better?
Go to websites like Amazon for physical products and books, which are great for almost any niche.
What exactly are customers looking for, and why were they unsatisfied? If you can build a core product that’s similar but specifically addresses where people felt the product(s) could be better, then you can be 95% sure that you have a viable business idea.
Why?
Because it’s already selling in the market, and you’ve fixed the issues.
Whether you can make money will boil down to your marketing and sales skills.
Daniel Ndukwu, CMO and Co-Founder, DoxFlowy
Assess Idea Scalability for Success
I believe in the importance of scalability in determining a business idea’s viability. I ask myself, “Can this idea grow and evolve over time?” I assess whether the business can scale up in terms of production, customer base, and revenue without compromising quality or increasing costs disproportionately. Scalability is crucial for long-term success, and if an idea doesn’t have the potential to expand, it might not be viable in the long run. This foresight helps me to invest in ideas that have the room to grow and adapt in the ever-changing market landscape.
Invite Critiques with Reverse Pitching
A unique approach I’ve found effective in determining the viability of a new business idea is what I call “reverse pitching.” Instead of seeking validation, I present the idea to a range of different people, usually comprising critical thinkers, industry veterans, and potential customers, and invite them to challenge and critique the idea.
For example, when I was developing my latest business, I approached it with this method. I laid out my plan not to impress, but to be questioned and tested. The feedback was eye-opening, revealing aspects I hadn’t considered and potential pitfalls in the market. This process was more enlightening than any traditional market research. It not only tested the robustness of my idea but also allowed me to refine and adapt it in meaningful ways.
Embracing criticism, rather than shying away from it, can be a powerful tool in shaping a resilient and market-ready business concept.
Daniel Bunn, Founder and Director, DB IT
Conduct a Comprehensive SWOT Analysis
I focus on conducting a SWOT analysis—assessing the Strengths, Weaknesses, Opportunities, and Threats related to my business idea. This comprehensive view allows me to understand not only the internal factors, like resources and capabilities, but also external factors, like market trends and competition. This analysis helps me to identify potential challenges and opportunities, allowing for a more realistic assessment of the idea’s viability. It’s a way of ensuring that I’m not just optimistic but also pragmatic about the potential of my business idea.
Jeremy Resmer, CEO, Value Land Buyers
Conduct Surveys and Focus Groups
The most critical step is to validate the market need and demand. No matter how exciting your business idea seems, it must solve a real problem or fulfill an unmet need for customers. Start by clearly defining your target customers and value proposition. Outline the key benefits your product or service will provide over existing alternatives.
Then, validate that through customer discovery. Reach out directly to your target customers through surveys, interviews, focus groups, etc. Get their honest feedback on the need for your offering, what they would pay, how it’s better than what they currently use, and so on. Seek out harsh critics to poke holes and pressure-test your assumptions. If multiple potential customers indicate they would buy or use your product at a price that supports healthy margins, then you know you are onto something promising. If not, it allows you to adapt or pivot the concept as needed.
Brian Meiggs, Founder, My Millennial Guide
Consider Regulatory Impact on Viability
When assessing a new business’s viability, knowing the industry’s applicable regulations is highly important, as they can significantly impact business operations.
Understanding the industry’s regulations allows for budgeting when it comes to expenses ranging from permit application fees to the installation of safety measures. This also allows for budgeting to maintain future compliance, either through the use of in-house resources, third-party contractors, or a combination thereof. Being prepared for regulatory compliance also saves on any legal or financial penalties that come with non-compliance.
The applicable regulations can also vary significantly by location, at the state, county, and city level. Knowing the differences between regulations in different areas can inform what the optimal locations are for maximum business viability.
Jasmin Gildert, President, Ariadne Hazard Communication and Engineering Services, LLC
Distinguish Between Pull and Push Businesses
Determine whether your business is a ‘pull’ or ‘push’ business. A ‘pull’ business is one that has so much demand it doesn’t require the founder or the sales team to push it or follow up on it. A ‘pull’ business solves a pain point that is in such high demand, unlike a ‘push’ business.
Lubna Forzley, Founder and CEO, Stories
Evaluate Market Resonance Thoroughly
“In the journey of entrepreneurship, the true validation of your idea comes from the resonance it creates in the market.”
Embarking on a new business venture is undoubtedly an exhilarating journey, yet the path to success begins with a critical assessment of your idea’s viability. One pivotal step in this process is conducting thorough market research. Entrepreneurs must delve deep into the dynamics of their target market to understand its needs, trends, and existing solutions. This forms the foundation for gauging the potential acceptance of your product or service.
A prime example from my experience in the tech industry involves a startup exploring the development of a cutting-edge, AI-driven application. To assess its viability, we meticulously analyzed the current market landscape, identifying gaps and pain points that our solution could address. This detailed examination allowed us to refine our concept, ensuring it not only met a genuine need but also stood out in a crowded market.
Furthermore, entrepreneurs should actively seek feedback from their target audience. Engaging potential users in discussions, surveys, or beta testing provides invaluable insights into the real-world reception of your idea. This iterative feedback loop refines your business concept, aligning it more closely with the actual demands and expectations of your future customers.
In addition to market research, financial feasibility is a cornerstone of viability. Entrepreneurs must develop a comprehensive understanding of the costs involved, projected revenues, and the timeframe for achieving profitability. This financial scrutiny forms a realistic basis for evaluating whether the business idea is sustainable in the long run.
Ultimately, the key to determining viability lies in the synthesis of market insights, user feedback, and financial prudence. This holistic approach not only enhances the chances of success but also positions entrepreneurs to adapt and evolve as they navigate the ever-changing business landscape.
Nimrod Vromen, Startup Consultant and Host, Startup Confidential Podcast – CTech
Seek Expert Advice on Business Plan
To determine if your new business idea is viable, seek diverse expert advice on your business plan. Engage industry specialists, seasoned businesspeople, and even marketing whizzes. These productive collisions of minds can bonsai your business idea, trimming inefficiencies and cultivating strengths. You’d have an outsider’s perspective on possible potholes, unexploited opportunities, and even market trends. Encompassing business advice is like a lighthouse to entrepreneur ships sailing towards the rough waters of startup success.
Abid Salahi, Co-Founder and CEO, FinlyWealth
Align Business With Personal Passion
A vital tip for entrepreneurs in assessing the viability of a new business idea is to align the business concept with their personal passion, purpose, and values. This involves introspection to determine if the business idea truly resonates with what they are deeply passionate about and if it aligns with their core values and sense of purpose.
When a business idea is rooted in personal conviction and passion, it not only drives sustained motivation and resilience in the face of challenges but also often leads to more authentic and meaningful connections with customers. This alignment is crucial for long-term fulfillment and success, as it ensures that the business venture is not just financially viable but also personally rewarding and spiritually fulfilling.
Lena Hardy, Intuitive Career Coach, Intuitive Clarity Coaching
Develop Comprehensive Product Suites
In my journey as a startup founder, spanning two decades and three ventures, I’ve learned a pivotal lesson that often eludes many first-time founders. It revolves around steering clear of the allure of feature-centric thinking when validating a startup idea.
The trap is a familiar one: treating startup concepts as mere add-ons to existing, popular products. Having navigated this myself, I recognize the origin of this inclination—coming from a background of developing features for successful platforms within large enterprises. In such environments, success is often tied to features that customers love. However, the startup landscape demands a more holistic approach.
Unlike the conventional feature-centric model, successful startups demand more than just augmenting existing products. For startup founders aiming at sustained success, the initial focus must be on building a comprehensive product or a suite of products. Only after establishing a dedicated customer base should attention shift back to feature-based growth.
I will illustrate this approach through my current venture in the API services space:
Step 1: Our initial offering is the API performance service, transforming API performance testing. Through our AI engine, we eliminate the need for extensive planning, writing, and maintaining of performance tests. The AI learns the customer’s APIs; it then plans and creates comprehensive performance test coverage—without requiring a single line of code from the API teams. A common mistake here could be just building a co-pilot feature that generates one test in one of the tools given a test case in English.
Step 2: Acknowledging that the performance service alone might not be enough for customer investment, we swiftly launched our second service—the Test Automation Service. This offering automates every facet of API testing, from planning and coverage to execution. By doing so, we address multiple challenges faced by our customers, significantly easing their workload.
The temptation for startup founders lies in building differentiation solely through features. However, for a solid foundation in the entrepreneurial landscape, it’s imperative to reinvent or solve entire problems. Crafting multiple products or a suite of services that collectively address a multitude of customer challenges ensures a resilient strategy for startup founders.
Intesar Mohammed, Founder and CEO, PerfAI, Inc.
Perform Detailed Feasibility Study
One crucial step for an entrepreneur in determining the viability of a new business idea is to conduct a feasibility study. This involves a detailed examination of whether your idea can be turned into a successful business.
A feasibility study should include:
Technical Feasibility: Can your idea be practically implemented? Do you have, or can you acquire, the necessary technology and resources?
Market Feasibility: Is there a sufficient market for your product or service? This typically involves market research to understand your potential customers, their needs, and the competition in your target market.
Financial Feasibility: Will your idea be financially profitable? This involves creating realistic revenue projections, understanding all costs involved, and determining the break-even point.
Organizational Feasibility: Do you have the skills, team, and infrastructure to execute your idea?
The aim of a feasibility study is not only to identify potential pitfalls and challenges but also to devise strategies to overcome them. If the feasibility study reveals insurmountable challenges, it might be an indication that the business idea isn’t viable. However, if the study shows that the idea is practical, meets a market need, and has the potential to be profitable, it could suggest that the idea is worth pursuing.
Michael Dion, Chief Finance Nerd, F9 Finance
Solve Significant Customer Pain Points
Your customers are going to buy your product or service because it solves a pain point for them. If the pain you’re solving isn’t significant enough, it’s going to be either very difficult to sell your solution or unlikely that you can earn a high enough margin to cover your costs. Find the biggest pain point you can, then find an effective solution to it.
Justin Silverman, Founder and CEO, Merchynt
Conduct Pre-Launch Market Research
Testing out your new business ideas before launch is absolutely vital. Any time you want to take a new product or solution to the market, I recommend conducting a market research assessment. I like to look at a combination of survey data, desktop research, and industry reports to give you a picture of what you’re getting into. This will give you a firm foundation to move forward with and enable you to make data-driven decisions as you progress through the process.
Shannon Listopad, Owner and Founder, November Consulting
Test Market With 3-5 Potential Buyers
When validating your business idea, it’s important to avoid wishful thinking. Many founders concentrate on solving problems that are significant to them but may not resonate with others. It’s crucial to find an objective method to research your target customer and determine their willingness to pay.
Prior to launching, review your product or service with 3-5 potential buyers, not just friends—unless they are particularly candid and knowledgeable about your industry. Strive to connect with individuals who are part of your target market and could become actual customers.
It’s essential to listen more than you speak and to ask follow-up questions to truly understand their pain points. With thorough research, you can receive valuable feedback and potentially secure your first customer.
Jenevra Georgini, Founder and Managing Attorney, Spark + Sterling
Use “Business Idea Validator” Tools
Utilize specialized tools like Bizway’s “Business Idea Validator.” This tool is designed to evaluate the viability of your business concept. It works by analyzing various aspects of your idea, such as market demand, competition, unique value proposition, and potential profitability. By answering a series of questions or providing information about your business idea, you receive insights and assessments that can help you understand if your concept has the potential to succeed in the real world.
Joe Kevens, Founder and Director of Demand Gen, B2B SaaS Reviews
Build a Conservative Product That Undercuts The Competiton
As an entrepreneur, if you’re trying to come up with ideas for a new business venture, the best tip I could give you is to consider the need and demand for the product. It’s crucial that the product you have in mind fulfills a need.
Additionally, you should consider the demand factor. If there is high demand, think about whether you can mass-produce the product if it’s popular and in high demand. Lastly, consider the pricing. Always conduct market research and build your product conservatively enough to be able to undercut the competition by at least 10%.
When I first started selling plants in the 1970s, I didn’t have a clear understanding of the bigger picture. Initially, we only grew five species of plants, but I soon realized that people wanted a wider variety of plants to choose from. Over the years, we have expanded our product line to include 344 different types of plants, which gives our customers a vast selection to choose from. As we grew our product line, we also had to purchase more acreage and expand our operations to meet the increasing demand.
Tammy Sons, CEO, TN Nursery
Gauge Interest with a Waiting List
One empirical way to gauge an idea’s viability is to create and promote a waiting list.
Waiting lists keep interested prospects in the loop about your business, serving as a useful litmus test for viability. If your idea impresses potential users, then they will share contact details in anticipation of an actual launch.
Failure to capture any potential users provides an early indication that your business isn’t viable, at least giving you pause for thought. Potential users may also share their opinions, providing valuable feedback and practical insight.
Although this approach hinges on marketing your idea early, it represents one of the few objective measures of viability that can be pursued before launch and should be strongly considered before taking larger risks.
Oliver Savill, CEO and Founder, AssessmentDay
Analyze the Market Using SEO Tools
As an SEO and growth consultant, I would highly recommend that entrepreneurs dive deep into keyword research to gauge market interest and competition. Using tools like SEMrush, entrepreneurs can discover the search volume and competition level for terms related to their business idea. This isn’t just about numbers; it’s about understanding the audience’s intent and needs.
If the search volume for keywords related to your business idea is high, it indicates strong market interest. Conversely, if the competition is too high, it might be a signal that the market is saturated. However, don’t be deterred by competition; instead, look for niche areas or specific underserved problems within the broader market.
This approach isn’t just about SEO; it’s a window into the market’s demand and the potential gaps your business could fill. Combining this with an understanding of the niche’s unique dynamics can give entrepreneurs a solid foundation for assessing their business’s viability.
Victoria Olsina, SEO Consultant, Speaker and Comedian, Victoria Olsina Growth Consultancy
Engage Your Community for Idea Feedback
Shop it around in the local innovation community. I realize that a lot of people worry that someone is going to rip off their new business idea, but unless you’re really working on something truly paradigm-shifting, the paranoia is not warranted, and you’ll get a good deal of perspective in speaking with other entrepreneurs. Book a table at your local innovators’ cafe or entrepreneur get-together on Meetup or Facebook, and just talk it out. It really helps to have a sounding board to make sure your thinking isn’t wildly off the rails.
Onno Halsema, CEO, Contentoo
