Monday, May 16, 2011

How to evaluate your ideas

It is exciting to think of ideas for a new business opportunity; that's the beginning of a journey for any entrepreneurs. When you discover a niche or a new way of doing things, something's telling you that you're on the right track. Ideas alone, however, isn't enough to get you where you want. There are several key questions you need to answer prior to taking your ideas to investors.

Here Try This:
1) Does this idea already exist
Sometimes it is hard to believe that just because you've never seen or heard of your new idea elsewhere before, it must not exist. Thanks to technologies today, the first thing you can do is go on the internet with your favorite browser and do a simple query. Two major information repositories that I find useful but often neglected during research are enthusiast forums and conventions websites. People talk and share online, and many good ideas are often discussed inside enthusiast forums. Depending on your idea, search around for enthusiast forums that target your audience, and sometimes you don't have to register in order to use the forum's search function. Conventions websites are based on industries and topics. If your idea is related to the automotive industry, you may be looking at the SEMA website or if your idea is related to social networking there's Web 2.0 Expo, etc. Many times pioneering ideas are being discussed at these conventions, and subject of interests would most often be posted in the form of an agenda on these websites. Physically attending these conventions (if possible) and meeting people with similar interest may help you evaluate your idea(s).

2) Who are your existing competitors / partners
If your idea doesn't exist yet, good for you; it doesn't mean somebody else isn't cooking up the same idea as you at this moment in time. On the flip side don't be heart broken just because your idea(s) is already out there. Do further analysis to see where your idea stands in the market space. Something that's hard to understand for most people is that the existence of competition may actually be good for you. In a sense the competition already cracked open the market, and data about price point, customer feedback, and marketing campaign can all be analyzed to help you address question 3 (below). A good example is fast food restaurants. When you see a fast food restaurant (ex: McD), what is almost always guaranteed to be across the street from it? Another fast food restaurant. In some cases competition may actually turn into partnership. An example of this is FB and Google allowing anybody to use their API to build web content, apps, etc. Plan ahead and figure out who may be your potential allies in the near future.

3) What is your value proposition / market differentiators
Now that you know what's out there, bring yourself back and ask: "how is your idea(s) any different?" Another way of asking this questions is "why would someone pay for your product/service over the other guy?" In order to win over your customer, you must provide one or several of the following benefits: Saves time, saves effort, prestigious or boost ego, makes them happy, reduce risk or increase safety, and lastly saves money.

4) Target audience and market potential
Knowing your target audience is important because it determines your market potential. What demographics are you targeting (children, adults, retired, male/female, etc) and what geographic location(s)? Is your audience going to purchase your product/service physically or over the internet? Calculating your market potential allows you to visualize and understand how to structure price point, provide customer support, and best advertise yourself.

If you've made it this far, you're doing pretty well. There are other topics such as resource planning, expansion model, financial structure, etc that will require additional brain power.

Hopefully you've documented all of the above in neat and organized manner because you would have written a majority of a business plan (which you will need to entice your investors). Good luck.

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