In our first blog, we discussed the importance of research and how to take the first few baby steps towards building your startup idea and modeling your business.
After doing your initial research, you should be able to confidently answer these few questions:
Target market:
Who are they?
Path to target market: How will you acquire new customers?
Key partners: Who can/will help you? Why?
Key resources: Who will supply your products/resources? How?
Key activities: What do you offer?
Cost structure: How much will it cost for you/customers?
Revenue stream: How will you make money?
Risks: What are some obstacles you may face?
Unfair advantage: Can you patent the idea?
Value proposition: Why should people choose your brand? What makes you special?
Now let’s say you’ve done your research and gathered sufficient information about your competitors, stakeholders, industry environment, risks, resources and target market. What’s next?
It’s time to analyse that information and put it under the microscope by asking a range of questions that will enable you to measure how valid and sustainable your idea really is.
Assessing Do-ability & Return
There are a few questions you can ask to help you assess whether your idea is practically and commercially viable. The key things to consider are:
Do-ability:
How hard is it to implement?
Do you / your team have the key skills and resources needed?
Is there a clear path to an MVP (minimum viable product)?
How big are the startup capital requirements?
What are the major risks and can these be mitigated?
Are you and your team sufficiently committed?
Return: Is the problem you are solving real and significant?
Would customers be prepared to pay for the solution, above your cost of production?
Is the market for your product big enough?
Is the solution scalable? Can it be used globally?
Is the solution unique or are there a lot of competitors?
Can it be easily replicated or copied?
If there are competitors, what is unique about your offering? How will you maintain sustainable competitive advantage?
The answers to these questions will help you identify whether you pass the do-ability and return test.
Do-ability & Return Test
Based on your answers to the above questions, rate the overall do-ability and return of your idea by low or high.
Do-ability: How hard is it to implement the idea?
Return: How are the financial returns (profit)?
Generally, your do-ability and return will fit into one of four categories:
First, if Do-ability and Return are both high
Pursue! Your idea appears to have sound potential. How de-risk further? Is your business model canvas (BMC) optimised?
Second, if Do-ability is high and Return is low
Proceed with the realistic expectation that your idea is doable, but put a good amount of thought into how you should scale it. It will be worth pursuing if you can ensure your ROI will be sufficient. It may not be a unicorn but could still make good money.
Third, if Do-ability is low and Return is high
Consider your options: How can you make the idea more do-able? Are there partners or others you can engage? Can you test the market further? More research and thinking is required before any commitments can be made.
Fourth, if Do-ability and Return are both low
Do not proceed, rework solution. Consider whether there is a sufficient problem. If no, can you change your solution to target a bigger market, make your solution more scalable or easier to implement? Rethink your BMC from the ground up.
Remember, if your idea didn’t pass the test then there are always alternative options to consider. This may just be a variation on your original idea, so do some more research through surveys, talking to your target audience and consulting experts to see how you might be able to adapt your idea.
Remember, the most important part of the equation is driving results because without users your business won’t be able to survive!
Did your idea pass the test? Talk to us
Stay tuned for our next blog about starting work on your viable idea.