Everyone of you reading this article might have thought about a new business idea atleast once in your life. But you did not have a way to check if the idea is worth taking to the next level. Did you?
This article solves that problem.
And it’s not rocket science. Validating a business idea doesn’t require you to be a number guy. A basic business acumen complemented by an urge to learn new things should do the job.
That said, let us get into the 5 easy ways to validate your budding business idea.
First and foremost thing you need to do before you proceed with your business idea is to see if a market exists for your product or service.
To find this information, you can do research online on the following key topics:
- Total market size of your industry
- Current gaps or pain points
- Market penetration of the your product category
- Demand forecast for the next 5 years
2. Feasibility of execution
For any business idea to succeed, it should be practical to execute. Just because your idea is awesome, it doesn’t mean that you will build a multi million dollar business. This could be attributed to the following reasons:
- Regulatory constraints
- Capital/financial constraints
- Building team and sourcing the right talent
- Lack of business strategy and roadmap
A business is a combination and collaboration of a lot of factors such as resources, strategy, vision, execution etc. So while assessing the feasibility, you have to look at it through all the above lenses.
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Hence, in order to build a sustainable business, you need build a good team that comprises the right set of skillsets. You may evaluate this factor based on the following aspects
- Whether you as an entrepreneur have it in you to build a business grounds up
- If it is possible to hire the right talent easily from the market, especially your geography.
- If you can create a work environment that encourages employee collaboration, cooperation and motivation
For a business to survive in the long run, all the above three need to work together.
One of the biggest threats to any company is competition. Before you decide to venture into a new business, evaluate the strength and market penetration of your competitors.
It wouldn’t make sense for you to enter a saturated market which already has a large number of established players, unless you have a killer product (like an Apple iPod in early 2000s) or create a new category that does’t exist (like Maggi or Kellogg’s)
So make sure your product or service addresses a key consumer issue which the existing players are not able to.
Successful business models are built by keeping scalability as a prime factor. The best way to see if your business is scalable is to start by looking at your idea itself. Make sure it would make a scalable business that could substantially improve your top line.
For example, if you are a manufacturing company, scaling your business requires increasing your production capacity. Ensure that this is factored into your business plan. If your resources are not enough to support this, you might as well want to consider not proceeding with the idea.
You also need to look at scalability in terms of people/employees, customer acquisition, technology support & capability and market penetration or reach.
Compromising on any of the above 5 points, could bring down your business over the long run. I would like to call this the litmus test for businesses. Make sure your business/business idea passes the test before you execute it.
If you wish to share your views or have any queries, please feel free to leave a comment.