Business Idea & Opportunity Evaluation
Process:1. Select your potential users from your network
2. Find the right time to talk with potential customers and ask if they like the idea and if the idea solves their problem.
3. Get the feedback and polish the ideas until it is commercializable.
Location:
1. Go to where your potential customer meets, and ask them directly to get feedback. The founder has to go out and ask.
Goals:
1. Polish the startup idea
2. Build customer base
3. Polish the business model
4.
Notes:
1. The documentation doesn't matter. What matter is the content.
2. The challenges are to filter out the way, which doesn't work, and use the right way which works.
3. There is a different process to evaluate business idea in startup and big corporations.
4. Great Idea Evaluation process can help polish the business idea, build customer base and contract, refine the business model, build potential team members, etc. All these can get it done without a single line of coding.
Great UI Workflow:
http://us.moo.com/startup-business-toolkit/flowchart/
References:
http://www.entrepreneur.com/article/81940
Detailed Analysis:
In analyzing your business ideas you must be able to pass them through a test to determine if they truly are valid opportunities. All of your ideas must have a demonstrated need, ready market, and ability to provide a solid return on investment.
Is the idea feasible in the marketplace? Is there demand? Can it be done? Are you able to pull together the persons and resources to pull it off before the window of opportunity closes? These questions must be considered and answered.
Opportunity-focused entrepreneurs start with the customer and the market in mind. They analyze the market to determine industry issues, market structure, market size, growth rate, market capacity, attainable market share, cost structure, the core economics, exit strategy issues, time to breakeven, opportunity costs, and barriers to entry. Below are two models that entrepreneurs use to evaluate their business ideas and plans.
Fourteen Questions to Ask Every Time
To evaluate opportunities, entrepreneurs ask the following questions:
- What is the need you fill or problem you solve? (Value Proposition)
- Who are you selling to? (Target Market)
- How would you make money? (Revenue Model)
- How will you differentiate your company from what is already out there? (Unique selling proposition)
- What are the barriers to entry?
- How many competitors do you have and of what quality are they? (Competitive Analysis)
- How big is your market in dollars? (Market Size)
- How fast is the market growing or shrinking? (Market Growth)
- What percent of the market do you believe you could gain? (Market Share)
- What type of company would this be? (Lifestyle or High Potential, Sole Proprietorship or Corporation)
- How much would it cost to get started? (Start-up Costs)
- Do you plan to use debt capital or raise investment? If so, how much and what type? (Investment needs)
- Do you plan to sell your company or go public (list the company on the stock markets) one day? (Exit Strategy)
- If you take on investment, how much money do you think your investors will get back in return? (Return on Investment)
Let’s take the above fourteen questions and term them into an easy model that you can use to evaluate your business ideas you come up with. This is called the RAMP model.
The RAMP Model
Let’s start with the first letter, R, which stands for Return. Return really is return on investment.
R
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Discuss Exit Strategy (acquisition or IPO)
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R
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Is it profitable? Will your revenues be higher than your expenses?
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R
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Time to breakeven (how long before cash flow positive? How long until the company begins to have an aggregate net income)
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R
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Investment Needed. How much money will it take to start-up this venture. Will it be $20,000, $200,000, or $2,000,000?
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Now let’s look at A. A stands for advantages.
A
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Look at cost structure (suppliers, what each element will cost to source or manufacture)
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A
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Barriers to entry (large competitors, regulations, patents, large capital requirements. If there are many barriers to entry, it will be difficult to enter a market. The higher the barriers to entry, the more disadvantaged you will be.
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A
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Intellectual Property. Do you have a proprietary advantage such as a patents or exclusive licenses on what you will be selling.
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A
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Distribution Channel. How will you be selling your product? Will you sell it direct to the consumer via the Internet, sell it to wholesales, sell it to businesses, or sell it to retail stores. If can develop a unique distribution channel this can surely be an advantage.
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Now let’s look at M. M stands for Market.
M
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The Need. Is there a big need for this product or service. Try to avoid ideas that sound cool but there is no real need for. Make sure your product or service fills and need or solves a problem.
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M
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Target market (who are you selling to? businesses? consumers? what demographics?)
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M
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Analyze target market (who are you selling to? businesses? consumers? what demographics?)
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M
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Pricing (what you they charge, what will be the price, will there be a high enough markup).
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M
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Analyze market size
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Finally let’s look at P. P stands for potential.
P
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Risk vs. Reward. How risky is the opportunity? If it is very risky, it there a chance for the business to do very well. Will there be a high reward for the founders and investors if the company succeeds?
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P
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The Team. Is the team right for the business. Do you have knowledge in this area.
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P
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Timing. Is the market ready for your product. You may have a great idea for flying cars, but if consumers are not ready for your product you may not be able to turn your idea into a successful business.
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P
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Goal Fit. Does the business concept fit the goals of the team to create a high potential or lifestyle business?
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By using the RAMP model and the fourteen questions above you should be able to do a thorough job analyzing your business ideas and opportunities presented to you.
Knowledge Sharing:
1. If you're big and/or have a lot of resources—or not very good at spotting new opportunities, but great at executing—a less-tractable idea may be for you. It may take longer to launch something worthwhile, but once you crack the nut, you have something clearly valuable.
2. Tractability is partially about technical difficulty and much about timing and competition—i.e., How advanced are the other solutions? Building a new blogging tool today is less-tractable, because the bar is higher. Building the very first web search engine was probably pretty easy. Conversely, building the very first airplane was difficult, even though there wasn't any competition.
3. Big wins come when you can spot something before its obvious to everyone else. There are several vectors to this: 1) Is it obvious why people should use it? 2) Is it obvious how to use? 3) Is it an obviously good business?
4. You want it to be a good business, but not an obviously good business, because than you get more competition. Web search was not an obviously good business before Google demonstrated it. This allowed them to leap-frog the competition that was in it for years, but not taking it very seriously. But, like Google, the business may not be clear until later.
5. On the flip side, if you can build an ad network that makes people more money, a better search engine, or a productivity app that actually does tasks for people—all, less-tractable solutions—it will be highly obvious to people why to use your product.
6. Turns out, it didn't need to be used by a hundred million to be worth a hundred million, so going for wideness is not entirely necessary.
7. Like deepness, wideness can take you by surprise. The web is getting so damn big, what seem like niche ideas can be very decent businesses.
8. Sometimes, you can find a spot that is both deep and wide. This is where multi-billion-dollar businesses are built: Google, Windows, Ebay. It's easy to think these kinds of opportunities aren't laying around anymore—at least not for the little guy. But most people would have said the same before Facebook entered the picture.
9. It's possible to get the word out without being "viral." One way is organic search traffic. Another is pay-per-click ads (if you can monetize). Another is plain old-fashioned word-of-mouth/blog/press. (Twitter has probably grown more through press and blogs references than any inherent viralness.) There's also distribution deals and partnerships.
10. Great products almost always come from someone scratching their own itch. Create something you want to exist in the world. Be a user of your own product. Hire people who are users of your product. Make it better based on your own desires.
11. My favorite products are those I really want as a user, but that I also think have some "greater good."
12. If you get to be #1 in your category, but your category is too small, then you can broaden your scope—and you can do so with leverage.
14. #1—the specialist will almost always kick the generalist's ass.
15. One of Google's biggest strengths—and sources of frustration for outsiders—was their willingness to say no to opportunities, easy money, potential employees, and deals.
16. Hire people who are users of your product. Make it better based on your own desires. (But don't trick yourself into thinking you are your user, when it comes to usability.)
17. Flickr's company was building a game. Ebay was going to sell auction software. Initial assumptions are almost always wrong. That's why the waterfall approach to building software is obsolete in favor agile techniques. The same philosophy should be applied to building a company.
18.
References:
how-to-evaluate-new-product-idea.asp
ten-rules-for-web-startups.asp
Idea Checklist
Knowledge Sharing:
1. If you're big and/or have a lot of resources—or not very good at spotting new opportunities, but great at executing—a less-tractable idea may be for you. It may take longer to launch something worthwhile, but once you crack the nut, you have something clearly valuable.
2. Tractability is partially about technical difficulty and much about timing and competition—i.e., How advanced are the other solutions? Building a new blogging tool today is less-tractable, because the bar is higher. Building the very first web search engine was probably pretty easy. Conversely, building the very first airplane was difficult, even though there wasn't any competition.
3. Big wins come when you can spot something before its obvious to everyone else. There are several vectors to this: 1) Is it obvious why people should use it? 2) Is it obvious how to use? 3) Is it an obviously good business?
4. You want it to be a good business, but not an obviously good business, because than you get more competition. Web search was not an obviously good business before Google demonstrated it. This allowed them to leap-frog the competition that was in it for years, but not taking it very seriously. But, like Google, the business may not be clear until later.
5. On the flip side, if you can build an ad network that makes people more money, a better search engine, or a productivity app that actually does tasks for people—all, less-tractable solutions—it will be highly obvious to people why to use your product.
6. Turns out, it didn't need to be used by a hundred million to be worth a hundred million, so going for wideness is not entirely necessary.
7. Like deepness, wideness can take you by surprise. The web is getting so damn big, what seem like niche ideas can be very decent businesses.
8. Sometimes, you can find a spot that is both deep and wide. This is where multi-billion-dollar businesses are built: Google, Windows, Ebay. It's easy to think these kinds of opportunities aren't laying around anymore—at least not for the little guy. But most people would have said the same before Facebook entered the picture.
9. It's possible to get the word out without being "viral." One way is organic search traffic. Another is pay-per-click ads (if you can monetize). Another is plain old-fashioned word-of-mouth/blog/press. (Twitter has probably grown more through press and blogs references than any inherent viralness.) There's also distribution deals and partnerships.
10. Great products almost always come from someone scratching their own itch. Create something you want to exist in the world. Be a user of your own product. Hire people who are users of your product. Make it better based on your own desires.
11. My favorite products are those I really want as a user, but that I also think have some "greater good."
12. If you get to be #1 in your category, but your category is too small, then you can broaden your scope—and you can do so with leverage.
14. #1—the specialist will almost always kick the generalist's ass.
15. One of Google's biggest strengths—and sources of frustration for outsiders—was their willingness to say no to opportunities, easy money, potential employees, and deals.
16. Hire people who are users of your product. Make it better based on your own desires. (But don't trick yourself into thinking you are your user, when it comes to usability.)
17. Flickr's company was building a game. Ebay was going to sell auction software. Initial assumptions are almost always wrong. That's why the waterfall approach to building software is obsolete in favor agile techniques. The same philosophy should be applied to building a company.
18.
References:
how-to-evaluate-new-product-idea.asp
ten-rules-for-web-startups.asp
Idea Checklist
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