As a prospective entrepreneur, you are bound to have a lot of ideas, things you think could be developed into a business. However, not all of them are bound for an effective and profitable execution. That is why it is important to screen these ideas and filter them, so that you are left with those that you should focus on, and hopefully build something out of.
When assessing if an idea should be pursued, you should frame it as a problem that you are attempting to solve. Ideally, this would be a problem you are personally facing and want a solution for, either because there is no solution readily available to you, or because those that do exist do not satisfactorily solve the problem.
By starting with an issue that you care about and are invested in, you will be further motivated to stick with the project through to the end, as you are working towards solving a problem that is a part of your life. The importance of working on projects that capture your interest cannot be understated. Staying motivated is key.
Now that you have a problem, it’s time to start thinking about how to fix it. Ask yourself if you have the required skillset to work on the project and execute the solution. If the issue you have proposed to address is beyond your technical ability (example: if you don’t know how to program, and the problem requires a software solution), then perhaps you should look elsewhere; that is, of course, unless you can find a reliable cofounder who can tackle that angle for you.
The takeaway here is that you should not, under any circumstance, start a company around something that you or your co-founding team cannot do.
Timing and Funding
With the implementation of the project sorted out, the next thing you should do is ask yourself: what is my competitive advantage? What sets me apart from the other solutions that already exist? How am I going to fund the company?
Regarding apps and platforms, you should consider bootstrapping. This is very important, because when it comes to investors, bringing them onboard early could lead to you giving away a large percentage of your company, especially if you require large sums of money down the line. This process can then snowball and kill your business if you are not careful. Thus, a good way of avoiding such complications is to bootstrap the project. While this can be harder to accomplish in the B2C arena, it can nevertheless be done.
In addition, you should ask yourself as you progress through the timeline: am I attracting the right people? The right customers? Are they profitable? Customer acquisition costs should be in a good ratio to the revenue, otherwise you will just be losing money.
Testing and Refining
Another critically important factor is feedback. You should talk to people and get feedback in a structured manner, such as through surveys. This data will allow you to better understand your product, to better understand the customer’s needs, and will subsequently allow you to fine tune the product, directing its development and your marketing efforts in such a way that reaches out to the right clients.
One incredibly useful tool regarding feedback and testing public interest is the MVP (minimum viable product). This should be a vertical slice of your product, that matches in quality what you are trying to accomplish. If done right, the MVP will give you a wealth of data with which to perfect your project. Do not treat the MVP as a lite, cheap version: it should accurately reflect the finished product.
You should also ask yourself if your product is easily replicated by competitors. You should figure out what makes you unique, what makes people like your product and what makes your business difficult to mimic. This will help to protect you from competitors cutting into your profits.
Managing your expectations regarding profit margins is also important. You should ideally be looking to establish a business that can deliver high margins and great financial results. If your original idea would lead you to a low margin business venture, such as owning a restaurant, consider ways in which to maximize profit, such as running a food platform instead, where you get a commission off every sale.
Keep in mind that if you want to find investors, they will want a considerable return on their investment, such as 5 to 10 times return. If you can’t supply them with the capital they want, they simply will not be interested in you.