How to check that your new business idea is viable
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Posted: Wed 15th Jun 2022
Preparing and testing a new business idea is essential. Just as it's necessary to have a good idea to start as an entrepreneur, testing will let you know if your idea is likely to succeed.
Being proactive here is vital. You'll have to be open, receptive and attentive. Also, you'll need to devote time to thinking about your project thoroughly and constructively.
Many entrepreneurs fall into the trap of thinking they don't need to take this step. Others refuse to try their idea because they want to be discreet and don't want their precious information to be revealed too soon. On the contrary, testing is in your interests as you'll be able to draw conclusions and take action.
Here are some ways to make sure your new business idea is viable.
Describe your idea
You need to write a detailed description of your idea. Ask yourself the following questions:
Is it a product or a service?
Define the characteristics of your product or service as precisely as possible. Include what you're going to distribute to your marketplace. Are you launching something new, or is your product an add-on for something that already exists?
What's its purpose and what are its strengths?
Noting your strengths means you can gauge your competition better, so always analyse them with a critical eye. This will help you find out if they're enough to make your new business appealing against the backdrop of the competition.
What solutions does my concept provide, and how will it be used?
To show how you intend your product or service to work, you need to know if it meets your customers' needs. Consequently, put yourself in their shoes to understand their expectations.
Why am I offering it?
Who are your ideal clients?
Before studying your target audience more closely and getting deeper insights, divide your market into segments. Can you identify your clients? Are they scattered around different areas, or are they within your district?
Why should potential customers choose me over my competitors, and what do they get in return?
Define your target
When entering a business market, you need to know its characteristics, trends, how it works and the type of audience you're targeting. It's unrealistic to try to reach everyone out there. Instead, you need to target specific customers. Ask yourself the following:
What type of market do you intend to serve? What size is it?
Is the market you plan to target local, regional or national? Have you segmented your potential customers? Are you working in a business-to-customer (B2C) or business-to-business (B2B) market? Is your market seasonal? Can you tap into a new niche?
Who are you targeting?
You need to define your potential audience and then those customers who will form your key target group.
What are the market trends?
Are you part of a booming market, which means your competitors will be quick to react? On the other hand, perhaps you're in a mature market where you need to visibly stand apart from your competitors?
What are the barriers when entering your market?
Launching into your intended market means you'll need to study it thoroughly and have a good network of contacts. Also, you'll need a suitable capacity for production, which is really important, depending on your position.
In this webinar, Steven Bartlett from Dragons' Den shares his top tips on how to put your business ideas into action:
Do surveys and interviews
Carry out a survey using the customers you've defined as your target. Send out a questionnaire, as you'll benefit from the number of responses and the content. You can do this online and make the whole thing an easy and automated process.
Conduct interviews with professionals in your business sector (for example, other contractors, suppliers and so on). Tell them about your idea and listen to their responses.
Ask your friends and family for advice, especially if you're using 3F (family, friends and fools) financing.
Attend trade shows and sector events
Visit trade shows, workshops and events for the sector in which you operate. This is an ideal way of meeting like-minded people. They might later become part of your network of trusted contacts.
Moreover, going to trade shows is a great way to study your market. You'll be able to analyse your potential customers' needs and exchange ideas with other entrepreneurs. So, don't miss this opportunity to talk about your idea and test it in professional surroundings.
Set up a landing page
Create a landing page to convey the central message of your new business idea as if you're at the point of launching (even though you might still be a few months away from being ready).
Include a call to action for customers to test your product or service and invite visitors to your page to leave their email addresses. The feedback you'll gain from this page can be exciting to check you're on the right track. If you get a fair amount of traffic to your page but no-one provides their email address, you'll know it's time to take action.
Choose testers
Pick a sample of your potential customers to test your product or service. Most of all, you need to analyse each participant's response and look for anything they like or want you to change or improve.
Have a prototype
You might include this when you choose testers, as mentioned above. However, for some products, you might want to create a prototype to test with relevant individuals from your sector after taking on board the feedback from your testing phase.
Do a soft launch
Launch your product or service in a controlled environment – for example, by using three or four businesses you know. Analyse everything you can measure and study the data carefully.
Get firms who work in the area where you're entering the market to be on your side. Offer them an initial good deal followed by incentive-based sales. This step is critical in understanding whether your business has the potential for growth.
Use a business incubator
This is an excellent way to test your new business idea in an expert ecosystem, without taking any risks. Also, you can set a specific timescale and have the legal set-up for invoicing, buying, managing and directing. Most of all, you'll receive support for developing your project.
Go into the market, your final testing place
Once you've launched into the market, don't underestimate the power of keeping track of customer feedback on your product or service. An easy way to acquire this is to run an app so people can rate you with several stars or by clicking on a pictogram like a smiley.
Key takeaways
Evaluating and testing your new business idea increases your chances of success. Your idea might be fantastic, but you need to make sure you've analysed your project sufficiently and taken the abovementioned steps. Otherwise, running before you can walk is likely to turn a great idea into a failure.
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