Key Questions to Ask to Truly Test Your Idea

Is your business start up idea a GO-ER or a FIZZER ….good or not?

We asked a group of highly successful entrepreneurs…….”What are the 5 Questions you ask yourself or get answers to when deciding on whether a business idea is a good idea that you will proceed with (a new direction for your business, a brand new business venture, an innovation with your existing business)?”

Here are the answers – straight from the entrepreneurs themselves…..

FRANK RESTUCCIA – FreestyleMedia

1. Will the business generate annuity or recurring (ongoing) revenue? If recurring (regular & ongoing) revenues make up a big proportion of total revenues then the business will prosper.
2. Is the business in a industry/sector of the economy that is growing fast? A fast growing market makes sales growth far easier.
3. Is the Lifetime Value of the customer high (will they over time spend a large amount with you and your business)? If yes, this means that you can afford to acquire customers at a higher rate than otherwise. This in turn, allows you to aggressively market the business/product/service.
4. Do you personally enjoy working in the business? There will be times when things aren’t going so well, but if you believe in the idea, you will get through difficult periods.
5. Is the business idea unique or at least rare/non-competitive? If the answer is yes, then you will enjoy super normal profits. If there is a chance you can be No.1 in your market as a result, then you’re on a winner.

SCOTT FARQHUAR – Atlassian

The two things with any business idea that I look at

• Would I personally use this?

You can build products or services for other companies, or for unknown markets. However, it is an order of magnitude harder than building something you would use yourself.

• Do I get excited about the possibilities of this idea?

If I’m not excited about something – the potential financial upside becomes meaningless. There are only so many hours in a week, and I want to spend them doing things that I’m truly passionate about.

There is also a pragmatic reason. Someone else who is truly passionate about your particular good or service will come along, and steal your market, because passionate people will always do a better job.

JESSICA SCHEBESTA (KIELY) – The Frank Team

- How does the idea make me feel? Am I excited by it? What does my gut tell me?
- What is the target market saying about the idea/possible product? If I don’t know, ask em!
- What are the start up costs/investment involved? How will I cover that?
- What are all of the revenue streams possible? There must be more than one revenue stream.
- Is it in line with my current goals, personal and professional?

MATT WILSON – Under30CEO.com

1. How much time/effort will the idea take to implement?

Most business ideas are “good ideas” but are they easily to implement with the least amount of time and effort possible? I’m a huge believer in Tim Ferriss’ 4 Hour Work Week and how he breaks down Parretto’s 80/20 rule; 80 percent of your profits come from 20 percent of your efforts. If you want to run a business you’ve got to prioritize where you put your time/effort and forget the little things that don’t get you closer to your goals.

2. Is the idea profitable?

Business is about the bottom line. How does your idea effect your profits? Many ideas don’t affect the bottom line directly, but will benefit profits somehow in the long run, whether it’s customer relations, branding, human resources, etc. While all these business units are critical to running a successful business, these type of ideas need to revisit question #1–is it worth implementing?

3. Does the idea fit your businesses long term strategy?

Always know your company’s direction and always consider whether your new ideas fit with your businesses culture/strategy. Think about getting your business from Point A to Point B; from where you are to where you want to go; does this idea, get you to Point B? Now, consider trying to plan getting from Point A to Point B in as few steps as possible. When you get to Point B it’s time to re-evaluate your strategy and find a new Point B; set new goal and plan your route to get there.

4. How will the public view your idea?

Your customers, the media, your competition and the general public all need to be considered when testing your idea. Think about Heinz and their Green Ketchup–this took thousands of dollars in market research to be sure the public was ready. Launch an idea like this and it flops? You lose serious credibility in the market. Launch an idea like this and it sees incredible success? Everyone remembers your name.

5. How will your employees view your idea?

Great leaders learn quickly that pushing your ideas onto the people who are supposed to execute them without their consent is a death sentence. Great leaders let their team come to their own conclusions and do more listening then talking. Sure, share your ideas with the team, but let them run with them–especially if it’s them who will be implementing it! Everyone loves to execute their own ideas, so let your team rally behind the idea and expand upon it themselves. Put your ego aside and let the team feel like their executing their own agenda.

JOE OLEJNIK – Australian Small Scale Offering Board

The quality of a new business idea will significantly contribute to the success (or other-wise) of your business. The following 5 questions will assist you in identifying the potential ‘diamonds’ and rejecting less suitable business ideas.

1. Is There An Unmet Need For The New Idea?

Your new idea must fulfil an unmet need in a sufficiently large (and ideally growing) market. If you have identified an unmet need with an easily accessible path to access that market you may be onto a good idea.

2. Can You Access The Resources To Turn The Idea Into A Reality?

To make the idea a reality you must firstly identify and then be in a position to access and manage the necessary resources required. Some of the resources required to turn an idea into a reality include time, money, management skills and specialist knowledge. Many inventors have brilliant ideas however they often are unwilling to bring on board the resources (usually investors) for fear of losing control of their idea. As a result unfortunately their idea stays just that – an idea and never sees the light of day. It is often said that it is better to have a percentage of a multi-million dollar business that has grown rapidly by using investors to fund the development of the idea rather than owing 100% of an idea.

3. How Does The Idea Fit In With Your Overall Vision And Strategy?

Are you genuinely passionate about the idea and the industry? You also need to consider if the idea will assist you to realise your long term vision and goals. Time and time again, often against all odds it has been shown that a good idea backed by vision, passion and unrelenting determination will succeed.

4. Does The Idea Contribute Positively To The Business?

The idea needs to contribute positively to the business – you can access the resources and you may be passionate about it but this doesn’t mean that idea will be commercially viable. As a result you need to consider what your revenue model for the idea is and what is required for it to become profitable. In asking these questions it is important to consider the costs of all stake holders in getting the idea to market, these include suppliers and distributors. Often an idea may not be a viable commercial proposition in its current form after factoring these costs in.

5. What Is The Sustainable Competitive Advantage For Your Idea?

To be a truly great idea you need to consider how to achieve a sustainable competitive advantage. Some competitive advantages may relate to patents and other Intellectual Property (IP) owned by company, another may be a secret processes or ingredient, however simpler measures such as how you deliver the idea to market may be just as effective (eg distribution methods, level of quality or even branding). If the idea doesn’t have a robust sustainable competitive advantage to protect it then it needs to be rapidly scalable so that it can be rolled out before a whole bunch of “me-too” competitors think your idea is just as good and copy it.

Finally, whatever your new idea, the use of external funding to assist research and develop the concept can ensure the process of getting the idea to market occurs much faster and more comprehensively than would otherwise be the case.

So now you have all of THE BEST questions to use to test your business idea – hopefully it has helped you to be more sure about whether to pursue the idea or not!

For more advice check out our Testing Your Idea article.

Ideas

An idea is where it all starts.

Sometimes that idea comes to you as you are waiting in line at the shops, lying in bed, in your dreams, while you are sitting at your desk at work board, sitting in class surfing the web, or when a group of friends are chatting and saying “gee it would be great if there was something that …..”.

And now you are wondering, “what do I do next?” to make it real.

Or perhaps you are having new business ideas all of the time, and you want to know which one to go with.

Or perhaps you know that you want to be a young entrepreneur but you haven’t yet found that idea that you would like to do something about.

Firstly, no one is going to be to tell you guaranteed whether your idea will be successful or not, sorry! You are going to have to work out yourself if the idea is worth pursuing. How are you going to do that? Well…luckily we are here to help!

Looking at your idea from all angles is vital.

Check out some of our popular posts about….
Testing Your Idea

The questions successful entrepreneurs ask themselves to test whether an idea is worth moving forward on.

Idea Inspirations – Where Ideas can Come From

Making Money Online from Your Skills

And also our RESEARCH section will give you a heap of tips on doing the hard-core checking up on your idea.

We have also put together some ideas that we think are good and worth doing something about – one of em could be perfect for you. These ideas have come from stuff we have seen online, overseas, what other young entrepreneurs have suggested, and our own experiences. If you’ve got some ideas you wanna contribute then send em on through – only if you are not going to do anything about them yourself!

And if you’re ready with your idea already then our START GUIDE is a great next step.

As we know though, having an idea is the easy part!

And we also know that a good idea is not all it takes. The right attitude and mental toughness are also required. Our Get Motivated section can help you with this.

Also be sure to sign up to our Team List to get business tips, opportunities and all sorts of goodies regularly. Trust us, no spammy stuff – just useful stuff.

And add your email addy in (top right) to get the updates from this site, as they happen. Or just come back each day and check out what is new!

Testing Your Business Idea

So you’ve had an idea! You think it would make a really great business and are thinking about starting up. So what are some “tests” you should put that idea through to really work out if it’s “the one” you should pursue with all of your time, energy and a possible short stack of money? Try these:

• Excitement levels

When you think of your idea and turning it into a business, how excited does that thought make you? Starting and running a business takes a lot of heart and soul to make it truly successful, so if the idea doesn’t fill you with fire in your belly in some way then it’s probably not right.

The most successful business people will always tell you that passion for your idea and business is essential. So really ask yourself right now, does this idea wake me up at night, in a good way? Does this idea fill my belly with butterflies when I think of where I can take it? Does this idea lead directly to thoughts of who you could work with on it, all of the possible marketing you could do to sell it and how much everyone is going to want it? If you answered yes to these, then your idea has passed its 1st test!!

• Outsiders

Have you told anyone else about the idea? What do they think of it? Of course, you may be worried about people “stealing” your amazing idea, so put due processes in place to protect yourself (Memorandum of Understandings or confidentiality agreements or get some legal advice if you’re truly worried), but then get out there and ask everyone you know what they think! Get them to pick apart your idea and ask you a million questions. This will help you to see what research still needs to be done, where the holes in the idea are, where there is more potential in the idea and perhaps will show you if the idea is not right in its current form. Of course, “advisers” have been proven wrong before, but no one has built a successful business without the advice of others.

If your idea has withstood this barrage, you are doing really well.

• Anyone done it before? Why not?

If your idea looks like it will be the “first of its kind” or “too good to be true”, ask yourself, why has no one else had this idea or done something with this idea before. Often the reason why no one has done it before is because it is not a really great idea, or its time has not yet come. Do your research in your industry to really find out why no one has done this before. It could be that the idea is so simple that no one has seen it yet, and it is truly brilliant. Or it could be that others have not seen any value or money in the idea. You need to find that answer for yourself too, to pass this test.

• Uniqueness

Every customer you will get, generally, means you are taking them away from someone else! So what is going to make your idea stand out so customers will come to you rather than anyone else? How well do you know your potential competitors, direct and indirect? Do a SWOT not only on your idea, but also on your competitors. You will learn a lot about your idea with this test.

• Start up costs

How much is it going to cost you, and how much will you have to risk to get it started? Can you put together a 6 month budget to see what you’re going to have to put on the line to start it up? How does that amount make you feel?

Perhaps you can get out and sell your idea (product or service) at cost or for free to test your market. Just starting small is a great test for your idea – selling 1 tutoring lesson, 1 new computer mouse, 1 piece of clothing on ebay – what was the experience like, what was the demand like, get your customer to give you feedback, learn, learn and learn more. This will provide a huge wealth of information that will help to direct your next move in testing your idea further. And by the way, if you do this step you have started your business!!!

• The market

Of course a good in depth look at your industry market and the general economic market and geographic location if you are setting up a physical presence can help to test your idea. How are other businesses doing in your area? Are they growing, stable or contracting? Are there other business like yours in the local area? Why and why not? Get out there and look at trends, read industry magazines, talk to people in the industry, go to networking events – really submerge yourself in the market you are thinking about. You will get a sense of the vibe and energy around your area. Good vibes = good idea!

• The numbers

Now depending on the type of entrepreneur you are and why you are starting, the financial numbers can also help to test your idea. For those of you just wanting to get out there, and get started and see how it goes – do just that, just start now. Others want to see that the “numbers” all add up – that is, that there is going to be profit and good profit in this idea. This will mean putting together at least a 1 year budget backed up with your research of the industry, competitors and market information. Get someone on your team who is really good at all of this stuff, and put your idea up against the toughest test, financial!

• Official checks

You know that amazing business name, or product name that you have just come up with? The one that is so perfect for you and your business? Before you get too excited check it through your state business name registry, and even the Australian business name registry to see if anyone else is already using it.

You can then also put it through the IP Australia registry of trademarks and again see if someone has already “got it!” And then of course the URL, is that perfect website you want already taken?!

Check it through a domain name search engine like NameScout .

You will find that when you sit down brainstorming ideas for business names, products and services, you want to have the internet at your finger tips to do your testing as you come up with the ideas. It can save a lot of disappointment and faster elimination of ideas for names you just can’t have.

Keep in mind key words used by potential customers when searching for your product or service and use those keys words in your business name and URL.

There are many ways to test a business idea and these suggestions are based on our experiences here at The FRANK Team and how we test our ideas as we come up with them – and the tests we have learnt the hard way that you should put your ideas through before going ahead with them.
You need to do your own research and then ultimately it’s your decision whether you think you’ve got a winning idea. Expert business advice from others is advisable as well.

And remember, there is no one way or right way when it comes to business. So what is your great idea? How have you tested it so far?

If you want to learn more about the steps to starting up your own business then The Frank Team has the prefect tools for you. Our Break it Down cards make starting up your business easy, fun and totally practical.

Starting up in business as a young person can be lonely and tough at times. Come and meet other young entrepreneurs just like you and share ideas and stories with the Frank Team’s Young entrepreneurs membership program.