11 Questions to test your Business Idea

by Enda Candon, Firstwestern Consulting

If you have a new business idea, or think that you have come up with the next iphone or facebook, here are 11 questions to help you determine if you have or not. Answering these questions honestly and frankly will give you much needed detail for your business plan as well.

1. Are you filling a void?

A clever idea is nothing more than an idea if nobody actually needs the product or service. "You have to determine that there's something actually missing to a specific market--something you're going to supply,"

2. Does the idea pass a live market test?

Many ideas lend themselves to an easy market test to determine if the product or service is needed or popular. A new jam or preserve, for instance, could be tested at a farmer's market before being pitched to retailers. If it doesn't sell at all to the market crowd, the product may need to be re-examined before being launched.

3. Does the idea have shelf life?

Are there upcoming or pending changes in technology that could render your idea obsolete? Companies not on guard for changes in technology or consumer trends can be swept away while competitors move ahead. Or it could be that there is new legislation in the pipeline that will make your product obsolete or unwanted.

4. How large is the market for the idea?

If a business plan requires that you sell to 60% of a potential market in order to make a profit, then the idea isn't realistic. Better business ideas can achieve profits by attaining a smaller market share of 5% to 10%.

5. Is there a high barrier to entry?

The best ideas have high barriers to entry. If an idea is good but not patentable or protectable in some other manner, then there is a risk that other companies and competition could start the same business and over run you.

6. Is the idea scalable?

The best business ideas incorporate plans that can be replicated and easily taught. Therefore can you easily scale up with increased production as the market requires or introduce other new products and services using the same equipment, skills and processes?

7. Can the idea be priced attractively?

There may be a reason why nobody else is already doing what you're thinking about--they can't make any money doing it. You have to run and test the numbers and make sure that the product or service can be offered to the market at a price the market is willing to pay.

8. If it weren't your idea, would you put money into it?

This is a simple question and an important acid test. "If a stranger pitched this idea to you, how likely would it be that you'd buy in?"

9. How much funding will the idea need?

Financing has rarely been easy for entrepreneurs, today's tight market makes things even worse. When it comes to specific business ideas, you have to ask yourself "How much money do you truly need to get the business off the ground?” If the idea will take colossal start up funding, it may be more prudent to examine business ideas with lower budgets.

10. Do industry experts hate your idea? Good.

Just because so-called experts hate an idea doesn't mean it's bad. It can often prove to be a good thing. Many companies are so entrenched that they sometimes don’t see change coming until it is too late and may also under estimate the importance of a new innovations. A major example of this was the introduction of the Dyson vacuum cleaner when all other manufacturers did not see the advantage of a vacuum cleaner without bags.

11. Can you pitch your idea as a business in 20 seconds or less?

Quite simply if you cant state and explain why it’s a good business idea in 20 seconds, then more than likely there isn’t a real opportunity.

See the first western blog at http://endacandon.wordpress.com/. Contact Firstwestern at http://www.firstwestern.ie/ or e-mail: Info@firstwestern.ie phone: 071 912 2834 http://ie.linkedin.com/pub/enda-candon/6/839/224