10 Interesting Questions to Evaluate your Startup Idea
We all love good business ideas. Here are 10 questions to test if your startup idea is worth pursuing. You can ask these questions at a very early stage to determine with as little effort as possible whether your idea has potential. Or you can ask these questions at a later stage to fine-tune your idea. In any case, these questions will help you to reflect on your idea and thus reduce the risk of failure of your startup.
1. Can you clearly describe which pain point you are addressing?
Often there are several pain points that can be addressed. However, as a startup you probably only have limited resources. Therefore, it is important that you bundle your resources and concentrate on a single pain point. If you position yourself at a single, clearly defined pain point for a very specific target group as an expert with a great solution, you can beat even seemingly unbeatable competition. If you focus on several pain points, then there will probably be a competitor for each individual pain point who has focused on that one pain point. Therefore you will find it difficult to compete against these specialized competitors.
2. Who has this pain point and as how serious is the pain point perceived?
You must know who your first customers are. For whom the pain point you're addressing is most painful. These customers will also be your first customers. On the other hand, even if a customer suffers a lot from a pain point, but doesn't feel it that way, you will always have to make a big effort to convince that customer. For example, many companies have a large pain point in IT security. But as long as the own company has not been affected by attacks, the perceived pain point remains rather small and insignificant. Immediately after a company is attacked, the perceived pain point is suddenly very significant. Although the actual pain point has not changed, an IT security solution is much easier to sell to a company immediately after an attack.
3. How is the pain point addressed currently?
There are probably direct and indirect competitors. A direct competitor is a competitor that offers the same product as your startup. An indirect competitor is a competitor who does not offer the same product but can solve the same pain point for your target customer. If the pain point is not addressed at all at the moment, you will have a hard time motivating customers for your solution. Ideally, your potential customers are dealing with the pain point every day and have already created their own cumbersome solutions.
4. Are you in a large, growing market?
If you plan to bring investors on board, you should be in a large market. Only a large company in a large market has the potential to multiply the capital invested by investors to the extent anticipated. A fast growing market is also advantageous. The mere fact that you are in a fast growing market should make your startup grow as well.
5. On which dimension is your solution 10 times better than existing solutions?
You do not have to create a product that beats every competitor in every point. But you have to offer the world's best solution for a small group of customers. Therefore you have to point out on which dimension your new product is be significantly better. For example, you could offer a solution that is 10 times faster to use than existing solutions. In that case you will win all customers for whom speed is absolutely crucial. Even though you might not offer as many features as the competition. This is especially true nowadays, where products are easy to discover and to compare thanks to Google, etc.
6. Do you have a viable business model?
Your business model is your plan how your startup should make profit. And even if startups fail for various reasons, in the end most of these reasons can be summarized in one point: The road to a profitable business was not found. Starting with a good idea is of course very important, but too much innovation or bad timing when entering the market may block the road to becoming a profitable business. No customer will pay you for your creativity. If that were the case, you would probably create and sell art. As a startup it is crucial that you solve an important problem for your customers in a cost effective way and that you are paid appropriately.
7. Does your idea has the potential to achieve monopoly status?
Companies with a monopoly position have to potential to make exorbitant profits and are usually well placed to compete. There are several ways in which a monopoly-like position can be achieved.
- Through network effects (Read More)
- Through branding
- Through embedding
- Through economics of scale
8. Is there a cost effective way to reach your customers?
Quite a few startups have failed because ultimately it was very expensive or time-consuming to acquire the right customers. The important point here is that a customer ultimately generates a customer acquisition cost that is significantly lower than the customer lifetime value.
9. Can you build it?
Do you have a team that has the skills to implement your idea? If not, can you put together such a team? In the past, many startups have failed to build a great team, especially in IT.
10. Why is now the right time to realize the idea?
You must assume that no idea is really new. And many ideas have already been tried or have not been tried for a good reason. What has changed that now is the right time to put your idea into practice? The fact that a technology is only available as of today, that a social or legal shift has taken place, are good reasons.