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How to Easily Evaluate your Startup Idea - pART 2 |
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Submitted by gO bIG nETWORK
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After you listen to about a hundred startup company pitches you start to notice that they all sink or swim on just a few basic points. Given enough time, you don’t even need to know what the product is. Instead you just start asking whether or not the entrepreneur has the right answer to a handful of questions that validate just about any start up idea.
This isn’t about having a sixth sense about the success or failure of a potential business idea. No one has that, not even the investors sitting across from you pretending like they do. This is about boiling your start up idea down to the few principles that make all the difference in the world. So here they are, in order of importance.
Revenue Model
There are many conflicting schools of thought on what it means to have a revenue model for your business. Some people will say that with enough customers you can eventually make the numbers work. Others will say that if you grow quickly enough you can get acquired long before you ever have to worry about making money.
Both schools are rarely right, and the exceptions only prove that there are exceptions. “We’re going to sell to Google” isn’t a revenue model any more than “I’m going to win the Powerball Lottery” is a full-time career move.
Your revenue model should be simple – someone is willing to pay for what you offer. Whether they pay for it indirectly through advertising or directly through a purchase, there has to be a sustainable and readily identifiable revenue model.
More importantly, it has to be a profit model. I can sell dollar bills for 99 cents and generate tons of revenue, but will certainly guarantee that the company will go bankrupt. The only companies allowed to exist without a profit model are charities and major airlines.
If you Figure all that out, Let’s Take a Look at the Product
The last order of business, which may sound bizarre, is the Product Plan itself. That’s because if the product doesn’t solve a customer’s problem that you can make money on, it just doesn’t matter what the product is.
In many cases you can test the market for your product against the three previous points by simply doing some basic research. Long before you actually build a product, you can ask customers if they’d buy it. You can start to figure out how difficult and costly it might be to acquire more of them. You can also get a sense for what you could sell your product for and get a basic understanding of whether you could do it profitably.
When you’ve got answers to all of these questions, then, and only then, it’s time to go build a company. Until, then, keeping asking questions.
Wil Schroter is the Founder and CEO of the Go BIG Network, the largest network of startup companies and entrepreneurs at www.goBIGnetwork.com. He is also the author of the new book “Go BIG or Go HOME”.
Click for Details --> Startup Ideas - Part 1 <--
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LinkedIn Recommendation:
 Karin Carros - Social Media Manager at General Forge and Foundry - I am working with Teo on an relationship management system (RMS) to allow my sales staff and customers to interact through my website. He always comes up with the right questions to make me think through the process and always has great ideas on how the system can handle them. For any RMS project, you can't go wrong with Teo. - March 19, 2012, Karin was Teo's client |
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