Five steps to evaluating your business idea

Jun 22, 2020 11:32:01 AM

If you’re ready to take the leap into business, the first step is to evaluate your business idea. 

A careful process can set you up to succeed. At its core, every successful business solves a problem or satisfies a need for their customers. Evaluating your business idea means understanding how your product or service can do this and make a profit. 

Research the competition

Start by getting a good understanding of who else is selling products or services like yours. If you identify businesses who are already doing what you hope to, it’s not always bad – in fact it’s great proof that your idea can work. By studying the existing offerings you can uncover opportunities for improvement or differentiation. Some things to consider when looking at competing products or services are:

  • where are they available 
  • what are costs and quality like 
  • who are the customers 
  • how do customers hear about the business? 

This information will allow you to identify something that sets you apart and makes your offering unique. 

Define your point of difference

Your point of difference is often called a ‘unique selling point’ or USP. Ideally, it’s something customers can’t get anywhere else. It’s the reason they’ll choose your business. Perhaps you have some innovative technology or a special mix of expertise. You could be first to offer a locally-made, sustainable or organic version of an existing product. Many small businesses in New Zealand are based on the personal service of their founder. If you aspire to grow a large-scale business, make sure your unique selling point is something that can be delivered even without your personal touch.

Validate and refine your product or service

Once you understand how you’ll set yourself apart from competitors, it’s time to test the saleability of your product or service. Remember, people liking your idea is not the same as them being prepared to spend money on it. A good way to validate your product or service is to start by selling a simple version of it. You can think of this version as a ‘Minimum viable product’ or MVP. Its purpose is to enable quick testing and improvement of your offering without a huge investment of time, money or resources. A sale is one of the best ways to confirm there are customers and a market for your business.

Evaluate your market and identify your customers

Researching your potential customers is a critical step in validating your business idea. To ensure you can make a sound plan, you need to make projections about how many customers you can count on. It’s good to be as clear as possible about your ideal customer. It helps to keep them in mind when you’re fine-tuning your business offering. The persona of this ‘ideal customer’ can help you in decisions about branding, pricing, location and much more. 

When you’ve confirmed you have a product that people will buy, you’ll need to ensure you can be profitable. A sound business plan is essential. Our blog on creating an effective business plan has practical tips that can help you with this process. 

Get expert help early

Bringing a Mentor on board via Business Mentors New Zealand is invaluable when you’re setting up new business ventures. A mentor can save you time and money, as well as giving you vital insights to help you succeed

Contact us for more information.