How To Analyze A New Business Idea

In: Uncategorized By: Brian Armstrong

9 Dec 2008

You probably hear good business ideas on a regular basis. But how do you know if they’ll be right for you?

Here is a quick checklist I like to go through to analyze a new business idea and decide if it’s right for me.

Would it solve a real problem or am I fixing something that isn’t broken?
Could I be the best in the world at it (at least in this niche)?
Will it be inexpensive and quick to test out in case it doesn’t work? (remember, 9 out of 10 of your ideas probably won’t work, and that’s great – it’s the only way to succeed – just try to do it fast and cheap)
Am I passionate enough to make it through the dip or will I lose interest in six months?

Regarding #2, I usually just Google it to check out the competition. Keep in mind that people can become very comfortable with their old, regular way of doing something. There is a cost to them of switching to your new service. Even if yours is a little bit better they still have to spend their time and brain power learning a new system and taking the risk that it might not work for them. They might not even think to LOOK for an alternative if their current system is “good enough”.

So you can’t just be a little bit better – a prettier color scheme for example. You have to be “enough better” that it’s worth it for them to switch. The best situation you can find is one where most people hate the only available solution, and are actively searching for an alternative.

This is the case with accounting software like Quicken and Quickbooks, for example.

6 Responses

Home Based Business

December 10th, 2008 at 1:58 am

Home Based Business Blog is a great resource of information for those looking to start a Home Based Business or seasoned veterans of creating your own home based business.

Caroline

December 10th, 2008 at 9:32 am

You should always take the time to do your research, whilst you may think you have the latest thing since sliced bread an impartial person will be able to give you a fresh perspective.

Brian Armstrong

December 10th, 2008 at 11:56 am

That’s true Caroline. What’s funny is that I often see people ask others for their opinion of a business idea, and then when it isn’t what they wanted to hear they get defensive and argue with the person about it!

It’s not easy, but just taking their reaction as feedback is valuable. If one person reacts that way, chances are others will too.

Matt Thomas

December 21st, 2008 at 1:34 am

Brian,
Interesting post. However, I slightly disagree with point # 1. With ever-improving technology, it is possible there is a very valuable opportunity (ie: cost savings) that isn’t that apparent because everyone is used to the status quo. It may take someone to recognize a better way of doing something that could be game-changing to the industry. So the problem might not be apparent until you can offer a product or service significantly cheaper than everyone else since you have discovered a more efficient way of doing something.

Brian Armstrong

January 3rd, 2009 at 8:01 pm

I think you’re right. Being significantly cheaper can be a workable benefit.

Breaking Free

How To Analyze A New Business Idea

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