3 key questions for the first test of your busines idea

Do not start too complicated to assess the feasibility of your business idea.

Update: Feb 21, 2024 Siert Bruins

If you have an idea for a startup, it is essential to evaluate its feasibility before turning it into a real business. Simply having an idea is not enough, as ideas cannot be sold. The first step in building a successful company is coming up with a brilliant business idea. This can be an invention that will be the basis of a new product or service. You do not need higher education or specifc skills and expertise for testing your business idea. Although, the most successful business ideas are typically developed by individuals with relevant experience who understand the needs of the customer, the market, and the technological capabilities required to create a successful business concept.

Just a note about the fact that you can't sell an idea alone. That's true because an idea is an abstract thing. However, what you can do if you don't have the time or intention to start a business yourself, or if you don't consider yourself a good entrepreneur, is to try to develop the idea as far as you think is necessary and then sell the idea to a company. Learn here how to sell your idea to a company.

Nevertheless, developing a business idea does not necessarily require prior entrepreneurial experience. There are examples of revolutionary concepts that have been developed by novices, such as Steve Jobs and Steve Wozniak, the founders of Apple. It is important to note that having a brilliant idea alone is not enough to attract investors. It must also be clear, concise, and convincing, with a well-defined target market and revenue stream.

Investors are primarily interested in the potential for profitability, not just a great idea. Therefore, it is essential to invest time in developing a complete business idea captured in a business model before presenting it to investors. A business plan can come later. To sum up, the dream of a successful startup requires hard work and preparation to turn a brilliant idea into a profitable business.

Conducting a Feasibility Study for Your Business Idea

Before launching a startup, it is essential to evaluate the feasibility of your business idea. Begin by asking yourself some relevant questions to roughly test the feasibility of your product. Consider factors such as the feasibility of the technology and product, whether existing technologies can be combined, whether the technology can be protected, and whether there are competing products on the market. Additionally, consider questions related to your team, estimated costs, and selling prices. Answering these questions as best as possible will help assess the feasibility of your idea step by step. Don't be afraid to share your idea with friends, experts, and potential clients to get feedback.

This process should lead to a rough description of your business idea, which can be packaged as a business model to attract investors or grant providers. Start with simple questions and gradually become more detailed to figure out more things that need to be answered. Be honest in your answers and avoid making it sound like advertising text. Once the feasibility study is satisfactory, you can proceed with a step-by-step plan for launching your startup.

Feasibility Study part 1: The Product

What problem does your product solve? The success of any product in the market depends on how well it satisfies customer needs. Therefore, it is important to clearly identify the problem your product solves, whether it is a product or a service.

Remember to focus on the customer's problem rather than the technical details of the product. Instead of saying, for example, "Our product uses infrared laser technology to achieve 15% more accurate measurements, requiring fewer checks," emphasize the benefit to the customer. For instance, you could say, "Our product saves 10% of your time and 25% of your costs with faster and more reliable measurements."

It is crucial to communicate the benefits of your product in concrete terms, such as faster, lighter, safer, smaller, simpler, more reliable, or easier to use.

High-tech companies often struggle to attract enough customers due to the failure to clearly communicate the benefits of their new technology. This is often because they focus too much on the technical details and underestimate the importance of communicating the solution to the customer's problem or need. It is important to conduct thorough preliminary work to clearly identify the customer's problem or need and to communicate how your product can solve it. Avoid the temptation to rely solely on slick powerpoint presentations and instead focus on communicating the benefits of your product to your potential customers.

Feasibility Study part 2: Market Analysis

Does your idea have a market? A business idea is only valuable if there are customers willing to buy it. Therefore, demonstrate that there is a market for your product or service and identify the primary target group and approximate size of the customer base. Explain why this target group is interested in your product or service, also known as the addressable market. A detailed market analysis is not necessary at this stage, but you should explain how you arrived at the presented market size.

Feasibility Study part 3: What is the Business Model

How will your business make money? In other words, who will pay for your product or service and why? Generally, money is made by selling products to customers, but sometimes the business model can be more complex. For example, printers are often sold at a low price or even given away for free, but the ink cartridges are where the profit is made. Don't just explain how money will be made, but also provide an estimate of the revenue. To do this, you should already have an idea of the addressable market, the selling price of the product, and how many customers in the addressable market will buy your product or service.

Below is a clear list of concrete questions that you should be able to answer after you have been working on the above key questions:

1. Who is your target customer?
2. Why would a customer buy your product or service?
3. What is innovative about your idea?
4. Why is your product or service better than similar offerings?
5. How unique is your idea? Is it patentable?
6. What is the cost price and selling price of your product or service?
7. What is the competitive advantage of your new venture, and why can competitors not easily replicate it?

If you can answer these questions and still feel good about your business idea, you can start with a step-by-step plan for the startup, which is outlined below.

Step 1: Assessing Originality

Before launching a startup, it is essential to investigate whether your idea is novel, and if others are already working on or have worked on a similar concept. The novelty of your idea is crucial for a successful patent application, and you don't want to waste time and energy pursuing a concept that already exists. Therefore, start by documenting your idea, outlining what is new about it, and conducting online research and a novelty search. You can outsource this task to experts, and for more information about patents, visit our patent pages.

Step 2: Assessing Feasibility

In this stage, you evaluate the feasibility of your project, considering the technology and end-product development, and assessing the commercial potential of your idea. While it is not necessary to map the entire market, you should determine whether your product is sellable and generate sufficient turnover. This step is critical, especially in a high-tech startup, as inventors may overlook the importance of identifying their target customers.

Step 3: Developing the Business Model

The business model is a further elaboration of your business idea, outlining what you will do, who your customers are, how much capital you will need to market your product, and how you will earn back the invested capital.

Step 4: Demonstrating Proof of Concept

Ideas alone have no value; hence, it is essential to demonstrate that your idea works. After proving the novelty and feasibility of your concept, you need to demonstrate how it works. This step is named Proof of Concept, where you aim to interest potential investors by providing them with a basic prototype, determining the cost of delivering Proof of Concept as accurately as possible, and accessing subsidies or credits.

Step 5: Building a Great Team

In this final step, you focus on forming a good team to increase your startup's success rate. Investors believe that 80% of a startup's success rate is determined by the quality of the team. Thus, before approaching investors for funding, ensure that you have an experienced entrepreneur and a good team to help turn your idea into a successful business venture.