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How to evaluate your new start up business idea

Business Idea new start up

Nothing beats the excitement of a new start up business. Lot of people worldwide are dreaming about being the owner of their own business using their own business idea. Those entrepreneurs take the decision to skip the regular 9 to 5 job and start their own route as a new start up.

Once you take the decision, you have to invest some time in evaluating the business idea you have. If needed, you may invest some extra time to develop it. Actually, No one can guarantee the future success or failure of any business. However, a good business idea has a better chance and higher probability to succeed. Moreover, a good business idea is only the beginning. Ideas cannot succeed without the proper Strategy, planning, implementation and management. You may read our article about How to build a business strategy.

To make it clear, to have a successful business and a good business idea, you have to provide something new, and you can achieve that “New” in several ways:

New Business Idea

iphone-Business Idea

That is in case you are providing a totally new product (or service).

An example was the first appear of IPhone. Although it was not the first mobile phone, it was the first new smartphone with multi touch screen and other interesting features. It invaded the market with almost no competition for months until other companies joined the competition.

Another example is when Netflix entered the market of video rent. Market was based on physical stores where customers select movies from the titles available on the shelves. Then, Netflix provided a new service by allowing customer to select movies using their online website. Moreover, they added a recommendation system to suggest movies according to the customer preferences and history. Previously, Netflix used to send movies to customers through mail. Later, customer watch movies online.

The advantage here is you have the whole market for yourself with no competition. That will be a temporarily advantage before someone appears with a competing product or service. Disadvantage is that you take the whole risk as well. You invade the market without having measures about the customer perception for your product.

New features

samsung- business idea

It is not necessary to provide a very new product or service. Actually, in most cases, that is not the case. A common technique is to study the existing product or service. Then, you come up with your product that provides new features to existing products, and that can be a winning business idea.

For example, when IPhone appeared, several companies studies this product. Then, they invaded the market with new smartphones with extra features such as larger screens, dual sim cards, and Bluetooth connection. As a result, they managed to get a significant market share.

 

New Process

flowchart- business ideaMaybe the innovation is not in the final product you provide. It can be internally in the process behind this product. Assume you have a small factory for fashion accessories. While competitors use traditional machines, you could automate the production process using efficient robots. Accordingly, you reduced the costs and availed your products to the market with a competitive price without reducing your profit margin.

Another example is when Dell appeared with its just-in-time (JIT) strategy. At that time, other computer manufacturers used to produce huge number of units then keep it in the inventory until they are sold. Dell process was receiving request from the customer with his specific requirements. Then, produce the unit and send it to customer. That reduced the cost of inventory and the cost of loss due to producing unsold units. Moreover, it allowed the customer to get a unit that meets his exact requirements.

 

New Segment

PSA - business idea

Sometimes your innovation is about finding new market segments for an existing product.

An example is the low-cost airlines that appeared in the mid of previous century. Previously, airlines used to target a specific segment that can afford the flight tickets. Then, Pacific Southwest Airlines appeared with a new operations model that focuses on providing the basic service without the extras like food, priority boarding, seat allocating, and baggage, etc.  that resulted in attracting new market segments. Later, many low-cost airlines appeared. They have same aircrafts as the traditional airlines, and they operate from same airports. However, they attract different market segments.

New Location

Map - business idea

Imagine a new residential district where people have to move for adjacent districts to buy their needs. Maybe you can consider opening an ordinary grocery store in there. While a grocery store is not a new business idea, this geographic location needs it. Therefore, the store will be be new for this specific district.

This case is somehow close to the first point we mention above ”New Business Idea”. Starting business in a new geographic location will give you the advantage of having the whole market without competition. However, this is a temporary state because someone else will appear and compete with you.

 

High Demand

Crowd - Business idea

Sometimes, you can succeed only by imitating existing business. This is valid if the demand is very high compared with the existing supply. Assume a crowded residential district with only one car-care center. Therefore, there is always a long line of cars waiting for their turn.  If you open a new car-care center, you will get enough customers to run a successful business. Simply, it is not a new business idea. it is just a supply-demand balance.

Problem is relying only on high demand is not wise because Supply – Demand relation can easily change by time. If new players entered the market, the competition will tough and you may lose your market share.

 

Brief

team think - business idea

In brief, entering the market as a new start up requires a business idea that has a competitive edge. That requires providing something new to the world. So, we are talking about creativity & innovation here. Otherwise, you will go to price wars with competitors and you may either lose the game or just achieve little profits.

You may read the story behind Nola Cupcakes