Are you wondering if your app idea is a good one? Or do you want to start a business but are worried it won’t succeed?
Take it easy! You can relax now!
I am here to help.
In this post, I will show you how you can evaluate any app or business idea just like a professional venture capitalist – with hard work, research, and good old-fashioned intuition.
I am here to take you through the entire process of how to evaluate your app or business idea and help you get started with your business on your own.
Evaluating your idea ensures you’re focusing your energy and capital on a viable business idea, a way to mitigate risk.
Why is this so important, you may ask?
Well, this may sound brutal, but many people are emotionally driven toward ideas and refuse to listen to bits of advice on their idea concept and often glaze right over the foundational principles of a strong statement.
And if you’re considering quitting a job and allowing your and your family’s financial security to take a hit, you need to be sure it’s stable.
But please, keep in mind that while these questions may poke holes in your current idea, it doesn’t mean the topic, industry, or general thought is wrong — many decent ideas can turn into great ones with slight pivots.
And heads up, almost every app pivots in some form or fashion during the journey from idea to market, as part of finding a solid product-market fit.
If any of these questions poke a hole through your idea, think about how you can iterate on yours to solve that issue.
So, here it is, a step by step guide that will help you evaluate your app or business idea.
- Does it solve a problem?
- Will people pay for it?
- What is your price point?
- Is there a sizable niche market for it?
- Are you passionate enough about it?
- Have you tested your idea?
- Are you open to idea feedback?
- How will you market your business?
- How well can you explain your idea?
1. Does it solve a problem?
The first question you need to ask yourself when trying to evaluate your app or business idea is whether your idea solves a practical problem. If there is a problem that affects you, your friends, family, co-workers, etc., then chances are it affects people you don’t know as well.
For example, let’s think about car mechanics.
A car mechanic’s pain point that they might have is to need one staff member to do all the admin stuff. For ex., if somebody wants to pick/schedule a service or when somebody needs an invoice. They usually need to manage all that side by themselves.
So that’s a pain point, right? Because that’s a cost. And because that is a cost, they could improve their margin by not having the member of staff, reducing the member of staff in terms of hours, or helping their members focus on customer experience.
Another potential pain point is that there could be bookings. So as a user, I don’t want to fill up a car garage to book an appointment. If the website doesn’t have a way to understand when I can book a service, then I might be somebody who picks with someone else.
So there’s a sort of pain point of potential loss of business.
So in this example, you can see mechanic.io (which is what I’m calling this fantastic venture) I’m getting this idea eight out of 10. For the question, Does it solve a pain point? Completely subjective.
So, is it a good idea to build a platform/software that would help car mechanics solve their pain points?
Definitely, yes. But that doesn’t mean you should stop now with the evaluating process.
Take time to make sure your idea isn’t already solved by someone else. If it is, write down how your business would solve it better.
2. Will people pay for it?
An idea is just an idea until you have a paying customer attached to it. Anyone can discredit a simple idea, but no one can discredit paying customers.
That is why before you continue on the next steps in this guide on how to evaluate your app or business idea, it’s crucial to answer if people will pay for your solution.
Because you need to have an idea that can make revenue.
So, if you’re solving a pain point that currently is costing money, for example, in the mechanic.IO idea.
If we assume the garage has five employees, from whom, one admin member of staff.
If I can “remove” the admin member of staff, I’m saving quite a bit of money for that garage. So will they pay for a solution? Yes, I think so.
Or I might help reduce the number of hours that they do.
Will they pay for it still? I think so, yes.
3. What is your price point?
Once you have determined that you are solving a legitimate problem in a scalable way, you need to determine not only the value that it delivers to the world but also what people would pay for that value. Once you choose the price, you can assess if your solution is business-worthy. That will also serve as your base number to educate your conversion and business modelling equations.
4. Is there a sizable niche market for it?
Start by focusing on a niche market you know that you can serve best. Make sure the market is large enough and that you can help those customers better than their alternatives.
A good way to assess market size is to look at the size of the sector you’re targeting (e.g. Utilities). That information should be easy to find on Google (Mintel reports, for ex.).
Also, look to see if you can find information on a sub-segment of your sector (e.g. Insurance > Pet Insurance) and size up that market the best you can. For example, if your target niche is smaller than “Pet insurance” and perhaps focuses on the “internet of things device that gathers data on dogs for insurance purposes”, then you need to make an assumption on what percentage of the market that is and state that: “Based on our analysis of the market size, Pet Insurance is $5bn annually and our target segment is $100m in year one but has the potential to grow into a $1bn market segment in year five due to this industry trend” etc..
Those are all assumptions, but as long as you can explain your rationale, you’ll be fine.
Large companies won’t focus on niche markets, so there is room to compete and exceed customer expectations in those spaces as well.
5. Are you passionate enough about it?
Your business will likely take up all your time, so before continuing in the next steps in this guide on how to evaluate your app or business idea, save yourself time and make sure you’re passionate enough about it to make it successful!
6. Have you tested your idea?
Test it — not just with friends who will be too polite, to tell the truth, but with honest members of your ideal target audience, and then listen to the feedback. That is the primary purpose of the prototype you will build, but you can test the idea now by talking people through it and measuring their reactions. Keep a spreadsheet of their comments and use that to improve your idea. Try to have at least 5-10 conversations with people, and if you don’t know anyone, then interact in online community forums or stop by businesses in person. You’ll surprise how many people are willing to talk if you’re polite.
7. Are you open to idea feedback?
If you’re not open to changing or adapting your idea to fit what your customers want, your business idea might not be worth pursuing. You may need to take a step back and think about whether you want to become a successful entrepreneur. Successful entrepreneurs are willing to listen and consider market feedback. That is a fundamental skill you must acquire that makes or breaks most entrepreneurs.
8. How will you market your business?
Building the app is only the beginning. Many entrepreneurs fail to think past the build and onto their market approach and target custom acquisition strategy. If you have a great product but no idea how to reach potential customers, it will be tough to make it successful. Thinking about these strategies early on will help you shape your app to fit your customer audience and marketing strategy, resulting in a more powerful launch.
How is your business different from others in the marketplace? If you have competitors, what will make somebody come to your business instead of your competitor? Get specific here. Successful businesses have a USP or unique selling point that is used as a cornerstone to refer to again and again.
What do I mean by a USP?
Here are some examples (in my own words, not specifically how those companies would describe them!):
1. Tesla: electric car with enough range to actually be used as your day to day car.
2. Snapchat: it WAS a clear USP – images that disappear once viewed – now a communication platform with stories (copied time and again).
3. Uber: hail a cab right now from wherever you are from your phone (copied many times).
As I put in (brackets), some of those have been copied over the years. Those companies launched with a strong USP, and if you cannot patent your concept then people will imitate. But having that first-mover advantage has put each of those three companies into a leading position that’s hard to supersede.
10. How well can you explain your idea?
And last but not least, the final step in this guide on how to evaluate your app or business idea, is how well you can actually explain your idea.
Continuing this train of thought, your business may solve a complicated problem, but you should be able to explain it in simple terms so that anyone can understand it.
It’s all about having simple straplines (bylines), which can be in this format:
[Name]: the [Comparable app] of [your industry]… Company X: the Uber of Massage, or, Company Y: the Airbnb of Sports Equipment, or, Company Z: the Shazam of Plant Identification.
It may sound cheesy or overused, but I bet you knew exactly what each of those apps would be and would do just by reading each strapline!
Another, less cheesy way to do it is to highlight the USP in a short snappy sentence, something like “Lyft: a ride whenever you need one”. That can take some time to perfect, but the game’s name is a clear and short strapline!
A few final tips on how to evaluate your app or business idea:
- For your first venture, consider avoiding the “blue sky/no one has ever done this” and go make something average better and more affordable. Innovate instead of revolutionize.
- Always do a “Gut Check.” How do you feel at your core?
- Squeeze more out of an already successful idea that someone launched. Lyft is a perfect example here. Even though it was launched years after Uber, they’ve been able to capture a sizable market share through great customer service and culture (certainly vs what seems to be a poor culture at Uber!)
- The best ideas are flexible.
- Keep an eye on trends and personalise them to your target audience. New tech angles can be a great way to iterate.
- Create a simple financial model around your idea to see if it is financially viable.
Once you’ve thought through these questions and collected feedback from a few close sources, I’d refine your idea again (if needed) and then use the questionnaire as an asset for business contact networking (typeform.com is great for this). People loved being asked for their opinions on things (but not being sold to!). Identify a few potential business contacts and send it out! You never know what kinds of doors will open.
I hope this article on how to evaluate your app or business idea was helpful in determining whether your idea will work out.
If you’ve followed the steps properly, and are still excited about your app or business idea, then congratulations! You have made the first steps in realizing your idea. You now have a solid enough foundation to move forward with raising capital and finding investors.