7 questions you need to ask about your business idea
You've got what you think is a great idea. Time to ask some tough questions
Ideas and building small businesses have increasingly become topics to keep my mind busy at night. I ponder ideas and approaches when I actually should be resting. My previous deep dive into validating ideas was aimed at providing a practical tool and many people loved it for exactly this.
However, I feel like there are some questions left to answer. The deep dive article is too practical to answer high-level questions. I’ve started to wonder: What are the core questions to ask yourself to decide if an idea is right for you? Here’s another article written at 5 am seeking to answer a seemingly simple question: What is the anatomy of a good project idea? What does it look like?
After some nightly thinking, it boiled down to seven points for me:
1. Can I personally build this?
We all love Elon. He and his teams achieved a lot. However, not everyone is cut out to non-stop work 80-hour weeks while doing highly demanding tasks such as writing code, designing and engineering cars & rockets, redesigning the energy grid and convincing the world that all of these are really needed while you are running smart marketing campaigns. For myself, an idea needs to be personally doable.
I’ve set myself a limit to avoid endless extensions and tweaks: I should be able to pull off an MVP in reasonable time with my given knowledge, skills, and financial background. No more than a month including a bit time to launch. After a maximum of three weeks you should put a name on it and ship it!
2. Is it obvious why customers want it?
One of my big learnings from a previous project was quite simple: If you have to explain to your customers or users why they might want to use your project, you have lost from day one. Period. It sounds hard, but it's not a task for an indie hacker to create a market. Leave this to the big players of this world. They have got the budgets to trail-blaze the way. Stick to clear-cut problems you don't have to explain every time you talk about your project.
3. How deep is it?
Some ideas appear simple and straightforward. It is "just a" little tool to do this or that. Sounds great, yet that doesn’t mean it’s a viable business idea. How much value does this provide to the customers at the end? Don’t forget the switching costs. Is it worthwhile for the user to learn a new tool or system to solve this particular issue? If your problem is too small you won't have enough value to deliver making it worthwhile to invest the time to check your solution.
You won't need a lot. If you can find 1,000 people who love what you're doing enough to give you $85 per month, you're already topping $1,000,000! Numbers scale in both directions: more premium (the Apple approach) or more mass-market (the Android market).
4. How big is the ultimate market?
Secondary to the previous question is this do you have enough to extend on? Starting in a small niche is great and makes absolute sense. However, you need something to extend to in the long run - can you extend it from your niche to a broader audience over time or are you ultimately limited to your niche?
Sure, building a service to deliver kitten photos is neat, but does it allow you to extend into more markets in the long run? Are these markets more profitable? Make sure your overall market is worth the time needed to get there.
Bonus: If you want to make your life much easier, aim for a business in a mega trend. Mega trends are fundamental shifts and movements. Think along the lines of global warming, more urbanization to medium-sized cities, remote work, privacy and religion (yes, religion is big business). If you can link your idea into one of these trends you'll have a much bigger and growing market. Growing markets are much easier to address than stagnating or shrinking markets.
5. How will people learn about your product?
Every indie maker dreams about this:
- Launching a project
- It goes viral
That's just not how reality works. By definition, not every project can become a hit. Under regular circumstances, you have to do marketing. Here it helps a lot if your product has a naturally built-in way to market itself.
PayPal had this by sending money via email. Every time someone new got an email with a payment notification, they got to know about the service and most likely become customers. Email as a free channel with a high incentive of receiving money made the decision to sign up very easy - this constructed a marketing flywheel for PayPal.
The best marketing and most fine-tuned user interface will not replace a marketing flywheel as described above.
6. How do you plan to make money?
Free services are awesome, if you aren't providing them. Free means many more users, usually with higher expectations, and low to no revenue. Open Source projects show that donations are a hard path to go down. Freemium is losing its attraction. Monthly subscriptions aren't hot anymore either.
Of course you can try things out and switch your business model, but your customer-base might not go along with it. Free users don't like to start paying for services they got for free before. It is wise to think ahead about how you are planning to monetize your project. While it naturally depends on your idea, often a paid or paid-with-trail approach from day one works best.
7. Do you really want it to exist in the world?
Some ideas seem logical and make absolute sense. They are no-brainers. The first things that jump to mind are services like accounting software, healthcare insurance or Wikipedia. But does this excite you enough to start one, work for a very long time on it? Would this idea make you get up at five am to work on it because you can’t stop thinking about it?
If you hit a clear "yes" here, that’s awesome. If you are in doubt, you might want to consider moving on and wait for the idea that is right for you.
Indie projects and businesses fail and win for various reasons. Answers to the questions above should give you a high-level idea of how to evaluate your ideas. Never forget to validate your ideas properly.