Is Your Business Idea Feasible? A Checklist for Entrepreneurs
Do you watch Shark Tank? If you do, have you ever noticed when an aspiring entrepreneur pitches an idea and you think: “Hmmm, I don’t think that’s a very good idea.” And the next thing you know every shark is saying: “No Deal.” Well, if you’ve ever seen that, imagine how bad it must feel for the entrepreneur to hear those words. With that in mind, we’re going to show you a set of rules many VC firms use when considering an investment. How many check marks does your idea have?
1. Does Your Company Solve A Real Problem?
The greatest sin entrepreneurs make is inventing a solution before solving a problem. We get it, you have the hustle and persistence, but at the end of the day. Are you really helping your customers solve a tough problem? If you can answer with a resounding “yes” then you’re well on your way.
2. What Is Your WHY For Launching This Idea?
Another way to phrase this question is: are you capable of doing this business idea? Simon Sinek is an author who asks one simple question: “Why are you doing this?” The reason is simple. What is your motivation to launch this idea, and will it keep you going when “the going gets tough”? Here’s a sad reality, if you think entrepreneurship is easy then you have it completely wrong. Running a business can be harder than you imagine, and if you want to make it through those rough patches you need a why which deeply motivates you.
3. How Fast Can You Execute?
In the world of business, there’s a simple motto. Execute, Execute, Execute. VC’s need to know how quickly your idea can become a reality. Additionally, they have to trust that you have the chops for pivoting when needed and can make adjustments as the data comes pouring in. The questions to ask are: “Is this an R&D project which will need funding to get the technology just right? Is this idea easily tested by the marketplace? What resources will I need to get my first version going? How long will it take to get my first sale?”
4. Do You Have Competitors In The Market? If So, What Are They Doing?
Business Insider wrote a fascinating article back in 2010 about the overrated myth of “First Mover Advantage.” In the article, he said: “First Mover Advantage — Great Bad Idea” and “Fast Follower – A Better Idea.” In the article, he also cited a study that showed 47% of First Mover Businesses failed and only 8% of Fast Follower Businesses failed over the long term. Here’s why: if you have competitors the solution is validated because there are people who are already paying for that very solution! This is great news for you because now you have an addressable market to sell your product. However there is a caveat, you need to know everything about your competitors because you’ll need to carve out a niche for your business to be successful.
5. Can The Business Be Described Simply?
If you need 2 hours and 100 slides to explain your business idea to somebody then your idea is too complex. People thrive on simplicity, and like the famous quote goes: “If you cannot explain it simply, you don’t understand it well enough.” The rule of thumb is this: If you were in a stadium crowd of your perfect customer audience, what would your businesses headline be to grab their attention? Normally this means concentrating the idea into 25 words or less, breaking it down to its bare essentials. If this is next to impossible for you, it may reveal a fatal flaw in the idea.
6. How Quickly Can You Monetize This Idea?
It’s interesting that the above question isn’t asked by many new entrepreneurs, but it’s the one every venture capitalist investor is thinking about. How quickly will I see my money back? This is where you need to get technical and deeply think through this problem. It’s important to have an accurate runway of your business idea so you can convey to potential investors that choosing your idea is a win-win for all.
The Bottom Line
As an entrepreneur, your dreams probably reach well over the $1 billion mark, and we hope it happens! However, remember that proper planning could mean the difference between a successful business, and an embarrassing failure. Use the above checklist to exponentially increase your chances of hitting a homerun! If you’re working towards being an influential entrepreneur then contact The Tandon Group. We’ve invested in the dozens of high-growth startups in the wireless, consumer, defense, and information technology sectors, across the globe. We’ve had successful exits and helped grow companies to millions of users, and you could be the next shining star.