Five Tips for Evaluating a Business Idea

How to tell if a business idea is strongAt our business, one of the toughest questions we ever face is whether an idea (be it product, venture, etc.) is strong. If it's not, this could lead to lots of lost time, money, and resources.

Over the years, Elsie and I have tried a bunch of different business ventures. We opened a local vintage shop, started a catering business, sold advertising on our blog, launched our own independent (handmade) dress line, collaborated with larger companies on products (like clothing, accessories, camera bags, shoes, etc.), published books, self-published e-courses, and released an app for the iPhone and Android market. All of these business ventures seemed like good ideas to us at the time. Some made a lot of money, some made basically none (or we lost money doing them). Some of these projects we absolutely loved working on, and some turned out not to be what we expected. We've learned a lot over the years, making plenty of mistakes along the way! As we work to grow our little company and attempt to be savvy business ladies, we're still faced with choices all the time on whether a business idea is strong or not. 

Sometimes you can fall head over heels in love with an idea before you evaluate if the idea is strong. This usually makes us really attached to the idea, and it can then be very, very difficult to let it go if it's not the right fit or the right time.

5 Tips for Evaluating a Business Idea:

1. Riskβ€”What do you have to risk in order to make this idea happen?

In my opinion, this should always be your first question that you ask once you've formed your idea. What will it cost to produce? How long will it take to bring this idea to life? Will you have to give something else up? Will you have to add any additional overhead to your business (e.g., will you need to rent space to house the product, build a website, hire an employee, etc.)?

Business is risky. Always. It is pretty much impossible to predict the outcome of any business idea you may have. A big reason for this is because it can be very difficult to predict human behavior (how customers will respond). You could take a survey of all your friends and ask if they think a business idea is good, and 100% of them could say yes (and mean it). But then when you actually take your idea to market it completely flops. Did your survey respondents lie to you?! Probably not. It's more likely they are just like you, unable to guess how they will behave all of the time. If you are the type of person who really doesn't enjoy risk, starting a business is probably not for you.

Assess how risky your idea is. Now, I bet you think I'm gonna say, "If your idea is too risky, it's a bad idea." And you're half correct. πŸ™‚ Risky ideas should be something you try once in a blue moon.They aren't bad, they're just… well, risky. If you have a great idea that isn't very much risk, now that's something you should probably do. Why not? 

2. Audienceβ€”Do you have one? Will your audience love this product?

No matter how awesome your idea is (it could seriously be the next iPhone), if you don't have anyone to sell it to it doesn't really matter. First thing's first. You need an audience/marketplace to take your product to. Think about it. Where do you see your product being sold? Who would love your product? Where are they?

You have two options here. You can take your product to a marketplace, or you can build one where you are. Our blog is kind of like our marketplace. It's filled with readers (like you!) who are interested in all sorts of things: crafts, fashion, photography, food, etc. If we have a strong product, we can develop it and bring it to you. And, fingers crossed, hopefully you'll love it. If you're a blogger, you can (or already did) cultivate your own audience through your site.

What if you don't have a platform? Where can you go? I highly recommend beginning to create a platform, in whatever way you want. But, there are also plenty of marketplaces already out there. A great example is Etsy. If you have a great idea for a handmade product, you should consider joining the Etsy community. It's a ready-made place filled with other handmade-loving customers. People could easily discover you by using the search function on the site, or you might even get featured on the home page or the Etsy blog. This represents a much stronger way of bringing your idea to market rather than creating your own independent website to sell your products (where customers are less likely to stumble upon you). 

3. Demandβ€”Is there space in the market for your product? Could there be a demand for it?

There are many different versions of consumer demand. Some things we buy because we need them (e.g. parents of newborn babies need diapers). Some things we buy because we want them (e.g. big screen television). And some things we buy because we need them AND we like them (e.g. clothes, your favorite brand of bread or favorite vegetable, etc.). Consider where your idea falls. How can you make your idea more in demand? It can be a need, want or full-on luxury, but make sure there is space in the market for it. Is someone else doing something similar? What makes your idea better answer the demand? If the demand doesn't currently exist, can you create it?

4. Sustainabilityβ€”Will this idea work in the long run? Can you sustain the amount of work or cost?

This is an especially tough question to ask yourself sometimes since the future can be so unknown! Think about your idea. Does it rely on very specific resources that might not be available in the near future? Is your idea so time-consuming, from a production standpoint, that you don't know if you'll be able to continue to produce at that level for many years to come (or grow if your idea takes off)?

Can your idea be scaled? Meaning, can it grow without breaking the bank or your back? If you start a catering company, let's say, at what point do you anticipate you'll have so much work that you'd need to hire additional help? Would you be able to afford extra help at that level (meaning you're making enough money to pay someone a fair wage to help and you still are turning a small profit)? If the amount of work has to double or triple before you could afford help, that might not be a good thing. Consider this before you dive headfirst into a business venture, as you could end up burning yourself out quicker than you think.

5. Loveβ€”Do you love the idea? Would you buy this product? How much would you pay for it?

Most people start with this question. And while I wouldn't start here, I do think it's an important one to ask. The truth is, if you wouldn't buy your product or use your service, etc., then what makes you think anyone else will? Good ideas are born out of passion, love, and hard work. If you've already gone through the first four questions but then find that you're not absolutely in love with the idea, it might still be a good idea, just not the right idea for you. Save your resources for your passions. 

xo. Emma

Credits // Author: Emma Chapman, Photography by: Elsie Larson, Emma Chapman, Sarah Rhodes and Float Away Studios.

  • thank you so much for posting this. my favourite part of this blog is when you get personal with us about your business adventures! – Yes, I spelt favourite right – Love from Canada:)

  • These are great tips, starting a business is hard so you guys sure know what you’re talking about. I am pretty risk adverse so even though I have lots of ideas I haven’t (yet) had the drive to follow through. Maybe one day. Thanks again Emma. Zoe

  • Hmm. That’s a really tough question. Some of the products and ventures we’ve done over the years led to other opportunities, while some are so new that they may but I just don’t have that perspective yet.

    Two memories that stick out in my mind are: our very first independent dress line launch and the (first) launch of our IOS app. Both projects were things we work on for a long time (most of a year for the app). Both took a significant amount of investment for us at the time (although the app was quite a bit more expensive). And since both were new ventures for us we didn’t really know how well they would be received. We’ve seen things flop many times and if those two had we really would have been up a creek, if you know what I mean. πŸ™‚ Both were SO well received (the dress line selling out the first night and the app going to #1 the first week) that it was so exciting to watch. Both were moments in my career that I’ll never forget.

    πŸ™‚

    -Emma

  • Thanks for posting/writing this and publishing it today as I really needed to read it. Just in time. Funny how that works. Excellent post!

  • This was such a great read. As I work towards trying to turn aspects of my blog into a full-time business and am in the process of evaluating my options to productize parts of it, this couldn’t have come at a better time. Thank you for sharing your experiences with us.

  • I love that you say “save your resources for your passions”. I feel like there are so many people and companies out there that just do something because it makes them money. Or there is this sentiment that if it isn’t a million dollar idea, it’s not worth it. I think it’s important to find balance in what you love and what is viable. And save your resources until you find it! Thank you Emma for encouraging people to not just try to make money, but to make money doing what they love!

  • I love that you guys occasionally post about small business. Those of us who have watched you grow over the years (and grow and grow and GROW!) love to hear how it happened and what you learned. You are both an inspiration to the entrepreneurial spirit!

  • I really enjoyed reading this post! You bring up many great points, but most of all, risk. I recently started a non-profit called The Tiny Professional, Inc. It is still in its infancy stage but I plan to grow it within the next few years. I realize and am willing to be patient for this growth to happen because I know this is something that I was meant to do. Originally my mission was to give interview-quality, professional business clothing at no charge to economically disadvantaged men and women in the Finger Lakes region. After numerous hours of research, multiple meetings with respected professionals in my community and some budget crunching, I realized that it would be very difficult to open an actual shop to house all the clothes and make rent, utilities and other expenses, on top of trying to work my regular 40 hour-a-week job. The thought of trying to manage the closet seemed impossible, even though the need was there. Eventually I decided that I was going to take a break and possible discover a new mission statement for the organization before I got in over my head. Fortunately, I have, and it doesn’t involve renting space or have set hours that could potentially affect job (that pays that bills). I truly enjoyed reading your post and I wish you both the best of luck in your future business endeavors!

  • Great post, these are such important points to think about when starting a business. It’s so refreshing to see other successful people share their thoughts and steps towards success!

    xo
    Steph
    Concrete Runway

  • The advice about scaling is really important. If you can’t make enough money to support yourself from you working alone, then how easy will it be to recruit others to help you? One of the projects I started was teaching something that not very many people know how to do. I’m teaching as many classes as I possibly can but I can’t grow because I can’t find anyone else good enough to teach. I really wish I had thought about this beforehand! Equally I think having some ideas which get maxim output for every input is really important too – a la digital products which are endlessly reproduceable. One to one is important, but one to many can mean a sustainable business…

  • Thank you! I’m working on an e-course right now that will be for working mamas, it’s something I’m so passionate about but I also want to be very conscious of the business aspect. I think ultimately that will help me produce the best product that will really help with working moms who enroll in the course. Thank you for sharing, love “shop talk”.

  • What a great post! I have a big, bleeding heart for creative entrepreneurs, they are my people. And because I am a serial entrepreneur just like you guys, I know what means to try something that maybe doesn’t work, assess the damage and then get up and try again. One of the big things I’ve learned is to first identify a need, something people are going without, or have limited solutions for, and then come up with a business idea based on that need because I know there is already a proven demand. (assuming of course that I’m passionate about the idea and it’s audience).

    It’s really important when you are getting ready to start a business that you have a plan. It doesn’t need to be a voluminous 50 page business plan with charts and graphs, but more of a road map. Where do you want to do? How much money do you need to get started, and then how much do you need to stay afloat every month? And most importantly How will you reach customers? I see businesses fail all the time, not because the idea or product wasn’t great, but because the owners had no idea how to reach their audience, or who their target customers even are.

    At the end of the day as you said, it takes hard work and passion to make an idea work. You guys have proven that time and time again. You gals are successful because of all the reasons you mentioned in this post, and you are some of the hardest working people I know. I am a huge fan! Keep it up!

  • I love that you picked this topic. I am about to launch a subscription service in May and in order to get the recipe right, it has literally taken me years to work out all the kinks.

    I loved everything you said here, you couldn’t be more right on but, my favorite is love. Do you love your idea? Would you buy it?

    For me, that’s extremely important. I simply can’t write about or sell anything that I would never read or buy myself. Thank you so much for writing this rock star post!

    Love and Luck,

    Laurali Star

    http://www.thesecretsurprisinista.com

  • Thanks! I love your blog and this post! I am definitely thinking about this a lot lately, because I have business idea I would like to start. The biggest hurdle for me is dealing with everyday expenses piling up when the business idea is first starting to grow/get tested in the market. If you have a chance, check out my healthy recipe blog too πŸ™‚
    http://www.healthyfoodcrush.com

    Cheers!

  • I love this post. I have been making candles and selling them on etsy for almost a year and have been really enjoying the process. I am currently brainstorming on how to expand my business. I use a lot of essential oils and know their therapeutic properties (I worked in organic skincare for a long time) and have been making my own beauty products for a while. I am wondering if I should combine my ideas, selling fresh scents and skincare, and this post is helping me evaluate that idea. Thanks again!

  • Thanks so much Emma! I’m currently planning to leave my job as an accountant in a big corporation to start my own, very different (and much more creative) business. I’m hoping to do it in the next year so thank you so much for this!

  • Great post. I am actually meeting with some “makers” this afternoon and will direct them to this article.

  • This is such a helpful post! I am partnering with two of my closest friends to launch a network for creative entrepreneurs and I think this is an awesome read for people just starting out. Thanks for sharing!

  • This post is awesome and came at the perfect time for me! I have an idea – I think a very good one and have not moved forward. Fear of failure maybe?!? Going to move forward and explore your 5 step evaluation!

  • I am currently in the process of a creative business venture and reading posts like this are always great! These sorts of ventures take a LOT of hard work and patience as they don’t happen overnight and stuff like this keeps me going πŸ™‚

  • Thanks so much for sharing your experiences with us. I am the person who has a million idea and doesn’t follow through with most. This was extremely helpful. :))

    xx,
    Tania

  • These are great things to keep in mind. You mostly hear of the winners and its good to be reminded that for every winner there are losers. It takes work, effort and thought to be successful.

  • I really love that you’re spreading the wisdom and lessons of female entrepreneurship! You guys are really inspiring. πŸ™‚

  • I cannot begin to tell you how helpful this post is– for me and many others.

    While taking risks is always a huge part of every business venture, it’s also important to be aware of whether or not it’s practical. I think tips 2-5 should be assessed first and then, based on your answers, you should be able to decide whether or not the risk is worth it. πŸ™‚

    http://buildyourbliss.wordpress.com

  • Thanks! I love your business tips and personal stories about how your business has evolved. I would love to have my own full-time creative business someday and you guys are such an inspiration for making a living doing what you love.

  • Great tips! Thanks. Especially since I hit “publish” on my first Etsy shop this afternoon. (Www.etsy.com/shop/CherryCreekCo)
    I’m happy to see that I actually considered everything you brought up…gives me hope I may actually sell something. Fingers crossed!

  • Thanks for sharing these tips. Which of your business ventures was the most successful concerning time and effort you spent?

  • Thanks for this.

    It is really inspiring how far you both have come. I pretty much read your blog daily for inspiration whilst working my office job wanting to make this leap to a more creative life.

    Here;s to risk!

  • Love this so much! So helpful when you’re at the start of your business journey. I really enjoy these posts, so thank you. A post on scaling and how you scaled up your team would be super interesting!

  • This is really helpful! Thanks for sharing! I really liked how you went through everything from love to risk:)

    xoxo

  • What an interesting read! I love the tips you have shared… I’ve entertained starting a side business to earn a bit of extra money, and this gives me some more ideas to think about πŸ™‚

  • I LOVE <3 <3 your A Beautiful Mess app! I don't know how I would live without out it now πŸ˜‰
    Your are by far my favourite website!
    ~Samantha

  • Such sound advice as always. There’s such a generosity to the words & value you bring to your readers lives, regardless of whether it’s important thoughts on growing a business. A new DIY idea, or even cocktail hour. Thank you for sharing each & every wonderful aspect of your lives & brand!

  • I think demand and sustainability are critical. If it’s going to work for 3 months, then it’s probably not the right product or service.
    Thank you for these posts, your little company is really inspiring!
    Good luck with everything πŸ™‚
    Xo, Belen
    Androbel Insider

  • I want to point out that a big consideration in the “risk” category is the risk to your personal life and relationships. Maybe it will be a great business, but is your family excited to come along for the ride? Will you make money, but lose a friend or even a spouse in the process? As someone going into business with my husband and a friend, I consider and talk about this often! I’m sure you’ve had to work through this process as well being in business with friends and family. It’s wonderful to see you all work together so effectively and watch your business thrive.

  • Hi Emma,
    Soooo funny you post about it, I’m right now where I’m asking myself: do I try or not? I do lot of crafts… many, and so many people told me to do it as a job. But I was true to me: 1rst I knew they told me this but wouldn’t buy it, 2nd I could not only live with a job that may grow. Now I guess I’m ready to try: I’m different that any other (french but definitly in US mood), I have good taste, I love cute BUT useful products, I can work at home, I guess I answer most of your question, just the platform one is tricky as I don’t really want to sell overseas for now.
    Thank you so much for this helpful post.
    XOXO, Lilou from France ^_^

  • I really connected with tip #5. I don’t think I would put enough effort to even move onto consider the other 4 tips if I don’t have the passion for what I’m working on.

    Thank you for the tips! Very helpful:)

  • I love this post. I have dreams and ideas that I’m always considering whether or not will work out — and this helps me evaluate them! Thank you!

  • This was a great piece. Loved it. I am actually thinking or on the road to opening my own business. Absolutely helpful. And all the answers to those questions were positive! πŸ™‚

  • Loved this! It’s easy to say that just because you’re passionate about something everything’s gonna work out for you. But it’s so important to be smart about it! Thanks for the reminder. πŸ™‚

  • Great advice, thank you! I confess I often struggle with the business side of well, my business. I get so caught up in creating that I tune out all the other important aspects like really thinking about my audience and business goals, marketing, investment and risk and such. I admire you so much for combining both the creativity and the business sense!

  • Wow … this is exactly what I needed.
    Since venturing down a new career path and starting my blog this year I have so many different business ideas running through my mind. I focus on one, then change my mind and switch to another. Think I might sit down with all of them and run through this checklist πŸ™‚
    Thanks for sharing,
    Jessie