How do I know if it's a good idea?

 

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If you're anything like me you'll have a new idea for making money about every 4 or 5 days, most of these are absolute rubbish and don't get past my crazy idea filter.  There can be a number of reasons why they would get filtered out;

  • It's illegal.
  • The idea is simply impossible, I'm thinking supersonic flying cars here.
  • I don't want to do it, or have no real interest in the idea.

​My next trigger point tends to be the idea repeating itself, if I have the same idea, or a similar idea again and again it's time to start exploring further. The big question is how do you tell if it is a good idea or not? Probably the first thing I do is suggest the idea to my wife, my long suffering wife – this is almost like a finer version of the filter above. My filter is like a colander, Becky's is more like a fine sieve. This does mean I have to explain the idea, which in itself is a good way of starting to evaluate if the idea is any good or not. Can I sum it up into a sentence, a short paragraph, do I actually understand the idea myself? If I can't explain my idea to someone else I probably haven't quite understood it myself, so talking to others about my idea[1] is important. This needs to be someone who can be critical of my idea, I want them to challenge it and query it, to ask me questions so I can start to refine – I try not to get frustrated if they have reservations. Quite often Becky will throw up something I hadn't considered. This may mean it's time to bin the idea, or I may need to think through the idea a little further.

My next step is to think about how it will make money for me this is key. I'll start to jot down revenue and costs. This process starts to throw up questions, some of these may be quite easy to answer, such as how much a premises will cost. Some are a lot more difficult, such as how big is the market, who will buy the product (until I know this it's really hard to even have a guess about how much revenue I can bring in). So I go through a process of writing down what I know, guessing what I don't (but being aware that I'm guessing) and then seeing if the money side of it adds up. I am very aware that this is NOT the way most people look at ideas, and if you google business ideas evaluation the finance is normally one of the last things on the list to be looked at! This is my Blog, and this is how I approach it – entrepreneurs are allowed to do things differently!

Yes, I said I would put in some guesses, things like IF my customers will pay £3 for a coffee and IF I have 200 customers per day I will make X amount of profit. I've done this with a few ideas and you end up with things like IF my customers will pay £10 for a coffee and I have 10, 000 customers per day I'll make a profit, now unless you are opening a coffee shop at the world's busiest airport and you have exclusivity on refreshments this is not going to work. So I may just trash the idea at this point, it might be a great idea, but as a business it's not worth my time investing in the research required for the next stage.

The next stage is where I start to really invest some time on justifying the guesses I made earlier. This involves proper market research, this may be what's known as secondary research such as Mintel reports (available from the university library for free!), trade journals and trade websites, it very much depends on the idea and what information I need. The second part would be back to talking to people again, potential customers, and similar businesses. My aim here is to question everything I put in as guesses earlier, and also to double check all the other assumptions I made. To look at the example above, say I did get the exclusive rights to refreshments at Heathrow are the £10 and 10,000 realistic? How much do you pay for a coffee at Gatwick? How many people pass through the terminal? Can I get access to Cardiff Airport and sit and count how many people buy a coffee?

By this point I've started to invest a fair bit of time into the project, and more importantly I should have started to bring together all the information needed for a business plan, but writing one of those is a whole different kettle of fish.


[1] Be aware of Intellectual Property before talking to anyone, especially if you have an invention which may be able to be patented.


Blog post by Steve Aicheler, Entrepreneurship Officer
November 2015