So often people are working hard at the wrong thing. Working on the right thing is probably more important than working hard.Caterina Fale, Founder of Flickr.com. & hunch.com
If you’re thinking of a new business idea or expanding an existing business into a new market, it pays to do some research before you leap.
My research led me to Josh Kaufman’s wonderfully compiled list of Ten ways to evaluate market for your new business idea provide a back-of-the-napkin method you can use to identify the attractiveness of any potential market.
Rate each of the ten factors below on a scale of 0 to 10, where 0 is extremely unattractive and 10 is extremely attractive.
When in doubt, be conservative in your estimate.
How badly do people want or need this right now?
Buying a new luxury car is typically low urgency; vaccine for a new pandemic is high urgency, since you only need it once.
How many people are actively purchasing things like this?
The market for cinema tickets is practically nonexistent; the market for Coronavirus cures is insanely massive, like the whole world population.
What is the highest price a typical purchaser would be willing to spend for a solution?
Lollipops sell for $0.05; aircraft carriers sell for billions.
How easy is it to acquire a new customer? On average, how much will it cost to generate a sale, in both money and effort?
Online delivery shops righ now spend little to bring in new customers. Government contractors can spend millions landing major procurement deals.
How much would it cost to create and deliver the value offered, both in money and effort?
Delivering files via the Internet is almost free; inventing a product and building a factory costs millions.)
How unique is your offer versus competing offerings in the market, and how easy is it for potential competitors to copy you?
There are many hair salons, but very few companies that offer private space travel.
How quickly can you create something to sell?
You can offer to mow a neighbor’s lawn in minutes; opening a bank can take years.
How much will you have to invest before you’re ready to sell?
To be a housekeeper, all you need is a set of inexpensive cleaning products. To mine for gold, you need millions to purchase land and excavating equipment.
Are there related secondary offers that you could also present to purchasing customers?
Customers who purchase razors need shaving cream and extra blades as well; buy a Football, and you won’t need another unless you lose or ware it out.
Once the initial offer has been created, how much additional work will you have to put into it in order to continue selling?
Business consulting requires ongoing work to get paid; a book can be produced once, then sold over and over as is.
When you’re done with your assessment, add up the score. If the score is 50 or below, move on to another idea—there are better places to invest your energy and resources.
If the score is 75 or above, you have a very promising idea—full speed ahead.
Anything between 50 and 75 has the potential to pay the bills, but won’t be a home run without a huge investment of energy and resources, so plan accordingly.