You have a business idea, and your gut tells you you’re onto a winner.
You’ve had other ideas before, but this one has legs.
Maybe you’ve been sitting on this idea for a while, or perhaps it’s a recent lightbulb moment. Either way, you can visualise it all. Customers browsing your stylish yet functional website, you dressed in a swanky suit shaking hands with investors, happy customers furiously typing rave reviews online, you standing proudly in front a trendy shop front, you throwing piles of cash in the air like autumn leaves…
The fact is, we all get emotionally attached to our ideas.
Your vision is often the best case scenario. In reality it often turns out no-one is quite as excited (or willing to cough up money) as you hoped they’d be.
So before you go any further, you need to take a step back and examine your idea in the harsh light of day. Flesh it out, critique it, pick it to pieces. Make sure that it’s worth your time, energy and money.
These 50+ questions will help you objectively challenge and validate your business idea to determine if it truly has profit potential.
Your Business Idea
- What will you do? – Define your product or service as succinctly as you can.
- What problem will you solve? – What is the problem your product will solve, or the unmet need that your customer has? How does your product solve this?
- What are the key features of your product? – Features are the characteristics of your product or service, such as the size, quality, materials, functions, services provided and delivery. Are these the features people actually want?
- What are the key benefits for your customers? – Benefits are what your customer gets out of your product and it’s features. Examples include convenience, making life easier, saving time or money, social status, or peace of mind. Are they benefits that people will actually pay for?
- What makes your product unique? – What features or benefits will you offer that no-one else does. What do you that’s new, or better, or cheaper?
- Can you communicate all this in a concise and compelling way? - A great idea is useless if it’s too hard to explain. Will you be able to communicate your product and it’s benefits effectively? In a paragraph? In a tweet? In a headline?
- Who will benefit from your product? – Describe your typical customer or client. How will they use your product, and how will they benefit from it?
- What are the demographics of your target market? – List factors such as age, gender, location, occupation, income level. education, family status, attitudes and beliefs, interests and hobbies.
- What are their buying habits? – Are they price sensitive? Will they research their purchase or make a fast decision? Will they compare your product against competitors? Do they need lots of hand-holding before they make a buying decision? How will you cater to these factors?
- What is the size of the market? – This can be tricky, but try to find some data to gauge the number of potential buyers in the market. You might try to find recent sales stats from competitors’ websites or industry analysis articles. If you have a local business, start with your local population and then narrow down to your target market.
- What percentage of the market would you need to capture to have enough customers to reach your profit targets? – You should know how much profit you will make per sale, and how many sales you need for your business to be financially viable. What percentage of the market does this number of sales equate to? Is this realistically achievable compared to competitor’s market shares?
- Who has tried to solve this problem before? – Why did they succeed or fail? – Research those who have gone before you. Can you replicate their success factors? Can you avoid their failures?
- Who are your current competitors? – You’ll need to know them inside out in order to compete with them. Look for their strengths and weaknesses in their products, location, price, branding, customer service, website, and reputation.
- What other substitute products exist? – These are different products that fulfil the same need as your product. For example if you run a personal training business, substitutes for a customer who wants to exercise would include gyms, group fitness programs, mobile phone fitness apps, home gym equipment and team sports club. If your customer wants to lose weight, their substitutes might also include diet programs, health foods and weight loss pills. These substitutes are all your competition. How easily can customers switch between substitutes? How will you convince them to stay with yours?
- What is your competitive advantage? – Competitive advantage comes from creating a product either with superior features or benefits, or at a lower cost than competitors.
- Why will people choose you over your competitors? – How will you communicate to customers the reasons why they should choose your product.
- Will you offer one product or a range? - What choice will your customers have? Multiple price points will help you reach a wider range of buyers. Services can be packaged into multiple tiers to provide options for clients. We do this on our own pricing page.
- What will it cost to produce? How long will it take? – If you will sell a physical product, you must know exactly what it will cost to source or manufacture. Timing will be critical to ensure your customers will have a reasonable turnaround time for their order, and you can manage inventory easily.
- Does your product require packaging? – What will it look like? Who will supply it? Who will actually do the packaging? Have you factored this into your costings?
- What level of customer service will you provide? – This is an important decision as customer service can be costly and take up a lot of your time. However for many products it’s essential for winning customers.
- How will you price your product? – Setting your prices is difficult. You will need to cover your costs and earn a reasonable income. But your price also must be set at a level your customers are willing to pay. Research the prices of competitors and substitute products to ensure you’re on track.
- What legal structure will you need to set up? – Different structures have pros, cons and costs. Make sure you choose the right one for you, and budget for the setup and ongoing costs. You can learn more in our business structures article.
- How will your customers order from you? – Will they purchase online, or submit orders by email? How will you process these? Will you have software to help you? How will you keep track of your orders or work, to make sure you’re serving your customers in a timely fashion?
- If yours is a physical product, how will it be manufactured? – Do you have a manufacturer lined up? Have you considered issues such as cost, turnaround time, materials, quality control, faults, and freight?
- Will you be dependant on any key suppliers? – Can you negotiate favourable terms? What would happen if your supplier had delays or went out of business? Do you have a backup plan? A business model is risky if it depends too much on someone else’s business.
- How will your product reach your client? – Freight and logistics can make or break your customer’s experience, as well as adding to your costs. Keep in mind many online businesses these days offer free shipping. Check your competitors to see whether you should too.
- How will your clients pay? – How will you invoice your customers? What payment methods will you need to offer? Will you need to chase unpaid invoices? Debtors can be a huge drain on small business’s cash flow, and unpaid debtors can break your business. If you’ll invoice clients after you do work for them, consider these issues carefully and make sure you have sufficient working capital to cover slow paying customers.
- Where will you be located? – Will you be convenient to your customers? If you will need a workshop, retail or office space, how much will this cost, both to lease and to fit out? How long will your lease commitment be? Can you afford this even if your business doesn’t perform as well as expected?
- What licences and permits will you need to obtain? – consider council permits, safe food handling and RSA licences, workplace safety requirements, police checks, working with children checks, and industry specific registrations.
- What insurances will you need? – These may include public liability, building and contents, professional indemnity, vehicle or equipment insurance and workcover insurance.
- How will you manage your bookkeeping and accounts? – Many small businesses fail because they’re overwhelmed by keeping their accounts up to date, or they fall behind in their tax lodgments and can’t pay their tax debts. If numbers aren’t your forte, factor in the cost of a bookkeeper from day one. If you don’t have the diligence to stick to your tax obligations, reconsider whether you should go into business.
- What is your business name? Your tagline? – You’ll need a name that is memorable, unique and easy to spell. Check that both the name itself and the domain name are available (our business names article tells you how). Your tagline will then need to communicate the benefits you provide in one clear and catchy sentence.
- How will you brand your business? – Your business needs a brand with personality, in order to connect with prospective customers. This includes your logo, colour scheme, the tone of your advertising, the look of your website, and how you bring your own personality into your marketing.
- How will you reach your target market? – You’ll need to work out the best channels to reach your target market where they ‘hang out’. These might include your website, social media, newspaper advertising, email marketing, flyers, posters and many more possibilities.
- Do you understand modern marketing concepts, such as content marketing and SEO? – There’s a big learning curve in effectively marketing a business today. If online marketing is new to you, are you prepared to take a course or tackle extensive reading to learn the ropes?
- Are you prepared to spend good chunks of time on social media and writing blog posts? - Content marketing is a huge part of being found by potential customers. This involves writing blog posts, guest articles and social media posts, and it can take up a lot of your time.
- How will you build an email list? – Another major part of online marketing, you’ll need to build an email list to directly market to prospective customers. You’ll need software to manage this (we suggest Mailchimp) and ideally a freebie, like an ebook, checklist or other useful bonus to give away in exchange for signups.
- Does your product entail repeat purchases? – If so, how will you encourage repeat purchases? Consider how you can capture your customers details, communicate regularly and provide incentives to create loyal repeat customers.
- What will the business cost to set up? – Our article on business setup costs will help you work this out.
- How will you finance this cost? – Will you need a loan or extra funding? Or do you have enough in savings for both the setup and ongoing costs? Will you be eligible for finance? How will you meet the repayments while the business is still growing?
- Will you need staff? – How many staff will you need? What specific skills will be required? How will you find them? Make sure understand all of your obligations as an employer, including payroll, PAYG Withholding, superannuation, workcover and award and contract obligations.
- What equipment and capital assets will you need to buy or lease? – Have you budgeted for all equipment, vehicles, computers, furniture and other capital assets you’ll need, plus any maintenance and running costs?
- How long can you afford to pay your living expenses for while the business develops? – Will you be relying on savings or will you have other income streams while setting up your business? If the business takes twice as long to get off the ground as you’d hoped, could you still manage?
- What are your personal objectives? - Whether you’re looking for independence, flexibility, a sense of ownership or financial reward, make sure that the realities of business line up with your own goals.
- What skills and attributes do you have that will help you succeed? – These might include skills and experience in your industry, sales skills, people skills, or business acumen.
- What weaknesses will you need to improve or manage? – Identify your business knowledge gaps in areas such as marketing and bookkeeping, and think about doing courses or outsourcing what you’re not good at. Also consider any personality traits you may need to work on, like time management, discipline, or confidence in networking.
- Do you have leadership skills? – A natural part of business growth is hiring staff. You’ll need to learn to train new staff, delegate tasks, manage workflow, motivate employees and give feedback.
- Are you unafraid not just to advertise, but to shout your message from the rooftops? – There’s no room for shrinking violets in the competitive business world. Are you prepared to promote yourself and your business to anyone and everyone?
- Do you have the time to commit to the business? – The time investment in a new business can be as big as the financial one. Are you willing to sacrifice your free time, and time with family and friends?
- Do you have people around you to offer advice, encouragement and emotional support? - You’ll need a solid support network behind you, especially when things get stressful. Seek out a mentor for business guidance, and be sure family and friends understand and support any sacrifices you’ll need to make.
- Are you prepared for the uncertainty and stress of running your own business? – Are you comfortable with unpredictability, both in your work and your income? Can you cope with stress, pressure, deadlines and long hours?
- Are you the kind of person who can stay positive in the face of challenges and failure? - Resilience is hugely important in business. Are you easily discouraged? Can you take criticism? Are you able to treat failure as a learning experience and keep moving forwards?
- What is your worst case scenario if the business fails? – Starting a business is a risk, and it’s important to know the consequences if it fails. This is especially true if you’ll be borrowing to start up your business. Could your home or personal assets be at risk? Could you end up bankrupt? How likely are these, and what can you do to minimise the risks?
- How do these factors stack up against the security and stability of working as an employee? - This may be the most important question of all. Are you certain that the long hours, constant stress, and financial instability of starting a business weigh up against the potential rewards? Are you sure that its all worth it compared to the stability of being an employee?
- Are you excited, motivated, resilient, driven, and burning to succeed? – These are the traits that will ultimately determine your success!
If at this point you’re feeling like you’re on the right track, it’s time to ramp your testing up to the next level:
- Write a full business plan – This can be time consuming, but it will force you to research and examine in detail the feasibility of your business idea. The good news is, if you wrote down your answers to the questions above, you’re already halfway there. These are the exact issues you’ll need to flesh out in a business plan. Business.gov.au have a great business plan template and guide to help.
- Conduct market research – Survey or chat to as many people as you can. Explain your business idea and gather their thoughts. Try to stick to your target market; family and friends don’t count!
- Run a small-scale test - Can you launch a scaled down version of your business first? If you’re making goods, start by selling them at a market. If you’re starting a service business, get some trial clients first. Create a very simple website before spending big on a professionally designed one. Build a simple prototype. In business-speak, this concept is called a Minimum Viable Product. It lets you test for demand and seek feedback from customers with minimal cash outlay. The Lean Startup is a highly regarded book on the topic if you’d like to learn more. Start creating your MVP and put your idea to the test.
Ultimately, putting your business idea through the wringer is an essential first step. Not only does it confirm that your idea is worth your time and money, but it also gives you confidence. Some day in the future, when the going’s tough, you’re tearing your hair out and asking “why am I doing this??!”, you’ll be able to take comfort in your testing and validation, and feel reassured you’re on the right path.