Evaluating Your Business Idea
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Evaluating Your Business Idea

I meet many entrepreneurs with burning ideas and visions for the future. 

Fueled by the knowledge that their product is amazing and the confidence that  everyone they have spoken to about it loves their business idea. Entrepreneurs often get the feeling that if they think it and feel it, it must be a brilliant idea and the perfect opportunity.

It’s true, all great businesses start with a good idea. But that’s just it – a starting point. 

Identifying Your Ideal Customer

Take a step back and look at your idea as if you were an outsider. Evaluate it from a removed, almost dispassionate, perspective to make sure you see all the angles, opportunities and risks associated with it.

Begin by answering the most important question: Who is your customer?

If you don’t have a customer, you don’t have a business. 

And, no – the answer is never everybody.

While it’s true, everyone might buy from you once: A grandmother might buy a skateboard for her grandson one day, but that doesn’t mean you should invest money in advertising skate gear to grandparents to capture that niche market.

This isn’t about deciding who you can sell your product to and who you can’t. It is about identifying your ideal customer and understanding how to focus all your efforts and resources towards them – who will buy your product first, fastest and consistently. 

Once you know your customer profile, or believe you know, who that is – then so many of your other decisions will have much more focus. You will be able to:

  • Decide where to locate your business based on proximity to your target customer.
  • Quantify your immediate and future markets  based on populations of your ideal customer within your starting and future service areas. 
  • Determine which tools or methodsto focus on your marketing efforts .
  • Develop clearer messages to talk to your audience by understanding what’s important to them. 

Developing a Customer Profile

To get this information, you need to first develop a customer profile. This means identifying everything you can about who you believe your ideal customer to be. But remember, keep an open mind, as it might not be who you suspect it to be.

Developing a customer profile is really a market research exercise. You will need to use third-party sources of information to validate the understanding and belief you have about your potential market and  Finddata to support and develop your understanding of your opportunity.The goal is to truly understand and evaluate the need, value and potential of the idea you have. 

Of course there will always be a layer of assessment and interpretation of data, to arrive at your conclusions however,  the more impartial data you can reference to support and develop your conclusions – the less it becomes your opinion and more it becomes something an investor, customer, partner and you can get behind.

What to Include in Your Customer Profile

For Consumers

Demographics: 

  • Identify their age range, gender, marital status, income level, kids / no kids, education
    i.e. a 25-35 year old, college graduate, single male earning $40,000

Psychographics:

  • Personality, opinions, attitudes, aspirations, values, fears, interests, lifestyles, etc. 
    i.e. Healthy, outdoor activity enthusiast, averse to additives in food.

For Business Customers

Demographics: 

  • What age is the business? 
  • How big is the industry?
  • Is the market big or small?

Psychographics: 

  • What will motivate the buyer to buy? Ease of use, low cost, speed, new rules, etc.
  • Remember, people decide on behalf of companies. Their motivations will differ from personal consumers but they still exist.

The more you know about the person who makes the purchase decision – the better you can prepare to target, measure and focus on them. The harder you focus in on your target, the better your return will be.

Not Just for Start-Ups

This researchs is not just a good idea for a start-up business. You should periodically reconsider this analysis as your business grows, market expands and new products are introduced. Your customers are growing an evolving every day – just like your business – do what you can to stay focused on your best customers.

Start Evaluating Your Business Idea Today 

Get that idea swirling around your head out onto paper and start figuring out what you know and what you might need to understand to get a real perspective on your idea. 

Need a helping hand? Download Evaluate Your Business Idea here and use it as a guide to start asking the key questions to understand your business and prepare to chase that opportunity.

Joshua Ludgate headshot

About Joshua Ludgate

Josh Ludgate is a Business Planning Advisor at Small Business BC. He has a background in leading and building technology and telecom start-ups in Vancouver, as well as international roles with Hewlett Packard Financial Services. He applies his diverse and extensive business experience to help clients successfully plan and grow their business.