4 Ways to Evaluate Your New Business Idea
Maybe you have a brilliant idea for a business that could transform the world. Or perhaps you just really, really think you can improve on an existing concept. If you're ready to launch a business, good for you. But before you jump, it's important to realize that lack of market need is the top reason new businesses fail.1 So no matter how brilliant your entrepreneurial idea appears, it's wise to do extensive research to explore its viability.
Here are four ways to vet your business idea before you invest a dime.
1. Start with online research
You have the whole world at your fingertips — so why not make use of it? By conducting online research, you can find out if similar businesses already exist in your area, what they're doing right that you can emulate, and what they're doing not-so-right that might offer a fantastic opportunity.
Here are some places to start your research:
- Search “[your business idea]" and “[your city]" to see what's already there. For example, if you're looking to start a catering company in Atlanta, search “top catering companies" or “event planning companies" and “Atlanta area" to check out your potential competition — and identify a particular niche you might be able to fill.
- Peruse Small Business Snapshot Reports,2 which are organized around a wide variety of small business concepts, from pet products to automotive accessories. Alternatively, you can use this Census Business Builder tool3 on the U.S. Census Bureau website to access reports on your potential customers based on the population in a select area.
- Read customer reviews of existing businesses to eavesdrop on real-life rants and raves. Check on Yelp, Amazon, TripAdvisor — or wherever your potential competition is garnering feedback. Knowing what customers are saying, and how the business is responding, can be highly informative.
- Find LinkedIn or Facebook groups for your industry to ask questions and view discussions on trends and issues.
While a direct competitor might not give away all their secrets, a complementary business owner might be willing to share intel on the local market.
2. Talk to your ideal customer
Hopefully you've identified your target market, and now is the time to dive into their pain points and frustrations with existing services. For example, if you're intending to open a new coffee shop with a play space, talk to local parents or PTA groups about what they might like to see — from healthy food options to a “no sick kids" policy. Ask their opinion on what they like and don't like about current options, and then test their interest on various ideas you have.
3. Talk to existing businesses
While a direct competitor might not give away all their secrets, a complementary business owner might be willing to share intel on the local market. For example, if you're starting out as a home stager, a local real estate agent might be willing to point you in the direction of the hottest neighborhoods.
Or if you have a localized business idea — say a tree-trimming business in Birmingham — ask to do a ride-along with a successful clipper in Montgomery or Atlanta to learn more about their best practices.
4. Seek counsel from an established resource
Finding a mentor — someone who understands the industry you're trying to break into or the customer base you're trying to serve — can help you objectively evaluate your business idea.4 Since they have deep experience with closely related businesses or customers, the right mentor can help identify reasons that something may not work as you had expected — perhaps because of regulations or other unforeseen issues. Alternatively, they might have some insights into why your business idea is just what the market needs.
It's possible that a mentor will present themselves easily. You could connect with someone who runs a complementary business near you, or perhaps you could find someone who has a similar business that serves a different demographic.
If you can't locate a mentor on your own, try locating one through SCORE,5 a nonprofit resource partner of the U.S. Small Business Administration (SBA). They'll connect you with a volunteer business expert who can provide advice via email, video chat, or an in-person meeting. Finding someone who has taken a business idea to market can give you insight into how to best evaluate yours.
Whichever path you choose, be sure to brush up on how to make the most of a mentor relationship before sitting down to that first cup of coffee.6
Think you have a viable business idea? Come talk with a banker at Synovus. Our local bankers have their finger on the pulse of the community and are happy to share their knowledge with you. They can also walk through the numbers with you — and help you determine which loans and banking services will help your small business start off right.
Important Disclosure Information
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
- CB Insights, “The Top 20 Reasons Startups Fail," published February 2, 2018, accessed August 4, 2019. Back
- SBDCNet, “Small Business Snapshot Reports," accessed August 4, 2019. Back
- United States Census Bureau, “Census Business Builder," accessed August 4, 2019. Back
- Matt D'Angelo “How to Find a Mentor," Business News Daily, published November 4, 2018. Accessed August 4, 2019. Back
- SCORE, “Find a Mentor," accessed August 4, 2019. Back
- Laurence Bradford, "8 Tips for an Amazing Mentor Relationship," published January 31, 2018. Accessed August 6, 2019. Back
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