5 Questions to Ask to Know If Your Business Idea Is Worth Pursuing

Eureka! You’ve just had a great business idea (or so you think) while you’re at work. But is it really that great and worth pursuing? Don’t worry, these 5 questions will help you better understand your business idea and determine whether it’s worth pursuing.

1. Can you copyright or protect your business model?

Think of your business model as a castle and you need to dig a deep moat around it to protect it. The wider, deeper and with crocodiles in it, the better. And, the moat represents the obstacles you create against competitors who want to directly compete with your business model.

A classic example of a deep moat is a patent, proprietary certificate, or unique information that prevents competitors from copying your business model.

However, if your “castle” lacks a moat, that’s okay. Many product companies have succeeded with little or no moat at all. However, if your company lacks a moat, and you don’t have positive answers to the following questions, consider redesigning your business idea.

2. Does the industry you plan to implement your idea in have many strict regulations?

Strict regulations are better if you are a consumer, because they protect your interests. However, when running a business, regulations are costly and come with a lot of friction.

It’s no coincidence that industries like healthcare and government often lack innovation. In fact, regulations, policies, and bureaucracies are a major deterrent to most entrepreneurs. No entrepreneur would want to enter a market where regulations would eat up their profits.

The easiest way to find out if an industry is heavily regulated is to ask someone who has been in it before. You can also do your own research on government regulations that apply to that industry. And if you find that there are few regulations that directly relate to your industry, you can breathe a sigh of relief.

3. Has this idea been implemented? If so, how have other businesses implemented it?

Generally speaking, there are two types of markets where you can launch your business idea. One is the “blue ocean” – where you have no competitors at all. The other is the “red ocean” – where there are a ton of competitors. Ideally, your company should operate in the “brackish water” – somewhere between the two.

Contrary to popular belief, creating a completely new market can be a bad idea. You will need to educate customers about your product; this means spending a lot on marketing budget as well as having some highly viral tools to reach customers.

Look for potential competitors or companies that were in your market before they moved on or went out of business. If you find one or two that are doing well, and there is still a lot of room for your product or service, that’s a good sign.

4. Are the initial costs to implement your idea large?

It goes without saying that it is best to avoid business ideas that require large startup costs. However, here are a few things to keep in mind:

First, the initial cost of implementing an idea is only a relative measure. Most businesses will need a certain amount of money to start up.

Second, spending a lot of money up front to launch an idea isn't necessarily a bad thing; a large initial cost can help you gain market share faster, thanks to early investments.

Third, high startup costs won't be a problem for low-risk business models; or at least it won't be a huge deal if you're the risk-taking type.

With that said, you need to estimate the cost required to successfully implement your idea before actually doing it.

5. Can you use your expertise to your company's advantage?

Going back to the moat, if you have some rare specialized skills, your business will be in better shape than if you need to learn certain skills that are relevant to the success of the company. However, this does not mean that you do not need to learn new skills when starting a business. The point is that building a business around your strengths will increase the likelihood of success over time.

If you think you need to learn more skills that are necessary for your business to succeed, consider partnering with another founder or hiring some talented employees early on.

Conclusion:Building and growing a business from ideation to IPO is never easy. The vast majority of small businesses fail within 10 years of launching. However, if you take the time to carefully nurture your idea before actually launching it, your chances of success are greatly increased.