How to Evaluate a New Startup Idea
By: Nicholas Dill
Tags: Startup, Side Hustle, Passive Income, Validation, Ideas

It’s not that hard to come up with an idea. But knowing whether or not you can build a successful business around it is another story. I’ve thought of ideas that seemed bulletproof, so I immediately started building a product thinking it would be a success. I’m sure others have done this as well. Of course, the product was useless because it didn’t help anybody.

How to Evaluate Your Potential Idea.

Save yourself a ton of time and energy by first evaluating your new idea. That means making sure it solves a problem and is something people need.

Step 1: Set goals and expectations.

The most important thing to understand first is what your end goal is. Are you hoping to build the next Facebook, or just start a new side hustle that makes additional income on the side? The first step in your journey should be to figure out what you want. Only then will you be able to validate if your idea makes sense for that goal. In general, it will be much easier to come up with ideas for smaller side hustles than multi-billion dollar hypergrowth companies. Think long and hard about what it is you want and how much time you’re willing to put into this venture. That will help you determine whether your potential ideas are worth pursuing given what you are trying to accomplish.

Step 2: What problem does this idea address?

Startups fail most frequently when they don’t solve a problem and their product doesn’t create value for anyone. Ideally, you come up with ideas by first finding problems you want to address. If your idea is a nice-to-have and not a solution that customers need then it will be extremely difficult to get any real traction and find enough customers to sustain the business.

Every venture I’ve started that has been successful, was so because it solved a problem and helped people. All of my failures simply did not, even though they may have been great ideas on paper. If I had simply asked myself this question before doing anything, I would’ve saved myself a significant amount of time. Before you jump into a new idea, make sure you can answer this question, really well. Make sure your idea solves a real problem.

Step 3: How big is this market?

If you decide that your great idea does indeed address a serious problem people have, the next step is to figure out how many customers you could potentially have. If you have the best solution to a serious pain point, but there are very few people with this pain point then you will ultimately only ever have a handful of customers.

Additionally, this question is really important based on your expectations for your startup. A side hustle might only need a handful of customers to become a nice source of passive income. But if you’re trying to build the next Facebook you’ll need to start looking for a different problem to solve.

Step 4: Is this a problem that people are willing to pay to solve?

So you’ve found a problem, come up with a solution, and you have learned that there are a ton of other people with this problem. Great, but now the most important part is would any of these people hand you money to solve that problem?

You could make the best notetaking app in the world, it solves problems existing apps haven’t addressed yet and lots and lots of people need to take notes. Awesome, right? Well no. Even if you created the best notetaking app in the history of notetaking apps, I would be hesitant to pull out my wallet and fork out any significant cash because there are already so many free options and even though you are addressing problems, these aren’t problems most people would pay for. Your idea could work since it solves problems, but again if people aren’t willing to pay for it you’re going to have a really hard time growing and selling what you have created. The best ideas solve serious problems that people need solutions for. They need these solutions so badly that they are throwing money at you so you can make their lives better. These are the kinds of problems you want to be thinking about. So before jumping straight into your next venture, consider how big of a problem you are solving and whether or not anyone would pay for your solution to that problem.

So you’ve made it this far.

If your idea has been able to survive my gauntlet of questions, then you may indeed have a great opportunity in front of you. But this is just the beginning, and you have very few data points. Now is the time to talk about your idea, and get out there and get outside thoughts and opinions. Feel free to ask friends and family what they think, but keep in mind you won’t get honest feedback.

These few questions can really be the difference between building a product nobody needs, and deciding not to spend another minute on something unless it has potential. Don’t make the same mistake I and so many others have made, and just validate your idea first!