3 Questions I Ask When Evaluating Business Ideas

I've learned from many business ideas I've evaluated over the years that coming up with a good idea is straightforward. The hard part is knowing how to assess it—and having the right mindset when doing so. Here are three questions I ask myself before investing any time or money into an idea:

1. What problem is the idea trying to solve?
2. Is it a growing problem with a large enough market
3. Are customers willing to pay for your solution?

1) What problem is the idea trying to solve?

To evaluate a business idea, it's important to have an idea of what the problem is. If you don't clearly understand the problem and its causes, your solution will be neither effective nor sustainable.

To begin with, ask yourself: What is the problem being solved? What specifically is wrong with the current state of affairs? Is there a problem, or do people think there's one because they've never been exposed to anything else? How would someone describe this situation or experience in their own words?

You should also ask yourself what kind of value proposition your idea offers as a solution. This can be anything from lowering costs for customers (automating administrative tasks), increasing revenue for businesses (optimizing the supply chain for greater efficiency), or helping customers save time/make more money/get better results (Using targeted marketing to reduce customer acquisition cost).

In addition to these tangible benefits, there are intangible benefits like pride in ownership over something created from scratch instead of bought off-the-shelf like most other products on the market today!

2) Is it a growing problem with a large enough market?

The second question I ask when evaluating business ideas is whether the problem being addressed is growing. If you're trying to solve a problem that's not growing, it will be hard to scale your business, but if your business idea aims to solve a common issue that is only becoming more prevalent as time goes on, then there's reason to be optimistic about its future prospects.

In addition to asking if the problem itself is growing, it's essential to push yourself further and ask if there's ample room for growth in the overall market potential of your idea. Here are a few market research tools to review trends (CB insights) and estimate the market size (US Sensus bureau, Ibisworld, Forrester). You can use trade publications (National Retail Foundation NRF) for specific data per segment.

3) Are customers willing to pay for your solution?

The third question is the most important one of all. It’s not about whether you can build it or have the right team to build it. It’s about whether people will pay for your solution.

The first step in answering this question is understanding who will buy from you and why. The more specific and clear this understanding is, the better off you'll find funding or partners interested in working with your company.

You must understand what problem you’re solving for your target market and how much they are willing to pay for that solution. You must understand who your competitors are, not just from an external perspective but also internally within the company (e.g., if a competitor starts offering similar products/services at a lower cost). You need to know what kind of business model makes sense for this idea to be viable enough as a company that can make money over time—and how much funding we need.

Finally, consider what price point would work best given their budgeting constraints and willingness to pay versus other options on the market today. Pricing can be a powerful tool for your market research, and it should be value-based (value of the problem you are solving) and not cost-based (how much it costs you to provide the product or service).

"In reality, customers are the gatekeepers of the startup world. If your product can get and retain customers, Investors (including YC) will give you money." Michael Seibel - Managing Director & Partner at YC

Conclusion: Coming up with a business idea is easy; knowing how to evaluate it (from every angle) is what matters.

Coming up with a business idea is straightforward. What's hard is knowing how to evaluate it (from every angle).

Understanding the market and the problem you are solving is vital. So is understanding your customers, their willingness to pay for your solution, and the competition. You also want to know your specific business model in detail. This includes how you will make money and how much capital you'll need to grow over time. Finally, there's team building: what kind of people do you need to make it happen? (This will be covered in the future). I hope this article has given you some insight into how I evaluate business ideas and, more importantly, how to think about evaluating them yourself. Please leave a comment if you have additional questions or thoughts!

"Genius is in the idea. Impact, however, comes from action.” Simon Sinek

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About me: Dr. Nadia Boutaoui, Ph.D., MBA (Healthcare)

I am a?scientist, innovator, and entrepreneur. I have?a Ph.D. in Genetics, an Executive MBA in healthcare, and I am certified in Tech Innovation and Entrepreneurship (Tie). I am the founder and CEO of NanoNares, a startup developing tools to improve drug development for respiratory diseases. As a primary caregiver & entrepreneur, I am all about clarity & efficiency.

I did research at Harvard Medical School and Directed a research laboratory in the genetics of respiratory diseases at the University of Pittsburgh. I managed multi-million NIH-funded grants, co-authored over 34 peer-reviewed research papers, and trained?many clinicians & researchers.

I am a business coach to healthcare tech startups and building a community to support women entrepreneurs. Be the first to know when our “women entrepreneurs in healthcare tech” membership open. Grow your business by being part of like-minded women entrepreneurs. Join the waitlist