Introduction
Having worked for tech and biotechnology startup companies, I’ve learned that it’s very important to have a quick and general framework for evaluating product and business ideas. Evaluation is critical because it can save you so much time working on product that no one will want to use or buy at a viable price.
This framework is by no means comprehensive, but provides some highlights you’ll want to hit on your product idea evaluation journey.
Note: To ensure your product ideas can find a market, it’s important to work backwards from the customer problem. To get an idea on how to do this, I recommend reading up on Amazon’s PRFAQ and working backwards process.
Step 1: Define the Problems
Start by brainstorming a list of business problems. This list can come from friends, family, your professional network or your own personal experiences.
Another great source for business problems is reading. Sources for niche and general problems can come from journals like SSRN or other more specialized publications. Journals can also be a great way to learn about the latest technologies which can spark ideas on problems to be solved. An example of this is when Larry Ellison and colleagues were inspired by a research paper on relational databases to eventually found Oracle to solve customer data storage and management problems.
You need to ensure you are capturing the core of the problem, specifically the answers to the questions:
- What is the problem?
- Who has the problem?
- Why should this problem be solved?
You don’t have to spend a great deal of time on the solution to the problem yet, but you should have a rough idea on possible solutions and technical feasability.
Step 2: Filter the Problems
Now that you have a list, it’s important to do some initial filtering based on:
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Enthusiasm - How compelling is the problem? One good rule of thumb that Paul Graham advises is to ask your self - “Is this something I think is cool? Are users going to think it’s cool?” Toss the problem if you or your potential users don’t find the problem or solution compelling.
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Expertise - Do you have the business acumen or expertise to create a solution to solve the problem? You don’t always need to be a subject matter expert (SME) in the particular area, but you should be able to hire people with this expertise, if required. My favorite example of this is the story of Ramon van Meer, a person with no knowledge of soap operas who entirely outsourced the writing on his site SoapHub.
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Technical feasablity - Is there a solution to the problem that can be created that’s actually technical feasible? Again, if you are not a SME, you’ll need to consult with one to determine the technical feasability.
Step 3: Market Research
With an initial round of filtering, it’s important to evaluate the market potential for your ideas. Specifically, for each idea you need to research:
- Total addressable market (TAM)
- Product development costs
- Business model or strategy
- Revenue sources
- Future product or growth opportunities
- Current solutions (if any) and why yours is better
Given you’re dealing with raw numbers, it’d probably be best to organize in a spreadsheet.
With the above information in hand, you will have a better idea about which one of your ideas will be a viable business.
Step 4: Develop Customer Acquisition Plan
The most difficult part of creating a product and a business around it is the customer acquisition. You’ll need to have a plan in place for acquiring your first customers. This will give you an idea on your customer acquisition cost and can inform how much funding or time you’ll need to cross the chasm and become a viable business.
After this exercise, you should be able to calculate your customer acquisition cost and have a better idea of your costs/liabilities versus the projected revenue. You’ll want to narrow down the idea or toss it altogether if the acquistion cost is too high.
Step 5: Development Roadmap
With viability of the business assessed, you can move into creating a product development roadmap, which will give you an idea on how much time and cost it will take to develop a MVP, including alpha and beta stages. If you’re looking to outsource the work, sites like upwork can give you a rough idea on development costs, whether the work required involves content or software.
Step 6: Validate Your Ideas
There are several ways to validate your solution and ideas:
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Create mockups - If your product has an interface, create a mockup. If it’s a physical product, try prototyping or modeling it. If it’s a website, try creating wireframes with products like Balsamiq or Whimsical.
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Talk to potential customers - Try showing your mockups or pitch your idea to potential customers. Their feedback can be invaluable for updating the trajectory of your solution.
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Create a landing page - Using a no-code solution like webflow, create a quick landing page with an email sign-up. Be sure to use an attractive template and clearly state your product value proposition. It’s probably useful to include formal designs of your mockups. The landing page will help give you an idea of how much customer interest there is based on the traffic to your site. Be sure to install an analytics framework like Google Analytics, which will help generate useful metrics (such as email list sign ups or time as spent on the site) to help you gauge interest.
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Post to creator sites - Sites like IndieHackers or Kern.al are great ways to get quick feedback and to discover if there are other solutions out there that are similar to yours. Include your landing page, if you created one. Surprisingly, I’ve found feedback for more technologically advanced solutions in the biotechnology space.
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Create an ad - Create a Facebook or Google Ad to drive users to your landing page. Spending the money upfront on the ad will help you get your idea in front of more of your target users and help validate your ideas faster.
Wrap Up
I hope this gives you a quick framework for evaluating your startup business ideas. It’s incredibly important to do this evaluation work up front as it’ll stop you from going down a business development path that leads to an unfortunate dead end.