How to evaluate an idea for a Start-Up!

 

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Picture Credit: Slideshares

While many of our clients are businesses that are established and have a single specific issue, we also are frequently asked to get involved with a Start-Up that is still in the conception stage and is being funded by a visionary.

Our assignment usually starts with an initial free consultation to determine if we have the necessary personal chemistry to speak to each other openly and bluntly. It is during that conversation that we also determine what the “Status Quo” is and what service or product the founder envisions. If the founder becomes our client, the next step is to evaluate the viability of the service or product in today’s rapidly changing market.

Prior to having the client spend on market research reports, business plan writing, legal charges for incorporation, black books and other professional services we conduct a review to eliminate the most common reasons that Start-Ups fail in the early stages.We do not believe in templates because most sophisticated investors do not take them seriously.

Is there a market?

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The founder has a very definite opinion about where his product should be targeted. Starting from there, a few hours of internet research will give us an approximate idea if the the market exists, how large it is and if there are related or competitive products or services being offered.

If this research does not rule out the product or service, it is on to the next step.

What are the barriers to entry?

This is another critical component in determining whether or not to proceed. For example, if the product needs to be certified by an independent agency, you are looking at serious time and money.

Also, if you are going up against an old established product you will have issues in getting distribution, a favorable location at Trade Shows and in hiring experienced Sales People that have established contacts with potential customers.

We use the  Michael E. Porter framework from his book   Competitive Advantage   and you can read more about how we use it here: The Fortress.

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The cost of getting to a MVP

Whether or not it is an APP, or a new kind of  CNC Machine  the question is: How do you pay for it?

Usually an intense session with the founder helps us to explore alternatives on how to get to the point where the MVP is financed and exposed to the market.

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Photo Credit: Pocket NC

The Time Line

This is the last step in our preliminary analysis. It will incorporate estimates for fund raising, regulatory approval (if needed), finding a facility and getting the product or service to market. If all these items are doable within a time frame that the founder can live with (and many can’t), we tell the client to proceed.

While our primary mission is to be a strategic sounding board for the founder, if needed we get involved in the details.

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Summary

If you are exploring an idea that could be a business, we can be of help. Start with our free initial consultation and then proceed to where the facts lead you. By approaching things systematically, you reduce your risk of failure and by using our expertise, you will make informed decisions on the many obstacles and road-blocks that will come your way.

Keep the Dream alive!

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