August 16, 2005
Ideas are a dime a dozen - which ones should be pursued?
The business idea selection process we're undergoing with The Business Experiment reminds me of some thinking I did on idea assessment while doing my MBA, in particular the need to have a framework for assessing qualitative information (which is pretty much all you have at an early stage).
Time is a crucial factor to any entrepreneur or investor. Success depends on the ability to quickly make decisions about which opportunities warrant further exploration.
I've started four small businesses, and frequently take time to flesh out thoughts that occur to me in the course of other activities. I desperately needed a way to assess ideas quickly and decide whether to fish or cut bait.
I made the development of such an analytical framework a secondary goal of my business planning process. Over the next little while, I'll be posting a series of entries outlining the assessment criteria and methods that I've adopted for my own purposes.
Overview
In the early stages of opportunity analysis, qualitative factors and gut reactions are crucial counterparts to any financial analysis that is pursued. In most cases, these factors should be given more weight, especially when dealing with projections prepared by those seeking financing. Much advice given to entrepreneurs pushes towards financials built from the bottom line up, resulting in projections that serve only to support the desired outcome without necessarily being grounded in fact.
While larger-scale ventures may be operating with more resources and experience than in the micro-business environment, the same problems are inherent to the process. In order to succeed, entrepreneurs must doggedly pursue their objective in the face of naysayers and fear-mongers, overcoming adversity through sheer determination and belief in their idea and their ability to see it through to completion. Although this trait is mostly positive, it's unlikely to lead to reliable financial projections.
The criteria I use to assess business ideas are listed below. Each of these will be discussed in a separate post in this series.
Assessment criteria
- Demand
- Competition
- Profitability
- Value Proposition
- Fit
- Deal Breakers
Posted by kenking at August 16, 2005 07:46 AM
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