Hello, everyone. This is Alejandro Cremades, and today we’re going to be talking about
how to evaluate a business idea. The first thing, when you have a business idea, is all
about identifying the market. How big could this market be? You don’t want to come up
with an idea that could be small operating in a small market because that is also going
to determine the potential outcome, the potential returns to you as the founder of the idea,
and then also the potential returns to the investors that may be backing you on the specific
project that you want to build on. Remember that also for investors, especially
if you’re thinking about doing a hypergrowth because when you come up with an idea, you
either have the idea that is a billion-dollar idea or the idea that is a lifestyle business
idea. If it’s a billion-dollar business, you most
likely are going to need venture capital financing, sophisticated investors that come in and invest
in the business. If it’s a lifestyle idea, you can do it on your own. You don’t need
that, and it’s fine whatever the market is.
But, it’s also important and always important to make sure that the market is big enough
so that you know whatever hard work, sweat, tears that you put into it are actually going
to justify all of the journeys that you’re going to through.
Remember, again, that it’s all about understanding like, what’s the market? Also, what you
can do as part of identifying the market size and also understanding the trends. Maybe there
are some reports, some data out there. One thing that is critical is that you want
to make sure that whatever business idea, in whatever segment that is, you want to make
sure that specific market is right for growth, meaning that you don’t want to enter already
when it’s at its peak. You want to enter when it’s nicely growing, where there is
research, where there are studies that are actually saying that market is going to continue
to increase. That’s essentially the type of market that you want to target.
The next thing is the competition. When it comes to the competition, what you want to
know is who is already operating in the market? Do you have direct competitors? Do you have
indirect competitors? Who has done this before? Remember that you’re never going to be the
first one to do this. Just like people like Mark Cuban say, “There are at least 100
other people that have thought about that same idea that you’re having.”
So, what you want to know is, what did they do? Did anyone succeed? If they succeed, how
great or how big of a business have they been able to build? Have they raised any money?
That’s also going to tell you whether it makes sense for you to go at it or not or
whether there’s nothing you can do because they’re going to crush you, given the money
and the resources that they may have. That’s something that you really want to
get clear on is, who has done this before, and if they did it or if they tried or if
they fail, you want to try to understand and determine why. What happened? I think what
you want to do at the end of the day is, you want to go at it and do it better and faster
than anyone else that is either actively doing it or that have tried.
The next part of evaluating if a business idea has legs or not is really doing some
analysis. For part of the analysis, what you want to do is, you want to get some qualitative
data and quantitative data. Quantitative data, you can probably get it from surveys, from
doing a lot of surveys like from people and trying to get their responses and see what
kind of data, what kind of information you’re receiving from that.
The other thing is the qualitative data or qualitative analysis that you could do. Basically,
there, what you are doing is getting on the phone with people, meeting people in person,
and giving them certain types of questions that they would answer, so that is going to
lead you to believe what’s the direction and how is the market and your potential target
audience, how they are thinking about that idea that you got.
The last part is, you want to conduct a financial analysis. As part of the financial analysis,
what you want to know is, how much is that going to cost you? Is it going to be super
expensive? Are you going to be able to afford to bootstrap it and finance it your own way?
Or, are you going to need investors, what kinds of investors are going to need to come?
How much money is it going to require to validate? But at the end of the day, what you want to
do, and now we live in a world where you can do this, is that you want to make sure that
you can validate that business idea as fast as possible. Don’t try to put something
beautiful out there. Just put something that is functional. You can start receiving some
feedback, some data of those people you are looking to target.
With that being said, the last thing is to make sure that you hit the comment section
below. Make sure that you subscribe; that you also like this video, and also don’t
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you so much for watching.