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How to Assess Business Ideas & Find the Most Promising Opportunities

HOw TO ASSESS BUSINESS IDEAS, TOSS OUT ONES THAT WON'T WORK, AND FOCUS ON DEVELOPING A WELL-CONCEIVED CRAFT BUSINESS IDEA WITH A REAL CHANCE FOR SUCCESS.

If you're a creative type, I'm going to bet that you have plenty of ideas. You probably have ten new ideas for your craft business before breakfast.

The problem with ideas, though, is they always appear lovely, compelling and exciting on the surface. We often fall in love at first sight with our ideas. But as a solopreneur, you only have time to pursue a few of your very best ideas.

It's necessary to assess business ideas - to really understand them, and challenge them before falling in love with them - before committing precious time and financial resources to bring them to fruition.

I've been through the process myself and, as a career coach, helped clients through the process of assessing life-changing ideas many times. It really is quite liberating to look at an idea, examine it from all sides and determine if it is truly as bright, shiny and promising as it appears on first glance.

Ask yourself questions like:

  • How does this idea fit with my goals and values?
  • Can I make this idea work with my current resources?
  • Does this idea have a real chance for success?

Once you've been through that process, you can either dive in with deeper knowledge about how to execute our idea. Or, you can let it go without regret, knowing the idea wasn't right for you or your business.

There  is an enormous amount of information I could share, so over the course of three articles, I'm going to boil it down to some key elements that are most relevant to craft business owners.

If you're interested in a more in-depth exploration of your creative business ideas, you'll find that in my course, The Best Craft Business for You.

THIS FIRST ARTICLE WILL COVER THE INITIAL PHASES INCLUDING:

CLARIFY YOUR IDEA(S)

  • Why you really should have multiple ideas
  • Summarize your ideas
  • Look for problems

EXAMINE RISK VERSUS REWARD

  • Determine the potential reward if your idea is successful
  • Determine the potential risk if your idea is not successful
  • Weigh the risk versus the reward
  • Specific risk / reward considerations for craft businesses
  • Look for problems again

and finally...

CLARIFY YOUR IDEA(S) IN MORE DETAIL

CLARIFY YOUR IDEA(S)

WHY YOU REALLY SHOULD HAVE MULTIPLE IDEAS

Ideally, you will come to this process with more than one idea in mind.

Why?

If you only have one idea, you risk falling in love with that idea. You don't leave yourself with any other option when you only have one idea, so you run the risk of hanging on to that idea even if evidence shows that it might not be the best option for your business.

You need to be ready to scrap an idea if you discover a deal-breaker problem with your concept. It's easier to let go of one option if you have other possibilities in mind.

Step one, then, is to get yourself into a mindset in which you are not in love with your ideas, and you are willing to scrap one of them if you discover a fatal flaw that has no real solution.

SUMMARIZE YOUR IDEAS

You need to understand your ideas fully, so you can assess them effectively. When we first come up with ideas they are not fully formed. We have a general impression of how something might work, but, until we think through the idea systematically, we lack necessary details and information.

Writing a summary of each of your business ideas will help you develop the clarity you need to make more informed decisions..

Brainstorm what the product is, and note the special features or benefits of the product. Answer questions like:

  • How you will make the item?
  • What raw materials and tools will you require?
  • Do you have access to those raw materials and tools, or will you need to source out and purchase them?
  • What skills will you require to develop your product idea?
  • Do you have those skills, or will you need to invest some time and possibly money developing those skills?
  • Who is your target customer?

You don't need to do a huge amount of research at this point. For the most part, you can just brainstorm based on what you already know.

If you need to do a quick search for something like the cost of a raw material you use, that's fine, but don't get mired in research right away. You don't have to find the best supplier with the best terms, for example. Get ballpark numbers that are close enough to allow you to make smart decisions. Work on developing an overview, so you can clarify in your mind what it is you are considering.

Look for PRoblems

Now look for problems, both solvable ones and deal-breakers.

It might feel early to start looking for problems, but really, it's better to find problems early on, before you've invested a lot of time and money into developing an idea. Looking for problems early will help you solve them and make your product better. If the problem turns out to be an unsolvable fatal flaw, you'll be able to move forward to a more viable idea.

Do you notice anything that would be problematic with your product? Consider your resources. Do you have the time, money, and skill required to develop your idea? Do you have any concerns about selling your product to your target market?

Make note of any problems, and red flag any ideas that have problems that are of real concern to you. You'll need to decide if these problems are deal breakers - something you simply cannot overcome with the resources you have available, or if they are solvable opportunities to make your product better.

ASSESS POTENTIAL RISKs AND REWARDs FOR YOUR BUSINESS IDEA

ASSESS THE POTENTIAL REWARDS

We often think about assessing the risk of taking on a project, but do we ever think about carefully assessing the potential for reward? In assessing the reward, you're asking yourself how much your business could reasonably benefit from the development of your product idea.

That kind of assessment will help you decide if the project is worth your time, or if you'd be better off spending your time pursuing another project. As a solopreneur, your time is almost certainly your most scarce and precious commodity. You need to use it well.

Ask yourself:

  • How much income can I expect to make from a product?
  • How much will I make per customer?
  • How many customers will I likely have?
  • Does my idea encourage repeat customers?

This information can be VERY tough to know, especially if you are just starting out. You might have to use your best educated guess.

If you have an established business, you'll likely have a better sense. For example, if you have your own website, or an Etsy shop, you might have an idea how many items you typically sell in a given time frame or based on a certain number of visitors to your site. Or if you've sold at craft shows before, you might have a good idea how much you typically make depending on the attendance numbers at the show.

Often, for new business owners, this assessment comes down to making an educated guess, but it really is helpful to think through the reward potential.

Assess The Potential Risk

Here come the big questions you need to ask yourself before developing an idea. Consider:

  • How much might you lose if the product is not a success?
  • What is the likelihood of not succeeding?

Consider the amount of money you will need to spend to develop the product. How much income will you need to invest in raw materials, tools, skill development, marketing opportunities...

Consider loss of time when you consider risk. Your time is worth something. Give yourself a specific dollar per hour rate and determine the approximate amount of time you'd spend in activities like product development, production, sourcing materials, skill development. Think about time you'll spend developing and creating the product, launching, marketing, providing customer care... All of that time carries value.

Defining high risk vs. low risk

There are actually specific mathematical formulas you can use for assessing risk and reward. I debated whether to include them but decided against it because they can get complex and also because often, when you're just starting out in a craft business, you simply don't have the information you need to make then numbers particularly accurate.

So, instead of formulas, we're looking at risk on a more general, broader scale, trying to get a good grip on potential reward as well as potential risk, and then weighing these factors against each other.

You might be wondering how to define high risk, versus low risk. That definition will be different for each person. The amount of time and money you can afford to risk on developing an idea will depend entirely on your own personal and financial realities. Would you be devastated if a project didn't work out, or would you be able to look at it as a learning experience and move forward? 

Drawing that line of acceptable risk will be something you'll need to decide for yourself.

WEIGH THE RISKS VERSUS REWARDS

Looking at the notes you made about the rewards and risks of each idea, consider the following:

If something is lower risk:

  • It's easier to give it a shot. You don't have much to lose

If it is higher risk:

  • The potential reward should be high as well to balance the risk
  • You must do extra-thorough research, and really look for problems in your plan
  • You must be extra diligent to ensure you have the resources to pull it off
  • If you don't have the resources to pull of a high-risk idea, but you still think it's a good idea, consider putting it aside for later. It doesn't mean you'll never develop the idea; you just might need to develop a different idea first and wait until you're in a better position to work on your high-risk idea in the future.

LOOK FOR PROBLEMS AGAIN

Now that you've assessed risk and reward, you'll have more information to be in a better position to assess problems.

Ask yourself:

  • Do I see any problems emerging that I didn't notice before?
  • What about problems that I've already flagged? How does this new information impact those problems?
  • Can you solve the problem and make your product better?
  • Did you discover any deal-breaker problems here?

Don't be so in love with your idea that you ignore a problem. Don't assume you have to go forward with an idea just because you've researched it to this point. You are a creative person. If you discover an idea you are researching has a fatal flaw, you will come up with other ideas.

At the same time, don't drop an idea immediately just because you discover a potential problem. Work through it. Look for solutions. The solutions you find here may really differentiate your product from your competitors.

IT'S GOOD TO BE A CRAFT BUSINESS OWNER

When we talk about potential risk, it's good to be a craft business owner.

Craft businesses are generally low risk enterprises. Certainly, your time and financial risk will vary depending on your process, and the equipment and raw materials you need, whether you need to invest some time sharpening a skill, and where you decide to sell your products. However, you can often start this type of business on a part time basis. There's no need to give up your day job. Plus, there's a good chance you have equipment and some raw materials on hand because craft businesses often begin with an area of specialization that is already a hobby.

When we talk about potential reward, craft business owners need to be careful.

If you are making products by hand, that means the growth of your business (your reward) is intrinsically limited by the time you have to create your items. That limitation might be fine based on your goals. It's not an automatic deal-breaker, but it is something to keep in mind.

Ask yourself:

  • Considering the time it takes to make an item, and the profit on each item, do the numbers work?
  • Will the reward meet your expectations?
  • Are there ways to change your product or your production process to increase the potential reward?

CLARIFY YOUR IDEAS IN MORE DETAIL

So far you have:

  • clarified your ideas
  • looked for problems
  • and assessed and weighed potential reward and risk for each of your ideas.

At this point, you might be ready to let go of an idea or two.

If you've found that one of your ideas has a very clear deal-breaker, insolvable problem, it needs to go.

Similarly, if you've discovered that you're just not in a position to develop a specific type of product, you might want to put that idea on the shelf for future consideration.

Maybe you're just not excited about an idea anymore. After thinking it through in more detail, perhaps the reward of developing the idea just doesn't seem worth the work and risk involved.

Whatever the reason, if you've discovered that an idea really isn't viable, feel free to drop it at this stage, and move on to something with more promise.

EXPAND ON THE IDEA(S) THAT MADE THE FIRST CUT

I'm going to assume you have an idea or two that have survived the initial assessment. Now it's worthwhile to invest some time in fleshing out the ideas in more detail.

Describe your product in thorough detail.

Imagine your target customer using your product. Ask yourself: How does she interact with it? How does she feel when using your product? What is her objective (what is she trying to get from using your product)? Does your product successfully deliver on that objective? What you can do to improve on the experience?

Connecting your customer with your product in your mind in this way can help you improve the design, find and solve problems, and find benefits you might not have considered.

Next, do some simple, initial research. There's no need to spend hours on information that might be tough to find, but make sure you have all of the basics you need to know including things like:

  • cost of supplies
  • cost of equipment and tools
  • access to equipment you might need
  • skill required to create your product
  • shipping considerations
  • time required to make your product
  • any other important considerations that are relevant to your idea

If, for example, your product requires expensive raw materials or a long time to create each item, but the typical selling price is low, you need to know these things (and develop a solution) before you commit to developing the idea.

Sometimes craft professionals will comment that they can't sell their product for a price that factors in all of their time and materials costs. If your goal is to build a business (as opposed to selling a few crafts for fun), and you can't sell your product for a price that reflects your time and materials costs, then you have a flaw in your product that needs to be solved.

Have a very honest conversation with yourself about whether you think people would actually buy your product at a price that allows you to make a reasonable profit.

Be willing to let go of an idea if it doesn't pan out. Yes, you have invested some time in assessing the idea. But if it's really not workable, letting go of that idea, will save your time, money, and pain. You can move on more quickly to an idea that will work.

GOT YOUR WINNING BUSINESS IDEA?

Once you get your ideas narrowed down to a single winner, it's time to take your testing to the next level.

Don't Have Your Winning Business Idea Yet?

You might need more detailed and structured guidance to examine all of your options and choose the business that's the best fit for you. It's worth spending some time in the early stages of your business to make sure you're going in the right direction.

I've developed a course called The Best Craft Business for You to help craft professionals assess all of their skills, resources, and options to find a creative business that's a good fit. You can learn more about developing The Best Craft Business for you here.

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