12 Questions Every Business Idea Must Answer
What is a business idea? The question sounds straight forward enough, yet it’s surprisingly hard to answer. In fact, when most people say they have an idea for a business, what they really mean is an idea for a product, which is not at all the same thing.
So what is a business idea? A business idea defines the market to be addressed, the model that will be used to address the market, the “mojo” required to operate the model, and the money we expect to earn, spend, and bank in the process.
Okay . . . but what does that mean? Let’s take a look.
The market is defined by three unique properties—the first three questions that a business idea must answer—as follows:
Who is the target customer? Will your business serve consumers, businesses, government agencies? What is their demographic profile? What are their defining attitudes and behaviors?
Which of your target customers “jobs” will your business address? Is it something functional like driving to work? Something social like impressing co-workers with what a nice car you drive? Or something emotional like feeling safe when behind the wheel?
What is the problem or opportunity your target customer is having with this job? For example is it convenience, speed, reliability, cost, etc.?
Once you have defined your market, it’s time to move on to your model which may be defined by answering the following four questions:
How will your company solve the customer’s problem? I.e. what is the product or service you plan to offer?
Why will the customer prefer your solution over competing options?
How will you make money? Who will you charge? What will you charge them for? How much will you charge them?
Where will the customer discover, explore, purchase, receive, and get help with your solution?
Now that your market and model are outlined, identify the right “mojo” by asking:
What core competencies are required to deliver on your promises? What business processes are critical? Market research, design, product development, marketing, manufacturing?
What key resources do you need to operate? Are they human, financial, property, licenses, partnerships, etc.?
Knowing the market, the model, and the mojo equips you to address questions about money:
How much revenue will your business idea generate?
How much cost will it incur?
How much profit will you make?
What’s a business idea? Sometimes the best answer to a question is another question. In this case, it’s actually twelve questions, and a business idea has compelling and definitive answers to each one.