10 Ways To Evaluate Your Business Idea (Market) So You Can Pitch And Win Investments

10 Ways To Evaluate Your Business Idea (Market) So You Can Pitch And Win Investments

I teach people to pitch their business ideas persuasively whether they were given 18, 5 or even 1 minute on the podium.

First thing I teach my clients:

What it takes for a business pitch to win investments is beyond just the rhetoric (communication skills) – it has a lot to do with the business and your deep understanding of the business – the market, the industry, your unique value proposition and strategy.

It’s hard to sell something that has no propelling edge in the marketplace. In fact, there’s really no reason to try to sell something that you haven’t even sold yourself on.

Business pitching is NOT an audition (unless you’re attending some of those). In most cases, it’s just what it is – business!

The more you understand your business, the more you increase your chances of selling the idea to someone else.

One of the fundamental understandings you should have about your business is THE MARKET – this will determine IF you should go into this business in the first place or simply invest yourself somewhere else.

Today, I want to share the 10 ways I evaluate my business ideas and that of my clients so we can both decide if the idea is worth pursuing or not. Once a client does these underground work, it makes the job of selling their business or pitching to investors easy.

Sometimes after these evaluations, many clients finally realize they don’t really need to be seeking for investment YET or AT ALL. Either because they don’t have a propelling value proposition or the target investors might not be impressed with what they’re bringing to the market.

Either case – honesty is all I bring to my coaching.

These measures are not mine. I got them directly from Josh Kaufman’s book  –The Personal MBA

Josh Kaufman Explains The ‘10 Ways to Evaluate a Market

If you’re thinking of starting a new business or expanding an existing business into a new market, it pays to do some research before you leap.

The 10 Ways to Evaluate a Market provide a back-of-the-napkin method you can use to identify the attractiveness of any potential market. Rate each of the 10 factors below on a scale of 0 to 10, where zero is extremely unattractive and 10 is extremely attractive. When in doubt, be conservative in your estimate:

  1. Urgency — how badly do people want or need this right now? (Renting an old movie is typically low urgency; seeing a new picture on opening night is high urgency, since it only happens once.)
  • Market Size — How many people are actively purchasing things like this? (The market for underwater basket weaving courses is very small; the market for cancer cures is massive.)
  • Pricing Potential — what is the highest average price a purchaser would be willing to spend for a solution? (Lollipops sell for $0.05; aircraft carriers sell for billions.)
  • Cost of Customer Acquisition — how easy is it to acquire a new customer? On average, how much will it cost to generate a sale, both in money and effort? (Restaurants built on interstate highways spend little to bring in new customers. Government contractors can spend millions landing procurement deals.)
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  • Cost of Value-Delivery — how much would it cost to create and deliver the value offered, both in money and effort? (Delivering files via the Internet is almost free; inventing a product and building a factory costs millions.)
  • Uniqueness of Offer — how unique is your offer versus competing offerings in the market, and how easy is it for potential competitors to copy you? (There are many hair salons, but very few companies that offer private space travel.)
  • Speed to Market — how quickly can you create something to sell? (You can offer to mow a neighbor’s lawn in minutes; opening a bank can take years.)
  • Up-Front Investment — how much will you have to invest before you’re ready to sell? (To be a housekeeper, all you need is a set of inexpensive cleaning products. To mine for gold, you need millions to purchase land and excavating equipment.)
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  • Up-Sell Potential — are there related secondary offers that you could also present to purchasing customers? (Customers who purchase razors need shaving cream and extra blades as well; buy a Frisbee, and you won’t need another unless you lose it.)
  1. Evergreen Potential — once the initial offer has been created, how much additional work will you have to put into it in order to continue selling? (Business consulting requires ongoing work to get paid; a book can be produced once, then sold over and over as-is.)

When you’re done with your assessment, add up the score. If the score is 50 or below, move onto another idea—there are better places to invest your energy and resources. If the score is 75 or above, you have a very promising idea—full speed ahead.

Anything between 50 and 75 has the potential to pay the bills, but won’t be a home run without a huge investment of energy and resources, so plan accordingly.

Questions About The ‘10 Ways to Evaluate a Market

  • How attractive is the market for your idea?
  • Are there other markets that may be more promising?
  • Can you alter the idea to appeal to a more attractive market?

“So often people are working hard at the wrong thing. Working on the right thing is probably more important than working hard.”

Caterina Fake, founder of Flickr.com

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