How to evaluate your e-business idea

By Charles Hopkins Published 04/7/2006 | Business and Finance

The most important part of business today is to make an idea saleable. It requires faith in the idea, and the belief that you can build a successful venture around it. However, before you spend time and money on an e-business idea you need to evaluate its business value.

The questions that you need to ask yourself are: Is this an idea that can generate revenue? Why do you think it is going to be successful? What is the skill level of your team members? More important, what is their experience in the virtual world? Are they trying to replicate a physical model? If so, what are its chances of working? What about the competition? How will your get potential customers reach your website?

You should also not forget finances. A web business is easy to start. But it needs to be sustained over a long period of time. You must find out if your idea will generate revenues immediately or will it need time? You also need to see your finances, especially your staying power. How long can you sustain the business?

No product is meant to stay on the drawing board forever. It has to reach the customer if it has to be successful. This requires belief, skills, and above all finances. Ensure that your team has all of these and in enough quantity.

Any new idea has to face competition. Web ideas, in addition, also have to suffer quick replication. There have been too many web start ups that realized it the hard way. You must list the points that make your idea superior to the others. You must also list the reasons why people will buy your idea. Take these lists to your potential customers. See, if they also believe in what you say. If yes, then your idea has a chance.

Identification of target customers and interviews with them can give you a fair idea of the viability of your idea. Get feedback from your target customers, especially about the ways your idea will add value to their lives.

You also need to study the web market. You can ask a professional agency to conduct the research, if you have the money. Otherwise you need to study the market yourself. You need to find out the existing demand, the strength of your rivals, the pricing structure, the distribution chain, the promotional costs, the readiness of the web market to accept a new idea.  

These are serious questions. Based on the answers you receive, you will have to work out your pricing, promotion costs, distribution channels etc. You may, in fact, be forced to revise your existing plans maybe rewrite them altogether. But this will be a useful exercise. It will give you a better understanding of the commercial viability of your idea.

Remember, no idea is worth pursuing unless it has a clear revenue model. This should be your basic yardstick.