The best entrepreneurs look for opportunity everywhere, but sometimes they can get carried away. Swept up with the excitement of a fresh idea, they can sometimes overestimate its real potential.
After the initial stroke of inspiration, you might go through endless rounds of concepting and trying to bring the idea to successful fruition, only to wind up with a deck that isn’t all that persuasive. But you’re tenacious, and you think it’ll just take a few pieces to fall into place in to turn your idea into a powerful business model. But where do you draw the line? At what point do those minor contingencies amount to a major roadblock? When is enough enough?
Deciding whether to kill a “great idea” is one of the most difficult quandaries entrepreneurs ever face. And while there are a few ways to know when your initial inspiration really isn’t viable, it’s also true that it takes a certain “gut instinct” in order to make that call. That being said, here are three important questions that can help you determine whether your great idea is truly good enough.
Few startups become overnight successes. But unfortunately, it’s possible that the delay required to raise funding, iterate concepts, and identify a minimal viable product that stands a chance in the market means you might miss the window for it to succeed.
Say, for example, that you’ve decided to launch a live video-streaming competitor to Periscope and Meerkat. While both platforms have weaknesses that could be exploited by another entrant, the reality is that if it takes you two years to get your product up and running, the odds are good that the consumers interested in this type of service will have either chosen a platform or moved on to something new altogether.
To assess how valid your core concept might be, answer these questions:
- Does an audience still exist for my product? If so, are they still seeking what I’ll offer, and are they likely to still be seeking it when I’m ready to launch?
- Has new technology launched that has displaced my idea or will displace it soon?
- Have any other assumptions about my idea been challenged in a way that’s unlikely to change soon?
Some ideas are evergreen. There’s always going to be a need for certain businesses (for instance, bookkeeping products and providers). Others, however, rely on getting the timing just right. Carefully consider where on this spectrum your idea falls, and whether market conditions are (and will remain) favorable for a future launch or turnaround.
Most startups fail, and the deck can often look stacked against entrepreneurs who are still in the ideation stage. Understanding why, though, is key to assessing whether your own idea has what it takes to make it in the long run.
According to an analysis of 101 failed startups by CB Insights, “ran out of cash” is the second most cited cause, behind “no market need.”
So think ahead. Try writing an obituary for your idea even before you get it off the ground. Brainstorm the whole range of potential reasons it might fall short, and make a comprehensive list of them. As you do, ask yourself this:
Do I have enough money on hand? Eric Paley, managing partner at Founder Collective, suggests that companies start to seek funding when they still have six to nine months of capital in the bank. “I’d suggest leaving more room for error,” he wrote recently on TechCrunch. “Ideally, don’t raise 12 months of capital out of the gate, expecting to go back out raising in eight months when down to four months of cash. Instead, raise 18 months of capital and start raising again when down to nine months of capital in the bank.” Will your idea be profitable enough to meet these milestones without running out of cash?
Will my net profits exceed my customer acquisition costs? Don’t assume you’ll somehow be able to acquire customers affordably. Actually test your assumptions whenever possible. Don’t wait until you’ve committed to your idea to make a reasonable estimate of your sales and marketing costs.
How can my idea be more profitable? It’s fine to be optimistic–in fact, it can be a strategic advantage–but if things go wrong (and at some point they will), what will you do to keep your idea afloat? The more flexible ones (for instance, product lines that can be extended or manufacturing costs that can be cut) are more likely to be financially successful than those whose costs and profits are set more rigidly.
Ideas don’t always fail because they’re bad. Often, it’s a lack of money–even a lack of money at the right time–that dooms a startup. Do your due diligence. If the profit potential of an idea is shaky at best, it may be better to kill the idea and save yourself the future financial heartbreak.
Finally, don’t discount the possibility that you’ll burn out before your business does. Whether or not you’ve already launched your great idea, pay careful attention to your personal investment in the concept. If a once-great idea no longer thrills you, or you feel your passion diminishing, it could be time to kill off your concept.
Ultimately, entrepreneurial ideas are like babies: They’re all beautiful to their parents, even if they look like hot, screaming messes to everyone around them. As a founder, it’s up to you to determine, through careful, objective analysis, which ideas have staying power and which should be scrapped. That’s never an easy decision to make, but it’s a vital one for keeping your finances, mental health, and reputation intact.