Entrepreneurs spot innovation but often lack market research skills. Many startups suffer from misguided assumptions about potential profitability. In fact, 70 to 80% of companies not meeting their projected return on investment fail. This usually happens after spending much capital and time.
The disconnect comes from being too close to the invention. As the creator, it's easy to miss what your design is capable of or fail to see its market limitations. Here are three ways to evaluate your idea's commercial potential:
- Solicit objective feedback Get third-party opinions to spot missed details and save time. Family, friends, and team members might not see issues or be too polite to mention them. An outside perspective can reveal blind spots and help improve your product.
An objective opinion can tell you if your product is unique or if a feature already exists elsewhere. Identifying flaws can save money and help you fix shortcomings before going to market. This is crucial when seeking investors.
- Perform a SWOT analysis A SWOT analysis helps determine a new business's potential. Assess four factors: strengths, weaknesses (internal), opportunities, and threats (external).
Identify your operation's strong and weak points. For example, you may have created proprietary software (strength), but lack a leader to drive its success (weakness).
Recognise opportunities and threats affecting your business. If there are few potential customers, can your company survive? Can you alter your product to remain sustainable? By addressing weaknesses and threats, you can compete better and have realistic expectations.
- Understand the full potential of your idea Entrepreneurs can be blind to all possibilities for their product. Some products have multiple uses, like bubble wrap—originally a textured wallpaper that became popular packaging material.
Discussing your invention with external reviewers may reveal different applications, turning a small opportunity into a large one. It could save you from launching in the wrong market or at the wrong time.
New businesses often focus on developing their product or service, making it hard to evaluate commercial potential. Planning beyond the first few years helps understand your business's future and build realistic expectations for you and your investors.