Evaluate Your Idea And Weigh The Risks

So you think you have a terrific idea for a business. Congratulations! It is very exciting to contemplate taking that big step into entrepreneurship. Before you get too far down the path of dreaming about great success and riches, though, it is important to evaluate your idea and weigh the risks of pursuing it as a business.

Evaluate your idea

There are a number of ways to evaluate your business idea, most of which require a great deal of self-honesty and objective thought. Here are a few questions you should ask yourself when evaluating any entrepreneurial idea:

1. Does the idea truly solve a problem or fulfill a need?
2. What is the exact problem or need it will address?
3. Is your idea original and new?
4. Is your idea a unique combination or update of other existing ideas?
5. What are the limitations of your idea?
6. Are there other variations of your idea?
7. Is your idea appealing and easy to market?
8. Is your idea affordable to potential customers?
9. How complicated is it to put your idea into action?

Some of the questions you will use to evaluate your idea will vary depending on the specific product or service you propose. Use the above list as a starting point, then add or delete questions that are relevant to your particular business proposal.

Weigh the risks

Once you have evaluated your idea and thoroughly explored its potential, you must also weigh the risks of moving forward with starting a business based on that idea. There are always risks inherent in any business, but if you identify them in advance and determine which risks are reasonable you can significantly increase your chances of success. Some of the questions to ask as you are weighing the risks include:

1. What investment will be required to start the business?
2. What are the expected revenues for the first 18 to 24 months of the business?
3. Are the expected revenues enough to keep up payments on any financial debts that may be incurred?
4. What factors need to go right for the projected revenues to become reality?
5. What factors could go wrong and prevent the projected revenues from becoming reality?
6. How much competition is there in the marketplace?
7. Are there enough potential customers to justify the investment of time, effort and money?
8. What needs to go right for you to be successful and how likely is it that those things will occur?
9. What could go wrong and prevent you from being successful, and how likely is it that those things will occur?

It is critical that you be honest and objective about risks associated with your business idea. Only through critical thinking and careful evaluation of risk can you determine if it is appropriate to pursue your idea.

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