How to Turn an Idea into a Viable Internet Business

Every successful business begins with that first idea, and the Internet has continued to make it easier than ever to launch a successful business. Maybe you have several unique concepts to choose from or are firmly set on a single one. Either way, how do you decide whether you should quit your day job and focus on your brilliant idea for starting an online business? You have to pick apart the idea, observe closely, and determine whether it merits a full-time (or part-time) business.

One question often asked is whether or not the idea has to be original. Innovative, never-before-broached ideas for an online business certainly exist. But being the first to have and implement an original idea is not a guarantee for success. Likewise, there may be exceptional opportunities for updating or modifying an existing business to an online format.

Consider that Netflix became an online streaming version of bricks-and-mortar video rental stores. The video rental concept was not new, but Netflix took video rental online and eventually became part of the reason for the demise of the leading offline video rental giant, Blockbuster.

Ultimately, your concept for the business, whether it’s a new idea or a twist on an existing idea, must be well thought out to increase your probability for success. Here are three methods you can use to decide whether your idea has potential.

Use informal research to verify your idea

The best place to begin gathering information is from sources closest to you. Be prepared to receive varying opinions — both positive and negative. Use this input as a general gauge of whether to continue reaching out to the next source of information. You and your idea are in the center, surrounded by three rings from which to collect input, as shown. If the ring closest to you provides mostly positive input, proceed to the next ring.

Ring 1 consists of your friends, family, and coworkers. Ask them these questions:

• Have you ever heard of this type of product or service?
• Would you buy this product or service?
• Do you think it’s a good idea?
• What challenges do you think I will encounter?
• What are the benefits?
• Can you envision me selling this product or service? Why or why not?

In Ring 2, seek input from industry professionals, investors, other entrepreneurs, and organizations that offer support to small businesses. Ask questions similar to those listed for Ring 1. Because of the experience of the people in Ring 2, you should give more weight to their responses. Small-business support resources include the following:

• Small Business Administration (SBA): The SBA, a government-sponsored organization, helps small-business owners with loans, paperwork navigation, free seminars, and other services.
• Small Business Development Center (SBDC): The SBDC is a partnership between the SBA and universities. Together, they provide support, mentoring, training, and educational services to both new and established small businesses. SBDCs are available through local branches, often located in a partnering university or Chamber of Commerce.
• Chamber of Commerce: From small towns to large cities, all local chambers help owners develop their small businesses.
• SCORE: This network of retired executives matches small-business owners with business-exec retirees who volunteer their time to help small businesses develop and prosper.

In Ring 3 are your potential customers. Ask them these questions:

• Would you use this product or service?
• Have you used something similar?
• How much would you be willing to pay?
• How often would you use it?
• Where would you normally go to buy this product or service?
• Would you order it over the Internet?

If you find that you’re receiving a majority of positive feedback from sources in all three rings, you can consider your idea worthwhile. Or at least you have enough validation to continue to the next phase of your evaluation process. Later, you may want to return to this list of friends and customers and ask them to “beta” test, or try out an early version of your product or service before it is fully available to the general public.

Apply a SWOT analysis to your business idea

Another popular method for determining the pros and cons of an idea is referred to as SWOT analysis. (SWOT is short for strengths, weaknesses, opportunities, and threats.) Companies use it for several reasons, including as a decision-making tool for product development. The simple process also lends itself to a more thorough investigation of your business idea. This section covers how you can put your idea to the SWOT test!

Create your own SWOT chart by following these steps:

1. On paper, draw a cross (or a box divided in half both horizontally and vertically) to create four quadrants, and label them as shown.

After you draw and label the chart, you can begin to fill in the details.

2. In each quadrant, write down the factors that influence or contribute to each of your four SWOT categories.

Strengths and weaknesses are considered internal factors that control or specifically contribute (good or bad) to the business concept. Opportunities and threats are external factors that are influenced to some extent by the environment or are otherwise outside of your control.

3. Analyze the information you filled in. Ask yourself the following questions to start developing your SWOT analysis:

Strengths

• • What advantages does the product or service offer?
  • Do I have expertise in this business or industry?
  • Can I get a patent to protect the idea?

Weaknesses

• • How much does developing the product cost?
  • Is getting suppliers difficult?
  • Am I learning a new industry from the ground up?

Opportunities

• • Does my idea take advantage of a new technology?
  • Is my product or service in demand?
  • Have changes in policies or regulations made my idea necessary?

Threats

• • Does my product or service have established competitors?
  • Do my competitors sell the product or service for less than I can?
  • Will changes in technology make my product obsolete?

Use the feedback you receive from your informal research (during the Three Rings exercise) as factors in your SWOT quadrants. Combining other people’s opinions with your own provides a more comprehensive — and useful — SWOT analysis.

4. After you fill in the categories of your first SWOT analysis, take a look at which quadrants contain the most factors or the most significant factors.

The listed strengths and opportunities indicate the advantage you might have in the marketplace. If you’re lucky, they outweigh your weaknesses and challenges. Perhaps you can now see what you must do to offset those disadvantages if you really want your idea to work.

Whatever the outcome of your analysis, you should have a better feel for the value of your business idea after viewing the completed SWOT analysis.

Create a feasibility study to validate an idea

After your idea gains a nod of approval from friends and family and the SWOT analysis indicates that your product has merit, your idea must jump through one more hoop for complete validation. A feasibility study is a somewhat formal, written process that helps you determine whether your idea is realistic. The goal of the study is to provide you with final proof that your business concept is viable.

A feasibility study answers these basic questions:

• Will the product or service work?
• How much will it cost to start?
• Can your idea make you money?
• Is the business concept really worth your time and energy?

A feasibility study kicks your analysis up a notch. It relies on in-depth research to provide more detailed answers to questions in five primary areas:

• Your product and service
  • What is the product or service?
  • How will my customers use it?
  • Where or how will my customers buy it?
  • How is it designed, and how is it delivered to my customers?
  • Am I testing to ensure that my product works correctly? (Describe these tests in detail.)
• Your experience (including your management team’s experience)
  • Who is my management team?
  • What experience do I (and my employees) have?
  • What are my specific skills and credentials?
  • Which skills am I missing, or in which areas am I weak?
  • How much time can I devote to my business?
• The market in which you’re competing
  • What is the demand for my product?
  • Who are my customers? (What is the target market?)
  • How big is the market I’m selling to?
  • What is the status of the market? Is it growing or stagnant?
  • Where and how can I reach those customers?
• Your competition
  • Who are my primary and secondary competitors? (Describe each of your competitors in detail.)
  • How do my competitors market their products or services?
  • What makes me different from or better than my competitors?
  • Is my product easy to copy? How can I prevent copycats?
• Your costs
  • How much does it cost to make my product or produce my service?
  • What other business costs do I have?
  • How much money do I need to start?
  • Do I have access to funding?
  • When will I make a profit?

Now you know how much information you have to gather in your feasibility study. As you answer all these questions, make sure that you back up those answers with detailed research. Then write your results in a one-page summary that discusses what you discovered. Your summary should answer all of the questions in each category and provide proof of whether you have a viable idea. After the validation process is complete, you can turn your attention to the next piece of the business success puzzle: potential customers.