25 Questions to Ask Before Starting a New Business Idea
If you‘re a software developer like me, we may share the same stupid habit: dreaming about a software product we will build someday, having a new exciting idea to endeavour or – if you‘re a freelancer or consultant – feeling tempted to try a new market position.
How do you decide whether to pursue a new idea or not?
Through your gut feeling?
In this post I'm going to present 25 questions that'll will help you making a better informed decision.
I have to admit that I collected more than 150 product and service ideas over the years in a private Trello board. I‘m guilty of staying awake at night being exciting while suffering shiny object syndrome. And I‘m guilty of wasting hours and hours of researching, taking notes, jotting down marketing ideas, searching for competitors and so on. You see, I tend to overthink things and there are people on the other side of the spectrum who start building stuff without much thinking. In my opinion this approach isn‘t better either.
Yet, I‘m at least not guilty of never starting anything. For example I made the leap to self-employment two years ago. And I had decent success with an Android app called ChannelListEditor. It was being used by people around the globe to sort channel lists of their Samsung TV sets. Eventually I shutdown the app even though it made some money through in-app purchases. Why? Because I lost interest and Google changed how Android phones are working in this special respect.
Despite releasing a paid app was a valuable lesson to learn, I could have seen it coming, if I would have asked the right questions beforehand. Since then and especially through the course of starting my own business, I‘ve read and listened to books and online resources about marketing, selling and how to build businesses in general.
While doing so and from my own experience I‘ve collected a list of questions that are worth being asked before starting anything new that remotely aims to create some business.
Why not skip those questions?
Before I start, I‘d like to explain why you may regret skipping those questions down the line.
As I already mentioned before there‘s a spectrum between overthinking and just start building stuff. Nowadays I would count myself to the former camp but I have seen a lot of fellows in the latter. With ChannelListEditor I started building without much thinking as well because I wanted to solve my own problem. But for both camps the main reason to ask the forthcoming questions is to mitigate personal risk.
In essence, to prevent investing precious time or in some cases even money for no return.
I spent about fifty evenings through the course of three years building ChannelListEditor. While I hit a real pain point for a lot of people, I held a false assumption. I assumed unconsciously that Android will always behave in USB stick mode when being plugged into an USB host. Google changed that for good reasons and suddenly people were no longer able to easily export Samsung channel lists to their phones. Besides, the binary channel list format of Samsung TVs changes every year. Testing the app on each year‘s series wasn‘t possible with the resources I had at the time.
Do I regret building it? In some regards yes. But in others not.
The 25 Questions
What I don‘t regret is that ChannelListEditor showed me how important hitting a real pain point is. Such a strong one that a one-page website was enough to get new users every day through organic search. This is by no means taken for granted. To the contrary, technicians tend to build stuff nobody needs, wants and as a result will pay money for.
So the key to a successful business is not to think about ourselves but about the group of people whom we want to serve.
Did you come up with the idea yourself or through another person?
There is a difference between ideas you came up with on your own and ideas stimulated by input of other persons. In the former case be aware you are most likely holding a lot of assumptions. So if you came up with the idea yourself, it‘s a really, really strong warning sign.
Sure, what people say they want is often not what they actually need. You sure know the Henry Ford quote about horses and cars. Thus, focusing on the problems, pains, needs and wants of a group of people is a good starting point. When you've observed real pressing problems, then it‘s your job to come up with a solution.
Do you know the market?
The more you know a market, the better. But if you don‘t know persons in the market, if you haven‘t done work for companies or people in the market, if you‘ve never solved any problem specific to this market, then this is a red flag. Again you‘re expecting a lot of assumptions to be true. If you don‘t know the market, I allege your idea isn‘t solving a real problem. In that case you will see that answering the other questions will be hard.
Do you even know what the target market will be?
Do you even know what the target market will be? Or do you plan to build a thing that can be used in a lot of industries? Is it so generic that it can be applied to a lot of situations?
Please don‘t start building that thing. There are a lot of drawbacks if you are tackling many markets. One of these is that you‘ll have a hard time to speak (when networking) and write about (e.g. on your website) what your offer is. When you can‘t articulate which concrete problems you solve for exactly whom, how should potential clients know?
I‘m currently positioned as a web developer specialized in data visualization. Furthermore I occasionally build websites for local businesses. That's a pretty generic position. At first sight it seems like an advantage because I could serve a lot of industries. But especially for a one-man show it's not. For instance whenever I edit my website, it is painstakingly hard to describe why people should hire me and for what.
What is a client required to do to adapt your solution?
I once have helped to build a very generic software product aimed to serve a lot of industries. In the team this generic architecture was perceived as a strength. But in my humble opinion it was not. On the contrary, I am convinced it was its greatest weakness. Why? It would have required our clients to adapt their existing software solutions on the code level. Who is doing that?
And on top of that, whenever presenting the product, the gap between the product‘s generic capabilities and any concrete problem of the customer was huge. It was the job of the client to understand the capabilities of our product and imagine about how it could solve his very concrete problems. We did nothing less than demanding our prospects to jump through a dozen of hoops before doing business with us. Needless to say that a lot of them gave up before even jumping through the first one. Put simply, they didn‘t know how the heck they would have benefited from the product.
Ever find yourself in that situation? Yes? The people you talked to weren't getting it, right? I doubt that. Everyone is lazy because that's just how our brain works. Prospects' minds are lazy to imagine how a generic tool can help them. Same as we are sometimes too lazy to think deep and hard about the real pain points of our target clients.
Let me show a more concrete example to reinforce what I mean. When I introduce myself to prospects to be a data visualization expert, I command them to know what that is and how it can be applied to help their business. That‘s a lot to ask for and most of the time people don‘t bother to find the connection to their business. In reality, data visualization is simply just a skill, although rare and valuable. Together with students I‘m currently running a project for a bakery. We attempt to reduce waste of baked goods (right now up to 20 %) by giving them a tool to analyze their past demand and waste. Which of the two service offerings would land me a similar job at another bakery? A) I‘m a data visualization expert who can develop customized dashboards and reports for you. B) I can help reducing waste of pastries by 5 % by giving you a tool to plan daily production more accurately based on historical data.
Would you sell to consumers or businesses?
That‘s an easy one. The general rule of thumb is to sell to businesses. In contrast to businesses, consumers have a different, disadvantageous price sensitivity. This is especially true for software. Moreover customers most likely won‘t accept recurring fees. The list could go on and on. If you want to know more, search through the archives of the Startups for the rest of us podcast.
Which problem does your product or service solve?
Can you pinpoint the problem you‘re solving? I‘m a data visualization expert, I‘m a web developer and I‘m teaching web development. Which of those three competences is nearest to a concrete problem. I'd say the third one. I help students and sometimes employees to learn or transition to web development. Why is that a problem? In our area it‘s hard for companies to hire new web developers. And why is that a problem? It‘s a problem because markets demand desktop applications being replaced by modern web applications. So companies are considering retraining their existing developers to do web development.
For now it‘s not important to go deep in analyzing the problem you‘re addressing. Write it down in one sentence to be prepared when answering the next questions.
Is the problem you‘re solving really a problem?
Are you sure, you really solve a problem for the target market? Or are you just assuming that you do? Are there any assumptions that may not hold true? Ask yourself, what makes you confident that you‘re solving a real problem. You should come up with a couple of arguments. These arguments might be assumptions that should be validated in some way.
Is the problem you‘re aiming to solve perceived as a problem worth solving?
You may came up with legit arguments that you‘re solving a real problem. But is it also perceived as a problem by the target clients? If not, you would need to educate them which can be very time-consuming.
If yes, there is a good chance that they don‘t see the necessity to solve it. In a podcast Patrick McKenzie once said that if your problem is not one of the top three items on your client's todo list, you‘re in trouble.
A photographer, for whom I created the website, offered me a free business photo shooting. Although it won‘t cost me anything except my time, I‘ve already postponed it for months and months. It‘s simply not upon my most important problems right now.
When are your target clients looking for a solution?
Let‘s continue with the photo example. For now, I‘m fine with the photo I have. But I may start a new website with a specialized service and for that „not having an appropriate photo“ may become an urgent problem.
So ask yourself when or more precisely in which situations do people feel the urge to overcome the problem in question?
I had an IT innovation manager as a client. He wanted me to design a visual report of the company's innovations. Unfortunately I was not commissioned to do the implementation. Anyways, following up with him on a quarterly basis would have been a good tactic. Why? Because he needed to manually create the report for upper management each quarter. Thus he was feeling the pain each quarter too.
Are you tackling a one-time or a recurring problem?
How often do your target clients feel the pain that makes them want to have a better solution? In the previous example quarterly. Not very often.
What about time tracking? Every company is suffering the pain of time tracking every single day. If we don‘t have a decent solution for time tracking, we‘re reminded of the problem everyday. As a result we are constantly wanting a better solution and start searching for one sooner or later.
Can you list particular situations when potential customers are facing the problem? How often does that occur? The less often, the more likely we are just muddling through it. Steve Krug talks about that in his book Don't Make Me Think in the context of how we use the web.
Are you clients able to solve the problem themselves?
Back to time tracking. I‘m stupid and built my own time tracking system with Google Sheets. Crazy, I know. But I did so because I can.
From experience as a consultant and as an employee I know that companies tend to solve problems internally. They only hire outside help if A) they find nobody in the company who wants or has time to do that stuff or B) nobody has the skills to do it.
What are the follow-up costs when clients adapt your solution or hire you to build something?
Prospects and clients alike asked me this question many times the last two years. The truth is that nobody likes follow-up costs. If your solution implies high follow-up costs, it can be a real deal breaker.
Can you name a few communities where your target audience meets?
You will have to do some amount of marketing. In my understanding marketing is merely a word for making potential clients aware of your offerings. If nobody knows that you and your offer exist, who should buy from you? Thus the whole „I don‘t like marketing“-mentality in our industry is counterproductive in my opinion.
The more communities specific to your target clients (e.g. real life meetups and online groups) you can come up with, the better. Why? Because your marketing efforts will scale better. Everything like a niche magazine or conference is a good sign too.
When starting my consulting business, I figured special service providers would benefit from good SEO. Thus I considered special service providers to be a possible target market. The reason I dropped the idea was because I wasn't able to find any communities that were gathering special service providers together.
Amy Hoy has given these communities a nice name: watering holes. At those watering holes people chat about their industry, about current challenges, worldviews and most important of all about their pressing problems. I once picked up a thread in Jira‘s official issue tracking system, in which customers complained fiercely about how there‘s no migration path for agile projects from one Jira server to another. The issue was open for at least two years back then and it was a real business opportunity.
Are your potential customers used to pay for services or products like yours?
Are your potential customers used to hire outside help or pay for special software products? It is clear that the more they‘re acquainted to hire outside help or pay for software, the better.
Does your idea make a crucial problem go away or is it a nice-to-have?
This is another way to ask if you‘re truly addressing a pressing pain point. At the bottom of this post I will advice to go and talk to people to find answers you don‘t know yet. Go ask prospects if your product is just a nice-to-have. And if you get almost yes answers, then you‘ll not going to sell a lot.
A side note: if you get a negative answer, use the chance to ask the prospect what else is a more pressing problem at the moment. It‘s all about understanding the customer.
By the way, Rob Walling is using a nice analogy for this kind of differentiation: Is your product an aspirin or vitamin product?
Is your service seen as a cost or as an investment?
This is especially relevant if you‘re planning a new service offer. If you‘re seen as a cost, it will be hard to demand high rates. If your client could hire an employee to do that stuff, it‘s a good sign that you‘ll be seen as a cost. In other words, are you offering a commodity like simple coding? Yes? Then you‘ll seen as a cost.
Are you serving a lot of markets or just one?
Again, a slightly restated question. The less the better. There are multitudes of reasons for this standpoint. Every extra market multiplies the needed effort to execute on core business processes like marketing, sales, proposal writing, learning the technical stuff, legal stuff, staying on top of skills and so on. I‘m guilty of offering a too broad spectrum as well. But that‘s not carved in stone.
In a 10-seconds introduction of your product or service, what are the core assumptions?
For a few months I rolled the idea of creating a more efficient search analytics report than the one in Google Search Console (GSC). Listening to the books The Personal MBA and The Lean Startup made me aware that our ideas are always based on some core assumptions.
For the stated idea my core assumption was that SEO managers are using the search analytics report within GSC. I didn‘t find concrete hints until I heard a German online marketing podcast about GSC. The guest expert named the search analytics report as the number one feature in GSC. In the research before I probably looked in the wrong places. But this was a very strong signal that this core assumption holds true.
What triggers potential customers to search for a solution you provide?
I can think of multiple types of triggers. With time tracking, it‘s constantly feeling the pain each working day. But it also could be a move of your customer‘s competition. Or maybe it‘s the lack of a specific feature in Excel that makes users search for alternatives. These are the situations you can use in your marketing to attract attention.
Can you come up with trigger situations with respect to your business idea? No? Maybe you're not addressing a real problem. Or you're not knowing enough about your target audience.
Are your target clients even aware that they have the problem you are solving?
If not, reassure yourself a second time that they really have that problem. If you convinced that this is the case and your target clients just don't know yet, then be warned of the fact that you‘ll have to educate potential customers about it. This is risky in terms of time to invest and the length of the sales cycle.
Does your product or service directly improves the bottom line?
Strongly related to the question if your solution is seen as a cost or an investment. The closer you are at the money-making side of a business, the better the chance you can directly improve the bottom line. That makes everything easier for you. Higher rates or prices through value-based pricing, easier sales process and so on and so forth.
Where are your target clients looking for solutions when facing the problem you are solving?
Are they running some Google searches? Are they asking for advice in online forums? Are they asking people in their network for advice? Are they contacting companies from whom they already use products or services?
Don‘t underestimate word of mouth and asking for advice in personal networks. I think that‘s especially true when people are looking for an external consultant or freelancer.
In case of a service, are you offering a skill or a solution?
If you are offering a skill like frontend or Android development, you are offering a skill. I already talked about it in the questions above: you‘ll need to find potential clients who know how your skill will help them. So if you‘re offering a skill, try to network with persons that understand how your skill can be useful.
As a side note: when talking about networking, it is by no means always about potential customers. It is also about making other people (let's call them contacts) aware what you offer and some will become referral sources. From the top of my head that brought me at least three new customers.
Have you already made money solving the problem you‘re tackling?
This is not restricted to self-employed consultants and freelancers. It is a legit question if you are in a 9-to-5 job too. You‘re paid good money to solve problems as an employee. Going independent in the same realm is a viable strategy. Why? Because someone else is already paying your employer good money to solve the very same problem.
If you are about to offer a personal service, is it something employees of your target clients don‘t want to do or can‘t do?
I can‘t remember the blog post or tweet in which I stumbled upon this observation. Anyways, the gist is that companies hire outside help for two reasons. First, to get things done nobody within the company is willing to do. Second, to get things done nobody in the company is able to do. If you‘re offering a service that no ordinary employee at you customer likes to do, will you enjoy that stuff? Maybe yes. But more often than not you‘ll hate that stuff as well. In addition, you‘ll have lower status which makes things like negotiating rates harder as well.
On the opposite, if you can solve a real problem only few people can, everything becomes easier.
Whenever we are seriously considering to pursue an idea, we're facing a tough decision:
Should we or should we not start out on our new idea?
I've seen myself and other people jumping in too early, regretting it later down the road. I hope these questions will help me and you, dear reader, to make a better informed decision the next time.
In terms of writing, I omitted questions that revolve around ourselves. Questions like "Do I really want to serve this group of people?" are super important too. Maybe I'm writing a follow-up post.
Other than that, I‘m currently considering a new service offering. Thus I will probably put those questions into a spreadsheet and start trying to answer them. I‘m a hundred percent sure that I will uncover assumptions that need to be tested. If I decide to invest time into the idea, the next step will be to cold-outreach to people in the specific market.
At least for the question „Do you even know what the target market will be?“ I can definitely say „Yes“ :)