I’ve been helping a friend evaluate a list of business ideas. At first glance, all of the ideas sounded viable, so to dive in further, I wanted a framework that we could use to differentiate between each idea based on key metrics and eventually choose one to work with.
I did some research and found that the existing options were extremely generic. The Lean Canvas seems to be the most-used framework nowadays, but I found that woefully incomplete and broad. I looked at about a dozen alternatives to the Lean Framework, and found those inadequate as well.
This must be the most well-trod aspect of the startup world… how has no one ever developed a comprehensive framework to evaluating a business idea? So I decided to just do it. That’s the whole point of a market gap, right?
A Comprehensive Framework for Evaluating any Business Idea
- What is the problem you’re looking to address?
- Are there actual indicators that this is a widespread problem, or does it just seem like a problem?
- How does your idea address the problem?
- What is your specific value proposition to your customers?
- Write down all known competitors and alternatives and the pain associated with each of them.
- Is your idea at least 5-10x better at solving the problem than the current alternatives?
- Is your idea just better version of what’s out there, or is it a complete game changer?
- Example: Prius (25% better gas mileage) or a Tesla
- Why do you as an individual have an unfair advantage over anyone else who might start this business?
- If you don’t have an unfair advantage, what resources are you going to have to expend to get it? Think money, networking, partnerships, co-founders…
- How will you acquire customers? Marketing? Sales? Which specific channels?
- Is there any opportunity to create network affects for easier customer acquisition?
- Who is your ideal customer?
- What is your realistic addressable market, in dollars, of early adopter customers?
- What is your total addressable market that could ever be captured (note that if you have a niche product, this should only represent the specific segment you’re targeting)?
- Is the market growing? Shrinking? By how much?
- How desirable do you think your business is to your ideal customer (is it just a cool idea to them, or when the time comes, will they actually put their money where their mouths are)?
- What are your revenue stream(s)? What is the cost structure/pricing model for each?
- How much startup capital will be required?
- Where would you source this capital?
- Will you need partners? What types, and what is your plan to get them on board?
- How will the product be manufactured?
- Will you own/manage primary manufacturing channels?
- If not, what costs are involved in paying distributors?
- How will the product be distributed?
- Will you own/manage primary distribution channels?
- If not, what costs are involved in paying distributors?
- How excited would you be about dedicating your life to this business?
- How feasible is the product rollout? Are there a bunch of risks, or would it be pretty easy? Do the potential rewards outweigh the risks?
- How would you validate this idea in 1-3 months to determine if it’s worth pursuing further?
- How would you create your minimum viable product?
- What is the plan for the business to become profitable, in detail? How long might it take to become profitable?
- What possible pivots exist that might emerge from this business to capture greater market share?
- What are all the different ways you could fail along the way?
TopScore Example
Here’s each part of the framework using the example of my company, TopScore, if we were to have completed this exercise as we were getting started in 2011.
What is the problem you’re looking to address?
Sports organizers spend countless hours collecting paper registration forms, juggling checks and cash, sending manual e-mails to their participants, and doing schedules and scores on spreadsheets.
Are there actual indicators that this is a widespread problem, or does it just seem like a problem?
Absolutely. We’ve organized and run sports leagues and found managing them a total pain. We wish we were just out playing. We’ve talked to other organizers that feel the same way.
How does your idea address the problem?
TopScore is a sleek, functional software-as-a-service platform allowing for easy online registration with integrated payment processing, liability waivers, an automated mailing list system, and an automatic scheduler that allows for online score reporting.
What is your value proposition to your customers?
TopScore saves sports organizers time and hassle by automating previously-manual processes.
Write down all known competitors and alternatives and the pain associated with each of them.
There are some solutions that exist, but they don’t capture a large part of the market. They mainly have outdated technology and aren’t mobile-friendly. Examples include Active Networks, LeagueAthletics, and SportsNgin.
Is your idea at least 5-10x better at solving the problem than existing solutions? Is your idea just better, or a completely different gamechanger?
We’re not a gamechanger, but we are quite a bit better in terms of technology.
Why do you as an individual have an unfair advantage over anyone else who might start this business?
We can immediately capture the ultimate market, because there’s currently no ultimate-specific solution and we’re all ultimate players.
We also have better development capabilities than our competitors. They’re using antiquated technology, and we believe we can build a better-looking product with more intuitive UI.
How will you get customers? Marketing? Sales? Which specific channels?
We will go to the Ultimate Organizers Conference and present our product directly to customers. Otherwise, we’ll rely on direct sales via email and phone.
Is there any opportunity to create network effects for easier customer acquisition?
Absolutely. Our software will have a unique network model where one user account can be used across the entire network. Because ultimate players often travel to different communities to play, they will be impressed by the platform and look to bring it back to their home communities.
Who is your ideal customer?
A forward-thinking ultimate organizer that is in our network or even knows us personally, that is currently doing things manually.
What is your realistic addressable market, in dollars, of early adopter customers?
We estimate we can generate $100K per year in revenue from our early adopters.
What is your total addressable market that could ever be captured?
Ultimate: $4 million
Niche sports: $40 million
All sports, United States: $4 billion
All sports, Global: $24 billion
Is the market growing? Shrinking? By how much?
Ultimate as a sport is growing, and youth sports are definitely getting more expensive, which means more money for us.
How desirable do you think your business is to your ideal customer (is it just a cool idea to them, or when the time comes, will they actually put their money where their mouths are)?
Extremely. We think customers will sign up right away. Plus, there’s very little startup cost to them, they just need to point their domain at our servers.
What are your revenue stream(s)?
We’ll charge $1 for each registration and bill the total at the end of the month.
How much startup capital will be required?
We’ll bootstrap this by building it part-time while working our other jobs. Hosting costs will be minimal and we’ll use free services for internal tools.
Will you need partners? What types, and what is your plan to get them on board? How will the product be manufactured? How will the product be distributed?
We’ll develop and sell TopScore all by ourselves, with no need for external help.
How excited would you be about dedicating your life to this business?
Very excited! We already love ultimate (and sports in general) and this combines our passions of technology and sports.
How feasible is the product rollout? Are there a bunch of risks, or would it be pretty easy? Do the potential rewards outweigh the risks?
Very easy. We just need to develop, deploy code, and sell. If it fails, no big deal, we’ll just return to working full-time jobs.
How would you validate this idea in 1-3 months to determine if it’s worth pursuing further?
We’d like to have at least 10 customers committed in the first three months.
How would you create your minimum viable product?
We’ll consider TopScore usable when it contains registration, payment, and communication features.
What is the plan for the business to become profitable, in detail? How long might it take to become profitable?
Since our costs are almost nothing, we believe it could be profitable from the first customer sold. However, as we’d like to pay ourselves normal salaries, we hope to get to at least 100K in annual revenue within two years.
What are all the different ways you could fail along the way?
There honestly aren’t many ways this could fail. It’s a very low-risk play.
What possible pivots exist that might emerge from this business to capture greater market share?
We could capture all of the sports market. We could sell insurance. We could advertise to our users.
