[This content is expanded in my upcoming eBook, How to pick a good SaaS idea: A pre-validation guide and evaluation checklist.]
For founders, this question comes up a lot:
“I have too many startup ideas. I don’t know which idea to focus on.”
It certainly did for me.
I have been building SaaS products for the last few years, with bad to mediocre results. Each one taught me something new. Each one revealed one or two factors about the idea that I wish I knew BEFORE working on it.
For example, if there is a HUGE population with the problem I'm solving, then there's a better chance of me surviving despite incumbents and competitors. Larger pie, more slices to go round.
If I had known how to evaluate these ideas beforehand, I would have saved a lot of time. It won't be a guarantee of success, but it would have helped increase my odds.
I wanted to know what else I should know before starting work on an idea, so I researched articles, podcasts and videos with successful founders to find out how they evaluate ideas.
The result is a 30-point checklist, curated from over 40 founders, that I want to share with you below. Use this checklist to evaluate your next startup.
This list allowed me to proceed confidently into the important step of validating my idea, by doing some up-front some research and pre-validation.
The intention of this advice is good, but, I feel this is misleading.
Given two ideas, executing on the one that has a better chance of succeeding will yield better results. Executing on a bad idea wastes time, money, and motivation.
Would you not want to know if an idea is a "good idea" before you spend lots of time and money trying to validate it?
If you think evaluating an idea before investing time and money in it isn't practical, then tell that to angel investors. They have to - they can't afford to give away money based on hunches. In their world, it's called due diligence.
"Ideas mean everything and nothing at the same time. They mean everything, because you can 10x your odds of success by simply picking a better one. They mean nothing, because with bad execution you'll achieve nothing, no matter how good the idea." — Alex West, cyberleads.co
So here's the list I'm using. I have grouped them into 3 groups:
- Must-haves: Don't even start without having all of these.
- Should-haves: The more you have of these, the better your chances.
- Nice-to-haves: Not essential, but really helps if you do have them.
Solves a very specific problem. What's the specific problem you are aiming to solve?
Targets a very specific niche. Which specific group of people has that problem?
Has a large enough market. How big is this market? Is it enough to meet your business goal? A large market also means there's room for competitors.
Will generate profit. How much will it cost to run this business, and will you be able to turn a profit? Obvious, but a surprising number of founders don't work this out until much later!
Can operate profitably without the founder. Can this business grow profitably without you?
Solves my own problem. Are you building this for yourself? Great start if you are!
"Hair on fire" problem. Will your customers need your solution urgently? Or is it not that important?
Frequently occurring problem. How often does someone have this problem? Hourly, daily, or at most weekly, would be best.
Growing market with this problem. More and more people are having this problem every day. More and more people will want your solution.
This is a mandatory problem. For example, this there's been a change in law and your customers need a solution. Like GDPR.
Customers are small businesses. These are the best customers to have because they have money, are motivated to spend, and has short lead times.
Founder has built an audience in the target group. Do you already have followers or subscribers that have this problem?
Can be launched quickly. The faster you can launch, the quicker you can learn, and the quicker you get to revenue.
Clear customer acquisition channel. You can think of at least one obvious way to reach your target customers and offer your solution.
Founder - market fit. Do you know this market well?
Founder - product fit. Are you the right person to create this solution? Do you need to build a team?
Founder unfair advantage. Are you one of only a handful of people who can build on this idea? E.g. you own a patent.
You love serving this market. Will you enjoy talking to and serving this group of customers day in and day out? Do you genuinely want to help them?
Market is proven. Are people already paying money to solve this problem? Are your competitors making tonnes of money?
Arduous but not impossible. Is this a problem that not many people want to solve because it's so troublesome? Is it a solution that requires a lot of "schlep"?
Unique value proposition. Are you providing a novel solution to the problem? Perhaps focusing on a small part of the bigger problem and providing a focused, but effective, solution?
Can be a sellable asset. Can this business become an asset that you can sell later?
No monopolies. Are the incumbents monopolies that can wipe you out in 2 seconds?
Market is highly motivated. The market is willing to spend money on anything that will improve their lives or work.
The market has the purchasing power. They have the money to spend on your solution.
Able to pre-sell the solution. Are you able to pre-sell the solution, as a way to validate demand?
The problem is not sexy. Sexy products get people excited, but also attracts more competitors. There's money being made on problems that don't get mentioned in TechCrunch or Wired.
The solution is simple. Is your solution simpler to understand and use than your competitor's?
Target customers exist as communities. Do your customers hang out online together? This helps with word of mouth traffic.
Quick time to first customer. Are you able to get your first paying customer within 4 weeks? Or quicker, relative to your other ideas?
To make it easy for you, I have created a checklist in a Google Sheet with all the criteria above.
Just make a copy of it and then use it to quickly tick off attributes of your idea, and to find gaps in research that you may need to do.
I've included one idea as an example - a simple Shopify analytics app for store owners.
Here's how I use the evaluation sheet:
- As a way to score and compare my ideas before I pick the next one to work on. For this, I assign points to the criteria in each category and then just sum up the ones that the idea has.
- As a checklist for questions I should be asking myself.
- As a way to evaluate other people's ideas, when they ask, "do you think this is a good idea?".
"The Idea Matters - A bad idea, executed well, will not make a good business" — Dan Norris, The 7 Day Startup
This post is a short version of a guide and evaluation tool I am creating titled "How to pick a good SaaS idea: A pre-validation guide and evaluation checklist", currently on pre-order.