The practical guide to evaluate your startup idea

December 2020

What is a startup idea anyways?

A startup idea is a problem you want to solve. A startup idea is not a solution and it is definitely not a collection of features. Those should come after you figure out what problem you ought to be solving.

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The way to get startup ideas is not to try to think of startup ideas. It's to look for problems...

Paul Graham

Cofounder of Y Combinator

In my experience, first time founders focus on solutions, seasoned entrepreneurs know to focus on problems. So before you go any further make sure you are trying to solve a problem and are not fixated on a solution, or worse on a collection of features.

Evaluating your startup idea with a flowchart

Assuming you are focused on a problem, how do you evaluate whether it is worth pursuing it? You should first consider if the problem is worth solving. Then you should figure out if you and your team are the right person/people to solve it.

Those questions are too high-level and as mentioned we don’t do high-level at Practical Startup Guide. So we broke them down to their pieces and visualized the questions you should answer as a flowchart.

1. Do you personally feel the pain?

If you are experiencing the pain yourself you understand it better. It becomes easier to craft the right solution for the problem and to market your solution effectively. Plus, not all problems are real problems. Sometimes we want to start a startup so bad we invent problems for the solutions we want to build. These startups almost always fail. If you are experiencing the pain yourself a problem is probably real.

Mitigation strategy: Sometimes you don’t have the pain yourself, but you observe others having it. In that case ask yourself how close you are to these people experiencing the pain. Will they let you into their world so you can understand the root causes of their pain? Without understanding the root causes of their pain, you won’t be able to build the right solution or market it properly.

2. Is the pain acute?

Pain has levels. You need to make sure the problem you are trying to solve causes acute pain. A good rule of thumb to figure out if the pain is acute is to see if you, and others you talk to, use the word “hate” accompanied by a healthy amount of profanity when describing the current status quo.

For instance, before Slack came around a lot of people used to say “I hate email.” Most would throw in an f-bomb in there for good measure: “I fucking hate email”. That pain was acute.

If, on the other hand, you catch yourself and others merely not liking something, then the pain is probably not acute enough to lend itself to a successful startup.

Show me the money: This question indirectly covers another one: can you make money from solving this problem? If the pain is acute enough you can make money. You can either charge for your solution, or put together another business model, like advertising, which your users would be willing to tolerate to keep using your products.

3. Do lots of others feel the same way?

This question tries to answer two questions simultaneously. Is the market big enough? And does a significant portion of the market feel the same way about the pain the way you feel about it? In MBA-speak this is the difference between Total Addressable Market and Serviceable Available Market. You need to have a large enough SAM. Having a large TAM is a prerequisite for having a large SAM, but it does not guarantee it.

Show me the money: This question, together with the previous one, covers how much money you can make. The pain being acute tells us that if a person is part of your target audience they can be monetized. A lot of others feeling the same way about the pain tells us that there are enough people in your target audience for you to be able to make meaningful revenues.

4. Is there an opening in the market?

If there is an acute enough pain felt by a lot of people then there usually is an opening in the market. Otherwise a lot of people would not be feeling the pain. The trick is to be able to spot it.

One way to think about the opening in the market is to ask yourself what is the one piece of unique insight you have about this market that others have not figured out yet. That is your opening. This is not always easy to spot so we’ll dedicate a separate guide on how you can spot openings in the market. In the meantime, try and understand the root causes of the pain. That helps with figuring out the opening.

5. Do you have the right skills?

If all the above conditions are met then you need to figure out if you are the right person to pursue this opportunity. The first question you should ask yourself is if you have the right skillset.

For most digital businesses you need similar skills. We have a guide that goes over what these skills are: The practical guide to the skills you need as an entrepreneur. We encourage you to read it, but we'll also provide a summary here: you need to be able to design and build your product or service, analyze its performance and iterate, and be able to market and sell it to your first batch of users. If you can do those things the rest, like recruiting and raising money, will come easier.

Mitigation strategy: What if you don’t have the right skills? People who don’t have the right skills do one of three things: (i) they deny that the skills they are missing are necessary, (ii) they try to recruit others to do it, (iii) they try and learn the skills they are missing. Don’t do (i) and do (iii) before you do (ii).

Eventually you will hire experts to perform the tasks in their areas of expertise, but initially you ought to be intimately familiar with all aspects of your business. Also, you can’t successfully hire for a position which you’ve never performed and have any of the skills. How would you even correctly gauge what is required?

In short, you should try acquiring the skills first before recruiting for them. Practical Startup Guide currently has one guide focused on learning to code: The practical guide to learn coding. We’ll add additional guides soon.

Finally, the people you do recruit don’t need to be all employees. They can be cofounders, advisors, investors, or even part-time contractors.

6. Do you know the right people?

Your know-who is as important as your know-how. Knowing the right people will help you recruit a more effective core team. It will make it easier for you to acquire your first users/customers. It will help you raise money easier. When you are stuck you will be able to get good advice. It is like having super powers.

Mitigation strategy: What if you don’t know the right people? You should try and meet them and form relationships with them. We’ll dedicate a separate guide on tactics to help you develop your network. If you can’t develop your own network make sure to add team members who can compensate for this weakness. These people could be core members of your team as well extended members like advisors and investors.

7. Are you willing to move heaven and earth to succeed?

This is the final check. You have to have the right attitude to succeed. Some people call this hustling, others call it being scrappy or resourceful. I call it being ready to move heaven and earth to succeed. Even if everything else checks out, if you are not willing to move heaven and earth to succeed I recommend you do not pursue your startup idea.

What if you decide your idea is not worth pursuing?

Don’t give up. Come up with other ideas until you find one that is worth pursuing. We'll have a guide on how you can spot startup-worthy problems to tackle : The practical guide to find startup ideas.

Concluding thoughts

• As mentioned we will be adding other guides to go into more depth about some of these subjects. You can follow me on twitter to get updates on our progress with these guides.
• If you'd like to see how this guide works with a real-world example check out my blog post : How I evaluated Tenxhired as a startup idea. I explained how I used this flowchart at my startup : Tenxhired.
• For this flowchart to work you have to answer these questions objectively. That is tougher than it sounds. I recommend you have someone you trust, someone who is not afraid to hurt your feelings, validate your answers.
• Also you can’t answer some of these questions unless you interact with your target audience. So start talking to them as early and as often as possible.