9 Key Characteristics to Consider When Evaluating a New Business Idea – Expert Opinions

When it comes to evaluating a new business idea, what characteristic matters most? Nine seasoned professionals, including CEOs and founders, share their insights. From the importance of simplicity over complexity to why a margin profile provides safety, discover the key factors these leaders consider crucial in their evaluation process.

• Simplicity Over Complexity

• Core Competency for Execution

• Competition Validates Demand

• Scalability Ensures Viability

• Time to Profitability Matters

• Clarity of Concept Attracts

• Financial Sustainability is Key

• Market Awareness Decides Viability

• Margin Profile Provides Safety

Simplicity Over Complexity

When evaluating a new business idea, the dominant characteristic that outweighs all others is complexity. 

Unless you have nearly unlimited access to capital, complexity is death for business ideas. Complex products and services are a nightmare to market, sell, onboard, and retain customers, as considerable resources are required just to make sense of the offering. 

Complex offerings are, therefore, best left to established players who have the resources required to properly compete in that space. 

Simpler offerings, however, can start small and require very little additional resource to get off the ground. This means you can test the waters and gauge interest without going all in right from the start, reducing the level of risk substantially.

Oliver Savill, CEO and Founder, AssessmentDay

Core Competency for Execution

I focus on core competency. The reality is that the vast majority of successful businesses are not successful because they have better ideas than everyone else. Successful businesses execute better. That's why I need to make sure that those looking to start this new business have the appropriate skill sets to execute at the highest level.

If you're thinking of starting an autonomous delivery company but you don't have the engineering skills or the capital to acquire people who do, your great idea will go nowhere. Figure out your core competencies as an individual or organization and only pursue business ideas that align with those core skills.

Temmo Kinoshita, Co-Founder, Lindenwood Marketing

Competition Validates Demand

Competition matters significantly when evaluating a new business idea for several reasons. It validates the demand for products and services. If there are successful competitors in the market, it means there is a customer base willing to pay for such solutions. It reduces the risk associated with entering a completely untested market.

You can understand customer behavior and preferences before actually entering the market with your new business idea if you analyze competitors. By studying what works and what doesn’t work for competitors, you can tailor your products to meet customer needs effectively. Understanding the pricing strategies of competitors can help a new business set competitive prices.

However, it is essential to offer value to customers while ensuring profitability. A competitive price also prevents overpricing. You should also analyze the market share of competitors. I did it before entering the market with my idea. I captured the micro-niche market.

Yogesh Kumar, Digital Marketing Manager, Technource

Scalability Ensures Viability

The one characteristic I look for when evaluating a new business idea is scalability.

The reason I look for this is that it gives me the most confidence in the long-term viability of that business. If the business can be scaled, then it will grow and expand, so my investment will be secure.

In my experience, I've found that if a business has high margins and low competition but isn't scalable, then it won't last very long. This is because the company will have trouble keeping up with customer demand as it grows—and if they can't do that, then they're going to lose money fast.

On the other hand, if a company has low margins but can scale well enough to meet customer demand as it grows over time—even if there may be some setbacks along the way—then it's much more likely that we'll see success down the road.

Zoltan Fagyal, CEO, Not Just Laptops

Time to Profitability Matters

The characteristic that stands out most to me when evaluating a new business idea is the time to profitability.

Launching a new venture always comes with a set of expenses, and the longer it takes to turn a profit, the more strain it places on resources and patience. 

A profitable business quickly transforms from a liability into an asset. With profitability achieved, I have the leverage to make critical decisions. This includes evaluating its potential for scalability, or even contemplating if the right move is to sell or further invest in its growth.

A quick path to profitability not only safeguards my investment but also opens up a plethora of opportunities for the future.

Domenico Trimboli, Freelancer and Business Owner, Domenicotrimboli.com

Clarity of Concept Attracts

The characteristic that matters most to me is its clarity of concept, specifically, how easily it can be explained. An idea's simplicity in communication is crucial because, if people can't readily understand the value proposition in a few sentences, it becomes challenging to garner interest and support.

An easily explainable idea not only attracts potential customers and investors but also helps in building a strong foundation for the business's growth and success.

Matias Rodsevich, Founder, PRHive

Financial Sustainability is Key

Financial sustainability is the most important factor I consider when evaluating a new business idea. While scalability and competition are important, at the end of the day, the numbers have to add up. But it's not just about knowing how much seed money is needed or the overhead costs. It's about dissecting projected income versus expenses and understanding your total earning potential over different periods—be it one month, three months, or a year. 

Financial sustainability serves as the foundation upon which we can build other business elements. Without a clear pathway to sustainable profits, even the most innovative or scalable ideas risk falling by the wayside. So, before diving headfirst into a new venture, I always ensure the financials are sound and promising.

Gary Gray, CFO, CouponChief.com

Market Awareness Decides Viability

When evaluating a new business idea, "market" becomes the deciding factor. We don't mean competitors or product reach by this term. Instead, we focus on market awareness of the product. For instance, if the new idea is disruptive, there's probably no market, and we have to create it. Our focus should not be on perfecting the product but on finding the right market for it. This will determine if the idea will be viable in the long run. 

Similarly, we study a saturated market to identify the gaps and how the idea fills them. We don't have to create a new product; we just have to fill the gaps to be successful.

Neal Topf, President, Callzilla

Margin Profile Provides Safety

The margin profile of a new idea is very important. Value investors throw around the term "margin of safety," but that's really what a margin is; it's the safe space you have to experiment and learn along the way. Ideas with tight margins have to be amazingly well-executed, and that's always tough when an idea is new.

Trevor Ewen, COO, QBench