A Basic Tool to Evaluate Your Business Idea

Like many other aspiring entrepreneurs I would use the internet to give me inspiration for generating ideas. I would often come across a number of different opportunities but with a lack of entrepreneurial experience I was unsure as to whether the idea would work or if it was right for my personal circumstances. These questions led me onto my next quest. How can I evaluate ideas in an objective manner? I was conscious that when you are an aspiring entrepreneur you emotions can get the better of you. You get a sudden flow of ideas and immediately think they all have the potential to succeed and make significant profits. In addition to this you may have a number of different ideas regarding the direction to take your business idea but aren’t sure which direction one to go with. Even for the experienced entrepreneur this can be a challenge.
The tool that I feel can answer all of the above questions is one that I first came across in my college days when studying Business Studies. It is called a SWOT analysis and is an anagram that stands for (s)trengths, (w)eaknesses, (o)pportunities and (t)hreats.
Lets start with the first part of the SWOT analysis which is strength. This is an internal factor and refers to what the business is currently doing well. Or if this is a hypothetical business idea what are your strengths? What can you do well? For example what skills do you have that are particularly suited to this potential venture? Think about the things that you are able to offer that your competitors wouldn’t be able to. In other words do you have a unique selling point (USP)?
Next is weaknesses and again this is an internal factor. What is it that lets this business idea down and more importantly can it be repaired? If the idea lacks resources or there is a gap in your knowledge then can this be fixed? It is very important that you are honest. Try and think what others would say is weak about the idea.
Opportunities and threats refer to external factors. When considering opportunities you need to look into the future. Are there any changes in technology which could provide further opportunities such as allowing you to provide more services, better value for money, or operate the business more efficiently? How could you attend to the future needs of your customers.
Finally threats are any external factors which could affect the future success of your idea.Think about are you over reliant on one product? Could future competition affect your USP? Again honesty is very important when completing this.
It is important that when you complete a SWOT analysis you are honest. By nature it is a subjective tool however it will only be efficient and help you succeed if you are honest and realistic. It may be a good idea to ask an independent person to look at your SWOT analysis to see if they agree with it.