You’ve got an idea for a new product that you think is amazing. The thought of introducing it to the marketplace is so exhilarating that it keeps you up at night, and you can’t stop wondering, “Why hasn’t anyone thought of this yet?!” For some, these feelings of optimism and excitement around creating a new product are the seeds from which a flourishing business will grow. For others, they can result in less than desirable outcomes (e.g., a substantial loss of time, energy, and money).
What leads to these disparate outcomes? Of course, there are a variety of factors. But one thing that every entrepreneur looking to develop a new product ought to consider first and foremost, is whether the product idea is truly viable. And by this, I mean: Will the product sell, and can you build a profitable business selling it?
If you’ve decided to pursue the path of entrepreneurship by introducing a new product to the marketplace, here are five questions to ask yourself before forging ahead.
- Does your product meet a need? Many times, the idea for a new product is birthed from the creator’s personal experience — one where he or she has a specific need that isn’t being met by any items that are currently on the market. It’s important that you’re able to clearly articulate how your product meets a specific need. Sure, the concept might seem cool, or interesting but what problem does it solve? In what specific ways does it enhance the consumer’s life or experience?
- Who is the target market for your product? In other words, who do you expect will purchase your product? Try to gather as much information as you can about them and find out what they think about your idea. Personally, I think formal focus groups are a little outdated, but if you can reach out to potential customers via social media, or surveys or even through informal conversation, you can gather a lot of useful information. Some questions you might ask are: What do they like about the idea? What don’t they like? Would they buy it? If they would, how much would they spend? If they wouldn’t, why not? Be careful not to limit your research to friends and family, who might find it difficult to be honest if they’re not fans. In fact, you may want to ask others to gather data for you, as it’s sometimes difficult to be completely candid with the person who sees the idea as his or her “baby.”
- What is your unique selling point? What makes your product special? You’ll want to identify all of the aspects of your product that make it stand apart from the competition. How is it better? What does it do that nothing else in the market does? Will you compete on price, quality, style, size? Be prepared to clearly articulate what makes your product stand out from the crowd.
- How big is the market? Or, how sizable is the opportunity? Is it large enough to attract investment capital? Is the market growing? What are the trends and new topics in the market? Imagine building a new technology designed specifically to convert Beta to VHS tapes in 1996, just as DVDs were entering the scene. You don’t want to be that guy. Do your research so you understand the size of the market and its potential for growth.
- How much will it cost? You’ll need to do your research on what the costs are to bring your product to market. Some of the initial costs to consider are developing a prototype, purchasing materials, shipping, manufacturing, and marketing. Then, you’ll need to price your product such that there is enough of a margin to build a healthy, profitable business. Ultimately, you should develop a financial plan that details your startup costs, operating expenses, projected revenue, and funding sources.
When considering whether you will develop a product-based business, time spent carefully evaluating the viability of the product in the marketplace is time well spent. The clearer you are about how your product meets a need, who your target audience is, how your product is unique, how sizable the market is, and what the financials need to look like in order for you to build a profitable business, the better prepared you are for success.
Article originally appeared on theyec.org. Reprinted with permission.
YEC Urban is an initiative of the Young Entrepreneur Council (YEC), an invite-only nonprofit organization comprised of the country’s most promising young entrepreneurs. YEC promotes entrepreneurship as a solution to youth unemployment and underemployment and provides its members with access to tools, mentorship, and resources that support each stage of a business’s development and growth. YEC Urban’s members are successful minority business owners, entrepreneurs and thought leaders.