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BUSINESS IDEA ASSESSMENT

Assessment – a measure to evaluate or estimate the nature, quality, ability, extent, or significance of
something which in this case the business idea.

The business idea assessment is sort of a roadmap on where we should go in the world of business and
entrepreneurship.

The importance of assessing a business idea are as follows:

 To narrow own the many ideas that we can come up as our business venture
 To evaluate our idea with what is already established in the marketplace
 To have focus as to what idea should be developed into a venture
 It will give us a bird’s eye view on the ideas we generate

Here are some questions to consider for your business idea:

 Is there a market for your idea?


 Does the market have money?
 Is there a lot of competition?
 Can you come up with the funds it will need to support the business?
 Do you know how to market and sell your product or service?
 Can you easily bring your product or service to your target customers?

It is wise to assess or test the business first before plunging ourselves in starting a business.

Key points on Business Idea Assessment

In doing an assessment, questions play a vital role in gathering information. The following are key
questions that every budding entrepreneur should answer and help in narrowing their business idea:

 What is the best way to get it started?


 What is the income possibility for the idea?
 Are there additional needs and costs related to the idea?
 Deciding factors for the business idea to materialize:
o Level of Commitment – How committed are you in working for the business?
o Family’s Support – Does your family know about your idea? How did they take it? Family support
is a key morale energy supplier for every entrepreneur. A business is doomed to fail if the family
does not back you up with your business idea.
o Zoning restrictions – know where to put your business. Do not hesitate to approach your city or
municipal hall for most likely they have the answer for this.
o Seek “outside” help – every entrepreneur needs professional help. There’s no successful
business that is self-contained.
o Compatibility of business with personal lifestyle – Know what you can do best and love to do.
Most often, it is a great avenue for opening up a business if it is grounded on something that
you love to do.
o Level of personal satisfaction – domino effect of the previous deciding factor. The level of
satisfaction is an effective gauge of whether the business is a good business for you or not.
BUSINESS IDEA ASSESSMENT

Idea Assessment Process and Business Development

Here’s a schematic procedure as to how we should do in venturing a business. As you may have noticed,
almost two-thirds of the process focuses on idea assessment. Including here is the decision making part,
even in deciding, we must be critical in assessing whether the idea is good to go or not. Everything we
do in business should be precise and accurate.

Step 1: Initial Idea Exploration,


Identification and Assessment

As discussed, the origination of a new


business venture come from anywhere, it
can be from a boardroom or a kitchen table.
Regardless of the setting, you may want to
use this approach in formulating the
business concept – anytime during steps 1
and 2 you may decide that your idea is not
viable, you can abandon the idea and move
on to the next. Here are some ideas that
you may implement during this first phase
of the business development process:

 Form a project committee – as


discussed, do not be afraid or ashamed to
ask professional help. These people are
grouped together and form a project
committee in evaluating your business idea.
Creating a good project committee involves
bringing together individuals who have the
skills needed to investigate the idea and
carry through with business formulation if
the concept is viable.
 Formulate general business idea(s) or
concept(s) – define your idea and explain
why it has merit. The idea may involve filling an unmet need in the marketplace with a new
product, providing an existing product in a new form, producing a product that is better or
cheaper than the competitors, etc. Remember, the idea can only be viable if people are willing
to pay for it.
 Identify alternative business models or scenarios for the idea(s) – a business model describes
how the business will function in producing the product or service and providing it to the
customers. A business scenario is a logical assemblage of the essential business elements
starting with raw materials procurement, and ending with the sale of the final product, and all
the stages in between. In this way, the entrepreneur can have a bird’s eye view on what to
expect if ever the idea is transformed.
 Investigate the idea and alternative business scenarios – conduct an initial informal study on the
validity of the idea. Early in the process, this may be no more than a series of telephone calls to
BUSINESS IDEA ASSESSMENT

knowledgeable individuals or experts in the field of the business or market sector you wish to
penetrate. Does your idea make sense? Identify business scenarios or models for further
investigation and eliminate those that are not viable.
 Formal investigation – it is in this phase whereby we can conduct a pre-feasibility study or a
marketing study pertaining to the idea and various scenarios or models. This may involve using
consultants to investigate various aspects of the project. It may involve eliminating additional
scenarios or identifying new ones.
 Refine scenarios – select those which are viable for further study and eliminate the rest. As you
go through this step, you should have accomplished:
o Reducing the number of scenarios or models under consideration for further study.
o Refine the remaining scenarios / models

Step 2: Idea and Scenario Deliberation and Assessment

 Further refine scenarios – this is critical before moving on to the next phase of the business
development process. By now, you should have trimmed down your idea to one or a small
number of a specific and detailed business model that you want to assess.
 Conduct feasibility study – a feasibility study can provide a comprehensive and detailed
assessment of the market, operational, technical, managerial, and financial aspects of the
business project.
 Analyze the feasibility study – upon finishing or receipt of the feasibility report, determine first
the accuracy and completeness of the report, and not deliberate them immediately. Does it
address concerns that you want to address? Was there a thorough investigation on identified
critical issues? Challenge the assumptions and conclusion of the study. Only after you have
accepted the study as being complete and comprehensive, you can now move to step 3.
However, before proceeding to the said step, you should refine the idea and business model
even further to be sure.
 Further refinement of the business idea and scenarios – you began this step with refinement
and end it with refinement. It is common for feasibility studies to uncover new issues that need
to be investigated. You may see the need for further study on the said issues or on various
aspects of the business project. Therefore, you may need additional negotiations with your
consultants to expand the original scope of the study to cover these issues and concerns.
Afterwards, if you completely accept the results of the study an there are no more new
concerns to be addressed, you may proceed to step 3.

Step 3: Go / No-Go Decision

 Everything we decide to do can make or break a project. Therefore, this step is the most crucial
in the entire business development process. In a way, this is a point of no return. Once you’ve
plunged in the creation of the business, no turning back. If there are unresolved doubts or
reservation about the project, it is wise not to push through with it. So, it is imperative to have
an open, honest and thorough discussion before making the decision.
BUSINESS IDEA ASSESSMENT

 There can have a division in the committee; one group will push forward, and the other will say
no. This is common and their opinion is important. You should take an honest look at all angles
and all arguments presented. If the issues cannot be resolved, each side needs to go in their
separate ways with no ill-feelings against each other. At this point, the remaining committee
members should determine on whether they still want to pursue the business venture.
 Commitment is a very essential factor to consider before you proceed. Most beginners to
business development greatly underestimate the time and effort required to start a business.
Financial commitment, for example, by committee members at this point is a clear sign of
commitment in the creation of the new business venture.
 This step involves one of three possible decisions:
o Decide that the project is viable and move forward with it.
o Decide to do more study and or analyze additional alternatives.
o Decide that the business is not viable and abandon it.

Value Proposition

Competitive Advantage – a way of moving ourselves forward against our business competitors.

In the stage of idea assessment, we should have a statement to describe the competitive edge of our
product and service. This statement is called value proposition. Let us decipher the word and talk about
its definition:

If we talk about “value”, it means:

 Worth in usefulness or importance to the possessor, utility or merit.


 A fair return or equivalent in goods, services or money for something exchanged.
 Relative worth, utility or importance.

While “proposition” means:

 The act of offering


 That which is proposed or offered
 Something offered for consideration or acceptance

Combining these, we get “Value Proposition”, that means:

 An act of offering something that has worth in usefulness or importance to the processor, utility,
or merit; or
 An offering that has a fair return or equivalent in goods and services or money for something
exchanged.

As a business term, “Value Proposition” means:

A statement that summarized why a customer should buy the product or use the service – meaning that
this statement should convince potential customer that the product or service that you offer will add
more value or solve the problem better than the other similar offerings.

It should be concise and appealing to the customer’s strongest decision-making drivers.


BUSINESS IDEA ASSESSMENT

In summary, a value proposition is an offer to some entity or target in which they (the possessor) get
more than they give up (merit/utility).

Examples of Value Propositions:


SM – We’ve got it all for you
IBM – Global solutions for a small planet
Visa – It is everywhere you want to be

Components of an “actionable” Value Proposition:


 Customer Objective – what specific objective(s) are they trying to solve in their language?
 Your Offer – what is your offer that will assist them in achieving that objective?
 Differentiators – how does your offer stand out from other options?

Value Proposition Diagram

Crafting the Value Proposition (Determining Content)

1. Internal Analysis
a. In looking at the value chain (internal logistics > operations > external logistics > sales and
marketing > service), how does your company create value?
b. What are your company’s core competencies and how do you differentiate yourself from
the competition?
c. What capabilities (internal and external – partners, alliances, joint ventures) can you bring
to bear to execute against your value promise?
d. Why should your value targets accept your particular offer?

2. External Analysis
a. How do your value targets quantify (measure) the value that you deliver?
b. How do you link your value proposition to your target’s needs and pains?
c. How do you compare and differentiate the value that you deliver from the value of your
competitors?
d. How do you substantiate your ability to deliver on your value promise?
e. How can you increase the return or decrease the risk, or both, in creating and delivering
higher level of value?