To estimate just how brilliant your idea is, run it through the following list. The better it measures up on these points, the greater its potential.
1. Degree of uniqueness
The more unique your idea is, the better. Someone might argue that unique is unique – meaning one of a kind, distinct from everything else. There’s really no degree involved. However, what we’re discussing here is really HOW distinctly different your idea is, when compared to all other ideas afloat in the same general market. It’s
not crucial that your idea be fundamentally different; it can be a new twist or fresh perspective on an existing concept. Go back to check the six parts of a unique idea, listed in chapter 2.3.
2. Proof of concept
If there is already a proven market for your idea, then it’s clear there are customers willing to pay for what you offer. That is, if there are already companies offering a similar product or service to yours, and they have an active and expanding customer base, then there is an active pool for you to jump into. With effective marketing, there will be buyers. Knowing something about the existing market makes costs, turnover and profit more predictable.
3. Entrance barrier
Where a market has a high barrier to entrance, but you already have a market presence (that is, you have already entered), circumstances are stacked in your favor if you intend to introduce a new idea. You have an advantage over any prospective competitor who has no prior established presence. Such a newcomer faces an uphill battle, just to break into the market at all. So if one should attempt to enter, you will be well aware of them long before they become much of a threat. You’re free to concentrate on improving your position relative to your already-established market competitors. By contrast, a market with a low entrance barrier (such as where the product or service in question is easily, inexpensively copied) is wide open to new entrants.
4. Potential for market disruption
An idea’s potential for disrupting the existing market is an important factor in determining how brilliant it is. A brilliant idea will shake up the way people think about a product or service, how they interact with that product or service’s provider, or both. Competitors are already heavily invested in their offerings and their delivery structures. They are, to a greater or lesser degree, locked in to their existing set-up. They cannot easily change their offering to copy your new idea. Take Skype, as an example. When Skype first launched free phone service for anyone who wanted it, there was no way for existing phone companies to offer anything even remotely comparable.
Just a few years after entering the market, Skype was sold for billions of dollars. They did not reinvent the phone – just the way we use the phone, what we expect in terms of quality, and how we pay for phone service.
5. Potential for subscriptions
Companies with a product or service that can be sold on a subscription basis are in an excellent position when
it comes to stable and predictable cash flows. Not all products and services are “subscriptionable,” but examine yours carefully and see if there is a way to adjust your business model to include subscriptions. A recurring income stream is highly prized by investors. It Simply gives you predictable and measurable income.
6. Stocks and inventories
If you sell software licenses or other digital products, your stock-on-hand is virtually limitless. This means your marginal cost over time is zero. You can sell your products for $1 or $1,000, without running out of stock. This is a very interesting factor; it means you can market slight variations of the same basic product to different types of customers, who have different concepts of price point and degrees of buying power.
If your idea is sufficiently scalable, and scaling can be done cost-effectively, it’s possible to serve a large and continually expanding market. If your offerings have global appeal (or can be made globally appealing) the potential for market expansion is nearly limitless.
Obviously, the ability to show a profit – and to increase profits over time – is a clear indication of the brilliance of a company’s idea. Some investors do not particularly care about profit; most do, though, and will see profits as a good indication of a sound business model and good future potential.