9 criteria for selecting your best business idea

When I am considering a new business idea, I have certain criteria I check against.

Some of these I never budge on, and others may carry more or less weight depending on the particular situation or my goals with the project.

It’s really helpful to have a framework like this in place that I’ve thought through previously to make the process simpler and quicker when a new idea surfaces.

I think everyone should think these through for themselves before committing to an idea:

1) Must have existing competition

Creating a new market is incredibly difficult, something the bootstrapper generally wants to avoid attempting.

These types of businesses require a lot more resources and funding. The presence of existing competition means you don’t need to validate the idea itself.

We talked more about this last week.

2) No third-party platform dependency

My goal in creating a business is to build something I have control over. Something that can’t be taken away from me at a moment's notice (like a 9-5). I therefore don’t want to be dependent on another platform for controlling what I can and can’t do.

A good example of this is recently, after Elon Musk took over Twitter, they started charging astronomical amounts for use of their previously free API. Overnight, this killed many software businesses and apps built on Twitter.

This is not to be confused with integrating with other platforms, or the use of third-party platforms at all. I have no problem using Stripe as my payment processor, for example, as I could swap that out if needed without risking my business as a whole.

3) Can be boiled down to a single high-value problem

As a solo bootstrapped founder, or small team, I want to minimize my initial build-out, and this is best done by solving a single problem very well.

This is the difference between trying to compete with Zapier and all of its workflows, versus making the best damn version of a single automated, high-value workflow

If we do that, we can get it into the market fast, get early customers, get feedback, and expand.

4) Good price point

The pros and cons of various price points are fairly obvious; the lower the price point, the more customers you need, and may or may not be an easier sell (depending on the customer type).

I like to look for problems with a price point averaging $49 (or $99 ideally) a month or more, or the ability to grow into that price point.

5) Not a fad

Fads can’t be predicted, so we just have to make a judgment call here and know what you’re comfortable with.

Are you looking to build a sustainable business or are you okay with possibly riding a short wave?

I’m looking to grow a sustainable business for the long term.

6) Would I be a customer?

In many ways, it doesn't matter to me whether I'm building a product that I am the end user of or not.

However, I know that of the dozens of apps that I've built, the ones that I've also been a user of have ended up dramatically better in terms of user experience.

You can learn a lot from talking to your customers and watching them use your product, but it's nothing like being a user yourself.

7) The market is easily accessible (to me)

The biggest mistake most early bootstrappers make is focusing on building and putting off the marketing to be figured out later.

The majority of the time, they realize they have no idea how to market or distribute this application. This is when they shut it down and decide to move on to something else.

So I need to know that I can find and get in front of the market I'm planning to target.

If you’re already immersed in an industry, you may know the market is accessible to you.

Other times, this requires validation, and it’s worth doing some early tests to ensure you can capture the attention of our intended audience before building anything.

8) Is the solution mission-critical?

The more mission-critical the tool is, the higher the value (the more you can charge), but also significantly more pressure on you to deliver.

And when things go wrong, it can be incredibly stressful and scary, and you’re likely to be facing a lot of angry calls and emails very quickly.

On the other hand, a non-mission-critical application may not be as valuable, but your life is likely to be significantly more enjoyable and less stressful.

I can tell you from experience, that running a mission-critical application can take its toll. I therefore lean heavily into the non-mission-critical camp now.

9) B2B versus B2C

B2B products are sold to businesses, while B2C products are sold to customers.

B2B is often considered preferable (in short because businesses are more willing to spend more money). These lend themselves to SaaS apps, which are popular for their recurring revenue. For most of my career, I've built B2B apps and focused on SaaS.

However, I was recently listening to an interview with Danny Postma, who has several successful B2C apps. He convinced me that selling B2C has great advantages, especially his one-off B2C apps that generate most of their sales through SEO. While he doesn't have recurring SaaS revenue from the same customers, he does have recurring revenue due to the steady search traffic to his sites.

Some benefits he points out about this product type are less customer support, non-mission critical nature, and if they don't work, someone just moves on. This contrasts with something breaking after a customer has been paying for it for a year, resulting in a very different situation.

⛰️ Challenge of the week

For those of you in the ideation stage, go through the above items, and write down which of them are important to you and where you stand on each.

Then as you’re considering pursuing an idea, check it against those criteria. It’s a great way to efficiently vet your ideas to decide if they’re worth investigating further.