There are 5 general rules to evaluating your initial business idea, and how well you answer these questions will depend on how well you've done your homework and researched your idea. Having said that, it will also influence how likely you are prepared to succeed with your idea.
RULE #1: IS IT A PROBLEM WORTH SOLVING?
Most people often overlook this first question. Maybe the idea suddenly hit you while you were at the gym and couldn't get it off your head, until you wrote it down. Or perhaps, you just found yourself struggling to complete a specific task and thought to yourself, why not create a product or service that will help? As much as these two situations can bring about great business ideas, just because in your perspective it is a great idea, does not necessarily warrant that it addresses a problem worth solving.To identify if it is a problem worth solving, you'll need to conduct preliminary due diligence by understanding the stakeholders involved, the industry trend, and estimate the size of the market going forward (if possible).The aim is to figure out if there are other people out there that face a similar problem, what they've done about it, is it a problem likely to be around for a long time, and are there any existing solutions or alternatives that you perhaps have not thought of.
RULE #2: IS YOUR IDEA INNOVATIVE?
Disruptive tech, AI, social media, the gig-economy, bitcoin, have been some of the buzz words of the 21st century business world. Many people are so focused on bringing the futuristic solve-all-problems product or service, without necessarily addressing the present problems. Certainly your idea should contain components of innovation, whether it means you are introducing a new business model in the particular sector (e.g. How uber democratises ride-sharing services, similarly Deliveroo, Airbnb, etc - which are by the way similar models operating in different industries), or perhaps restructuring and revolutionising a traditional business model that wasn't previously effective or profit-making. To put simply, you don't need to bring a "back from the future" product, but rather you should address and solve a problem differently than how it is being done today.
RULE #3: IS YOUR IDEA VIABLE?
Although these 5 rules are important to evaluate your business idea, Rule #3 is perhaps the most crucial. Viability means the likelihood that it is feasible, realistic and has potential for success. In essence, is your idea going to live or "make it" or is it probably not going to work. On the one hand, almost every idea has potential for success, however the vast majority of them will fail because of various reasons, such as the team, the lack of capital, competition, a market that is not ready for the product, poor delivery/distribution channels, etc. Viability is subjective and only you, and ideally with the input from other mentors or professionals who have been there before, can assess and determine if your idea is going to work or not. The best way to do so is to plan and refine your idea by sharing it with people who have the credibility, expertise and knowledge - and ideally someone who's already built successful businesses.
RULE #4: IS YOUR IDEA SCALABLE?
Scalability is simply the potential for your business idea to expand. Not every entrepreneur looks for scalability, many are just looking to create a lifestyle business that enables them to live comfortably and provide for their family, while still having some degree of financial independence and freedom. Others are looking for massive expansion and growth for the business, especially true in tech-based startups, whether by the introduction of new products/services, expanding into new markets, vertical/horizontal integration, mergers and acquisitions, etc. So this criteria of scalability depends on your aspirations, however, depending on your product or service, scalability might be a crucial factor that can often mean life vs death of your business. Read the 5 Stages of small business growth as identified in the Harvard Business Review.
RULE #5: HAS ANYONE ELSE OUT THERE DONE IT?
Lastly, as anyone else attempted to make a business with a similar idea as yours? If yes, how did they do it and how are they doing? If no, look into adjacent industries, what are key lessons that you can draw from them? Going back to the "gig-economy" concept, although Deliveroo operates in the Food industry, Uber uses a similar concept but in the ride-sharing industry. That said, Airbnb also operates on a similar concept but in the Hospitality and Accommodation industry. At the end of it all, they are essentially platforms allowing peer to peer "trading" so to speak. Therefore, knowing if a similar problem has arisen in a different industry might allow you to adapt from these adjacent solutions to solve the problem at hand. And if others have attempted to solve the same problem, it is an opportunity for you to draw from their successes and failures and potentially do it all better.
Finally, here are a couple of books that will certainly help you think of an idea/business/product/service differently.
I hope this advice helps and don't hesitate to comment and share your thoughts on identifying a great business idea!