How to Tell If Your Ecommerce Business Idea Will Work

If you’re ready to start a business or online store, what’s your first step? Many aspiring entrepreneurs would answer “build a website” or “buy inventory.” However, before you do any of that, you need to take one absolutely critical step - figuring out whether or not your business idea is actually viable.

Determining the viability of your ecommerce business idea might sound complicated, but it’s actually pretty easy. To figure out whether your idea will work you’ll need to answer 3 major questions:

  • Will people actually buy what you’re selling?
  • Will people pay enough for your products to make them profitable?
  • Is it possible to set up the business from a legal & logistical standpoint?

If you answer yes to the questions above, you’re ready to get started. If any of the answers are no, you might need to go back to the drawing board. We’ll walk you through how to put your ecommerce business ideas to the test and make sure that they’ll actually work before you invest a lot of time or money.

In this article, we dig into the research and questions you need to answer, as well as tactical tests you can run to gauge how viable (or not) a business idea is.

Why Testing Your Idea is Important

Before we get into how to prove viability, let’s talk about why it actually matters. The most obvious reason is that if you’re going to sink time and money into this business, you should know upfront how likely you are to find success.

Beyond that, if you ever need to secure outside funding (like a bank loan or venture capital investment), business viability is a big part of how investors will value your business. They want to know that your business is capable of earning enough money to repay their investment or loan.

Testing for business viability can also help you identify blind spots and areas for improvement as you build the foundation of your business.

Testing for business viability can also help you identify blind spots and areas for improvement as you build the foundation of your business. It’s a good practice for fine-tuning your value proposition and product positioning before you go to market. So you’re fully prepared and in the best possible position when you launch.

Do Your Research and Ask the Right Questions

Determining whether or not your business idea is viable breaks down into two key phases:

  1. Research
  2. Testing

Viability research involves taking a deep dive into the current marketplace around your product or service (if there is one already) and the challenges consumers face. Doing the research upfront ensures that you have the most viable idea possibly before heading to the testing phase.

If you ask and answer the right questions during your research, you’ll have a refined product and service to test.

If you ask and answer the right questions during your research, you’ll have a refined product and service to test — and that means the results of your viability tests will be as accurate and actionable as possible.

In an article for Foundr, Daniel DiPiazza outlines the three broad questions you should look to answer when researching a new business idea:

Founder and Inc. contributor Ilya Pozin notes three important signs your business idea is worth pursuing:

  1. The business relates to or eases a point of friction in the market
  2. The idea stands out (really) among competitors and similar offers
  3. It contributes to a better world

Let’s dig into our take on those three big questions.

Are you solving a genuine pain-point?

The number one question of business viability is whether or not you’re actually making customers’ lives better. Your product or service doesn’t have to radically change your customers lives — but it does have to make a difference. Are you enabling them to do something faster or easier?

The best way to answer that question is to go directly to the source — by talking to customers (or your potential customers) directly. Customer interviews and surveys are one of the most valuable resources business owners have throughout the life of the business, and viability testing is no exception.

Here are a few options for gathering customer input:

  • Attend industry conferences or events and strike up a conversation
  • Begin collecting emails and send out an online survey
  • Pull together a focus group to ask targeted questions about your business idea
  • Look for people following competitors online and ask to interview them

Do you have competitors and are they making money?

Now that you’ve established there’s consumer interest in your business idea, it’s time to figure out if people will pay for it. While it’s possible you’ll be first to market, it’s more likely there are already competitors in the industry — and that’s often a good sign. A thriving, competitive market indicates there’s ample consumer demand to justify and sustain so many businesses.

Are your competitors actually making money?

During your research, you should put together a full picture of the competitive landscape, including positioning of each competitor’s product (more on that later).

Once you have a map of the industry, dig deeper to ensure the market has enough demand to sustain your business. In other words, are your competitors actually making money? If one or more competitive businesses isn’t doing well financially, that can be an indicator that the market is as viable as the number of competitors might imply.

Look for details on your competitors like:

  • Funding they’ve raised (venture capital, crowdfunding, public stock trading, etc.)
  • Revenue earned (you can find this info in Annual Reports, Investor Relations pages, or using sales intelligence tools like ZoomInfo or D&B Hoovers)
  • Investments they’ve made — like hiring more employees or otherwise expanding operations

What’s your unique selling proposition?

Once you’ve figured out the competitive landscape your future business has to fit into, it’s time to figure out how you’ll set the business apart. Naturally, a business idea that’s exactly the same as an existing business probably isn’t viable.

In the positioning map we talked about before, any obvious blank spot is a good candidate for how to position your business among the competition. The key is to have at least one key differentiator that’s unique to your business. That can be almost anything including:

  • A higher quality product
  • A product that solves customer problems in a different way
  • Better customer service
  • A social mission that resonates with customers
  • Lower price

Any of those factors can be your business’ unique selling proposition. However, a word of caution about price: While offering lower prices than competitors can win you market share, it isn’t a very stable USP, because competitors can simply lower their prices in turn. So price is a better differentiator in combination with another USP.

Test Your Business Idea’s Viability

After you’ve gathered all the preliminary research you can, you should have refined your business idea to the point where it’s pretty viable. But it isn’t time to launch full steam ahead just yet. It’s best to run a few viability tests to ensure your research and conclusions about the market are accurate.

Go Directly to Customers

In the business world, there’s no substitute for real, genuine customer feedback. After all, customers are the people who will ultimately exchange their hard-earned money for the product or service you’re offering — so their input can be invaluable in shaping and testing that offering.

Here are a few ways you can test your business idea with real customers.

  • Focus groups: Get a group of your target customers together in a room and introduce them to your business and product. Ask if they’re interested in your offering, if they’d be willing to pay for it, and how much. If you have branding or mission information, see how it resonates.
  • Crowdfund your launch: In addition to raising funds for pre-launch expenses, crowdfunding can be a good corollary for actually selling your product or service. It’s also a good practice for refining your message and seeing how it impacts customer willingness to pull out their wallets.
  • Launch as a side gig: If you aren’t ready to dive into your business idea full-time, you can launch as a side project and see how the business performs.
  • Launch a freemium product: As much research and testing as you can do before launching, there’s no substitute for sending your business idea out into the world. Offering the product for free can help you get a sense of potential demand — with the caveat that a good portion of those customers may not be willing to ultimately pay for your product.

Validate Your Business Idea for a Smooth Start

When you’re excited about a business idea, pausing to validate its potential success can seem unnecessary or overly time-consuming. But the reality is, determining your business idea’s viability is a vital first step for every business.

Instead of wasting valuable time and effort on an idea that won’t work, you can move forward assured that your business has what it takes to burst into the market and make some waves.

Have any questions about evaluating your business idea? Ask them in the comments!