When it comes to developing a highly productive business, choosing the right product is without a doubt the most important piece of the puzzle. A critical first step in making sure you’ve picked a winner is estimating the market demand, existing competition, and viability of the product itself. Get this step wrong and you run the risk of wasting your time and energy, or worse, sinking a bunch of money into inventory you can’t move. Get it right and you set yourself up for purchases and profit.

To help you decide if you’ve got a viable and successful product idea on your hands, we’ve put together some steps guide that presents you exactly how to take a look “under the hood” of your market and your goods, to make sure you’re creating your business on a powerful foundation.

Market-based criteria

The first thing we want to look at is market-based principles. These are principles that are usually external-facing like market size, target customer, whether you’re dealing with a trending product, and so on.

What is the company strategy?

As you start and build a business it is necessary to spend time thinking about your business strategy. Think of the business strategy as your map — with it, you’ll decide the direction of your business and what you want it to look like in the future. By clearly defining the strategy, you’ll have the guidelines and structure to develop your business or growth plan and achieve your business goals.

Remember, you cannot be all things to all consumers. You do not have to be the market leader to compete successfully, but you do need to concentrate on your company’s strengths to find a way to differentiate from other competitors.

Who are your competitors?

It’s always helpful to know who you’ll be competing against if you choose to start your business. The more you know about the competitive scene before you start your business, the less possible surprises you’ll face later.

What is your business model?

At its core, your business model is a description of how your business makes money. It’s a description of how you deliver value to your customers at an appropriate cost. 

Business models can be broken into three parts:

Everything it takes to make something: design, raw materials, manufacturing, labor, and so on.

Everything it takes to sell that thing: marketing, distribution, delivering a service, and processing the sale. How and what the customer pays: pricing strategy, payment methods, payment timing, and so on. A successful business model just needs to collect more money from customers than it costs to make the product. This is your profit—as simple as that.

Who are your target customers?

Before you completely decide on a product, it’s important to get a sense of who your potential consumers are. You don’t want to find out too late that all the people that would be probably involved in your product live someplace you can’t ship to or can’t purchase.

What are the offers and sales plans?

A sales plan is the “who, where, why, when and how” that will guide you to hitting your sales goals for the year. Big picture aside, a sales plan is a month-to-month projection of the level of sales you expect to achieve and how you’re going to get there. It covers past sales, market concerns, your specific niches, who your customers are, and how you’re going to find them, engage with them, and sell to them.

Starting a new business is always exciting, especially when you have hundreds of brilliant ideas. However, are you 100% sure that your startup idea is the right one? Before jumping into the development process and coding your new product, you have to evaluate your startup idea first.