Question 1: What is your Unique Selling Proposition (USP)?
USP Definition: The factor or consideration presented by a seller as the reason that one product or service is different from and better than that of the competition.
The importance of this cannot be overstated. You need to physically write this down (type it out, whatever) and revise and refine it until it's succinct, clear, and complete. You should be able to express it in no more than a few sentences and describe it to anyone in no more than 60 seconds (without visual aids!!).
Question 2: Who Else is Already Doing It?
Ahh, I hear you now... "NOBODY!!!" Well, the skeptical optimist in me calls bullshit on that one - but hear me out! :)
It's unusual (though not impossible) that you are creating a truly unique thing (whatever that may be). It's extremely likely that your idea is closely related (even if it's well differentiated) to some existing thing people spend money on.
You NEED to understand this. 10 minutes of Googling not turning up a result is not enough. Search wide AND deep to find the two or three existing companies you feel are the most similar to what you're offering. Research them, find feedback about them, learn everything you can about their history and current status. Are they growing? Are they pivoting (as in - converting to sell something different)? Doing this well and in an organized way will take days, even weeks.
So, do this exercise even though your idea is totally unique; I promise that while doing it you'll learn something useful to you whether it's a feature (like a platform integration) you hadn't considered, a use-case not on your radar, or some other tidbit of information that will help you down the road.
Competitor Stalking Resources: inc.com Article (pretty good!) Good Website Research Article
Question 3: How do you Make Money Doing It?
Yes, I can see your eyes rolling from here. Duh, right? I'll make money by selling XYZ!! Great, true - but you need to get a little more nitty-gritty than that.
You've all heard the cash is king saying but trust me, you are going to learn it on a whole other level once you start your business! It's astounding how many things cost more than you expected and how hard it is to actually get money coming in the door. It does not take long at all for those things to get out of sync and suddenly things get non-fun very quickly! My first business was consulting based. I decided I could charge $75/hour (which was too low, but hey) and so the potential income was $150k/year! Wowsa, great!! My burn rate was about $60k/year (house, car, lights, etc.) so easy peezy - I already started shopping for my private jet.
Well, here was the reality:
It is extremely unlikely that you will actually bill 40 hours per week with one person
Companies using smaller independent contractors want work done now, so it's unusual to have more than 1 or 2 concurrent projects going with happy customers
If I was not at my desk, at my computer with my hand on the mouse, I was losing money, not making it. This includes weekends, sleeping, etc. - it weighed on me heavily
Because the money that did come in went to paying my bills, it left very little (often exactly zero) to invest back into the company to develop new ideas, customers, marketing, products, etc.
Cash-strapped is the worst possible way to be when trying to make good business decisions. So, yeah those are not secrets, but I will say I did not consider them fully enough when I started out, and as a consequence, I had many months of burning cash faster than I could make it. Turns out that's a bad thing! :)
I see lots of people on here talking about eCommerce stores which, sure - makes lots of sense. But if you are not actually MAKING a product, you are selling things that can be got elsewhere. So, you make money on the margin, on inbound traffic, on high conversion rates, etc. Are you a SEO guru? Do you have killer connections and reputation in your niche already? If so - sweet! If not, better really dial in your answer to Question 1 because you are one big vendor price-raise away from being in a tight spot.
So, don't assume how you will make money, do the actual math. I'd also recommend that once you go through the numbers, you multiply all your revenue projections by 0.7 and your non-variable expenses by 1.3 and see how it looks then. Call those SkOp constants (yep, skeptical optimist). If that makes the business a loser, then you are starting out from a really tough spot.
Cash Flow Resources: Bplan.com Article - you eCommerce folks pay close attention to the Inventory section!! 5 Worst Cash Flow Mistakes
Question 4: What is a User Story of Your Customer?
This concept is more prevalent in the software industry, but is also used in product development and in my estimation is a good tool for anyone looking to start a business.
Write a simple, plain-language story about your user interacting with your product. Who are they? Why do they interact with your company? What motivates them to do so, what do they hope to get out of doing so?
It may sound a little cheesy, but I hope you'll take the time to try it out - it's a really interesting and enlightening way to look at your potential business. For my latest venture, I've written several of them to help me get (and keep) my head around what the User cares about vs. what I, as the product developer am focused on.
Once you've written a User Story, go back and look at the previous questions from that User's perspective. This can be jarring but very informative. Would your user do a better job than you did of finding competitors?
User Story Resources: 10 Tips for Writing Good User Stories
Question 5: How do you Make MORE Money Doing It?
Some day, this will turn into things like capital expenditures, customer-acquisition-cost, etc. But for now, it's important to understand two constraints that are baked into your idea:
What limits the PROFIT you can make per transaction?
What limits the VOLUME of transactions you can do?
For your profit constraint, do you control it or do others? If others control it (competitors, suppliers, etc.) what leverage do you have to resist undesirable changes? If your competitor is better funded and decides to drop their prices 25% for the whole summer, will you still exist? If your key supplier has a problem and can't ship anything for 2 months, will you still exist? Can you replace them before your customers give up and leave?
For your volume constraint, it could be many things. The goal here is to understand where those pain points will be (outgrow the storage in your garage maybe) and how much time and cash it will take to remove them. Consider all the time, space, energy, etc. it takes to make the business tick day to day and try to plan what happens when any of them are overtaxed.
One of the most common constraints, in reality, is the "I need another me" scenario. Chances are if you've got a solid idea, you bring something unique to the table. When it's time to grow, you need more of your own secret sauce - but there is only one you.
The right solution is often offloading work you do that is non-secret-sauce (social media, bookkeeping, packaging, whatever) to free up more time but actually making that happen can be tricky and expensive. So, give it some thought early on.
General Related Resources: Good Discussion of Startup Ideas 20 (Different!) Questions You Can Ask Yourself