Grading Your Software Business Idea

***Albuquerque, NM
April 2, 2009 ***

Warning: this is a quick and dirty post.  It’s designed to get some core ideas down and elicit insightful additions from you, the reader!

Before starting a software business, it’s important to be able to grade certain characteristics it has before you jump in - if not as a signal of whether or not to invest the time in it, then at least to set the expectations correctly.  There are so many things in this world that can still be improved by software, and so many things to get passionate about, it’s important for you to choose the right one.  But choosing the right one is hard - there are so many unknowns, among which may even be the financial model many times.  So it’s nearly impossible to analyze any idea on projected revenues or profits.

What you can do to help estimate potential success, however, is pit your business ideas against each other, by grading them according to criteria that you can make educated guesses about.  The more experience you have in a particular area, the better your guesses will be.

The list I provide below is a few of the ways you can grade your software business ideas against one another.  Right now, it’s just a cursory list, but this page is where I will continue to add ideas of how you can score different potential ideas against one another, so you can make the educated choice about which idea to pursue.

• **First, list the complete idea out into concrete deliverables, each one being something you can sell.  We’ll mostly be concerned with the first and the last.
  Example: our first deliverable is a website product that will only allow optometrists to add, remove, edit pages.  Our last deliverable will include contact lens ordering and online appointment scheduling, etc. etc. **
• **How many times a day (or week) will the potential customer use the product (in its first deliverable)?
  All wildly successful webapps can be used multiple times a day, by an average user.  Google, Hotmail, YouTube, Facebook, the examples are endless! **
• How many potential people will be paying customers for the first deliverable?
  Example: our first website product targeted optometry offices, 25% of which would likely use deliverable 1 with no changes.
• How about the last deliverable?
  Example: our last deliverable will be usable by all optometry offices with no changes, about 300,000
• At what velocity do your first deliverable’s paying customers adopt new technology?
  Example: Optometrists don’t adopt new technology quickly
• How risk-averse are your users or customers to using (or purchasing) new, similar software in a similar domain?
  Example: Optometrists are generally risk averse, and this bleeds into website software.
• How well-connected is your market about your software’s domain?
  Example: optometrists don’t talk to each other very much, and when they do, it’s rarely about websites.  Web Designers, on the other hand, twitter to each other all the time, and they are excited to talk to each other about apps which can improve their own products/services.
• How much effort is the first deliverable?
  Example: it will take 3 developers and 1 designer 4 weeks to deliver the product
• **How easy is it for your team to access the next potential customers?
  **Example: in optometry, to really access potential customers, you really have to create a brand, and the only way to do so is by going to trade shows, aligning with partners, etc.  Direct (e)mailing doesn’t sell.

There will be more to this list, but that’s what we’re thinking about right now!

How do you grade your ideas against each other?