Stress Test you Idea for Viability
Question
If you don't have a "big enough" problem worth solving, why should you spend time on it?
big enough to first convince yourself (it can be subjective), but then also investors (it is objective).
The situation is too foggy to make reliable financial forecast. It would be a pure exercise. Use Fermi Estimation instead.
big enough can be translated in traction: the rate at which a business model capture monetizable value from its customers (i.e. the capacity to generate money in the future, not revenue which represents what you actually get now)
The customer factory and traction
- Acquisition: an unaware visitor become an interested prospect, namely somebody you can interact with in the future to develop you business
- Activation: once a prospect "signs up", you have to full fill the promise in your UVP to activate him/her
- Retention: repeated use/engagement with your product
- Revenue: your customers will eventually pay you
- Referral: happy customers helps you in acquire new prospects
- Cancellation: some customer will leave you!
Tip
Traction is the output of your customer factory
Use fermi estimation to test viability of your idea
Tip
Define a target throughput goal (Minimum Success Criteria - MSC) in terms of Annual Recurring Revenue (ARR)
We need a MSC target, namely the smallest outcome to make you deem your project, otherwise we easily illude ourself.
ARR is simple: # customers, price, frequency of purchase
Tip
Test whether your customer factory can achieve the MSC
Tip
If your customer factory cannot achieve the goal refine the model