Starting a business often begins with a simple question: “Is my startup idea good?” This question can lead to countless sleepless nights, second-guessing, and lots of brainstorming. But how do you really know if your idea is worth pursuing? To help you figure this out, it’s essential to look at three key factors: desirability, feasibility, and viability. In this blog, we’ll focus on viability, breaking down what it means and how you can assess if your idea has the potential to be profitable in the long run.
Viability, in simple terms, means whether your business can make money. The core question here is: Will we be able to turn a profit at some point in time? To simplify this, think of the basic equation for profitability:
If your “money in” is greater than your “money out,” you’re profitable. While this sounds simple, achieving profitability is one of the toughest parts of running a business. In the early stages, most startups spend more than they earn, and that’s normal. But how long can you sustain that before running out of resources? That’s the challenge.
Viability isn’t just about if your idea can make money; it’s about when and how. Every startup is different. While one business might break even in six months, another may take a year or more. Some startups never reach profitability.
In the early stages of a startup, you don’t need complex calculations. What you do need is a basic understanding of how your business will make money. You can start with simple assumptions and gradually build on them. There are plenty of online tools and calculators designed to help new business owners estimate profits. You can use these to get a rough idea of how your startup might perform financially.
One thing to keep in mind: don’t get lost in the details too early. Focus on the big picture and prove to yourself and others that your idea has the potential to be viable.
The example focuses on a startup that wants to sell chairs. The startup has set a revenue target of 20k per month.
The first step of a startup viability calculation is to form the mathematical assumptions. The example uses the following assumptions:
Now it’s time to do the math:
Each chair costs you €50 to produce, and you sell them for €100. That means you make €50 profit per chair sold.
In addition to the cost of producing the chairs, you also have fixed monthly expenses like rent and marketing. In this example, those fixed costs total €6,500 per month.
To calculate how many chairs you need to sell, first add your fixed costs to your profit goal.
€20,000+€6,500=€26,500
Each chair gives €50 profit.
So €26,500/€50= 530 chairs
The next step is to conduct market research and enrich your calculation with this data.
Update and do a reality check based on the research.
Create different scenarios. The following scenarios are recommended to work out:
Let’s take a look at some of the most common mistakes early-stage startups make when it comes to assessing their idea’s viability:
One of the most frequent mistakes new entrepreneurs make is avoiding the financial side of things. Phrases like “I’m just not a numbers person” are a red flag. Even if you’re more of a creative thinker, understanding basic financial metrics is essential. It’s not enough to say that your business will make money—you need to back that up with concrete numbers.
Many startups start with a specific business model in mind, like advertising or subscription-based revenue. However, just because you choose a model doesn’t mean it will work. It’s important to test your business model with real data and customer feedback. For example, if you plan to generate revenue through ads, you need enough users on your platform to make it viable. Don’t just assume it will work—get proof.
It’s common for new startups to rely on friends and family to make their first sales. While it’s a great way to get started, it doesn’t give you a true sense of the market. Your friends and family may buy from you because they want to support you, not because they need your product. To truly test your idea’s viability, you need to reach customers outside of your inner circle.
Many startups fall into the trap of pricing their products or services too low. This can hurt your business in the long run, as it reduces your potential profit margins. Pricing is tricky, but it’s essential to find the right balance. Consider the value your product offers, and don’t be afraid to charge what it’s worth.
When calculating profitability, it’s easy to forget about the costs associated with making a sale. For example, if you spend €25 on online ads to sell a chair that earns you €50 in profit, your actual profit is only €25. It’s important to factor in all the costs of acquiring customers, including marketing, sales, and distribution.
When creating your financial model, be careful not to include expenses that aren’t relevant to your business. For example, many entrepreneurs include costs like office space or software subscriptions that they don’t actually need. Start lean and only add expenses that are crucial to your business’s success.
When evaluating whether your startup idea is good, it’s crucial to consider not just its viability—how well it can generate profit—but also its desirability and feasibility.
Together, these three aspects—viability, desirability, and feasibility—form a comprehensive framework to determine the true potential of your startup idea. If you have researched those 3 components you are able to answer the question: ”Is my startup idea good?”.
I hope this article on startup viability inspired you. Do you want to learn how to create better startup concepts? Discover the book Business Model Hacking. It’s a powerfull approach to develop great business model ideas. It consists of +200 Business Model Hacks and has a lot inspiring examples.
You’re lucky! Limited-offer: Subscribe to Business Model Hacking and get the digital version of the book and the cards for free.
Receive inspiring content and the e-book Business Model Hacking for free.