Question
How do you decide whether or not to go forward on a business idea?
Answer
Never evaluate a business idea in isolation. Always use 5-8 other ideas, even if you only intend to pursue 1. Your own, not benchmarks. Objectivity is not helpful in the exercise I am going to suggest.
If you can't come up with at least 5-8 other ideas, you don't have the agility to run any business (since it is going to pivot and reinvent itself a few times anyway), so you might as well quit. This is not hard. If you can think up one business, it should take you about 4 hours (or one afternoon, 2 cups of coffee) to completely think through idea #2 on about 15 sheets of paper. Put in the 2 weeks of work to think up 5-8. Try to make them all separate, and based on a different strengths/desires on your part, but don't bother trying too hard. If all your ideas look suspiciously like variants of the first one, so be it. Take a day off to do something relaxing, and let the set of ideas simmer. Then sit down and summarize each idea on one piece of paper each. Make up some roughly comparable format, but don't waste time trying to fully parametrize all ideas in some 213-variable space. Just summarize, make them roughly comparable.
When you have your set, take everything you know about all of them to rank them by shuffling the stack. But don't try to do any metrics-based ranking; just use your instincts/gut feel. You've thought enough about the ideas that your gut will do a better job than any explicit ranking. The most important variable is the level of your own passion about each idea. A $1 billion market idea with medium passion is far worse than a $10 million market idea with extreme passion. Then take the top 4-5 high-passion ideas, play devil's advocate and try to shoot them to pieces with worst-case scenario thinking. It helps to watch a depressing or gloomy movie to get into the appropriately pessimistic frame of mind. Pick the best of the survivors. You need to be in a vicious mood to do this shooting down. You must get a gleeful pleasure out of it. This attitude is rarely useful in business (too draining), but this is one of the rare times in the life of a project when it is.
Ask yourself, do you REALLY care enough to ruin your health, disrupt your relationships and live in semi-poverty while you are seeing if the idea pans out? If not, give up. No shame in it. Not everyone has the peculiar mix of stupidly optimistic passion, and grit to survive the costs that it takes.
And I am not making this up in the abstract. I've done this several times to pick both research and business ideas to work on, and the process has never failed me. I actually use a ++ version of the process, where I maintain notebooks where I capture business ideas as and when they occur to me. Then when I am in need of a new idea to pursue, I pull out my notebooks, flesh out a few old ones, add a few new ones, and do my picking.
Once you've picked and committed...
... use all the tricks in the lean startup book, and all the money/resources you can beg, borrow, steal, and run with the idea as long as you can, as fast as you can (which may not be a steady all-out pace... it'll be like sailing; you'll make furious progress alternating with upwind tacking and being becalmed in phases). When you either have a positive feedback signal from the market, or you run out of money, passion or both, you're done. If you succeed, you're not done. You've just locked yourself into phase II. Success traps you more than failure does.
If you can't come up with at least 5-8 other ideas, you don't have the agility to run any business (since it is going to pivot and reinvent itself a few times anyway), so you might as well quit. This is not hard. If you can think up one business, it should take you about 4 hours (or one afternoon, 2 cups of coffee) to completely think through idea #2 on about 15 sheets of paper. Put in the 2 weeks of work to think up 5-8. Try to make them all separate, and based on a different strengths/desires on your part, but don't bother trying too hard. If all your ideas look suspiciously like variants of the first one, so be it. Take a day off to do something relaxing, and let the set of ideas simmer. Then sit down and summarize each idea on one piece of paper each. Make up some roughly comparable format, but don't waste time trying to fully parametrize all ideas in some 213-variable space. Just summarize, make them roughly comparable.
When you have your set, take everything you know about all of them to rank them by shuffling the stack. But don't try to do any metrics-based ranking; just use your instincts/gut feel. You've thought enough about the ideas that your gut will do a better job than any explicit ranking. The most important variable is the level of your own passion about each idea. A $1 billion market idea with medium passion is far worse than a $10 million market idea with extreme passion. Then take the top 4-5 high-passion ideas, play devil's advocate and try to shoot them to pieces with worst-case scenario thinking. It helps to watch a depressing or gloomy movie to get into the appropriately pessimistic frame of mind. Pick the best of the survivors. You need to be in a vicious mood to do this shooting down. You must get a gleeful pleasure out of it. This attitude is rarely useful in business (too draining), but this is one of the rare times in the life of a project when it is.
Ask yourself, do you REALLY care enough to ruin your health, disrupt your relationships and live in semi-poverty while you are seeing if the idea pans out? If not, give up. No shame in it. Not everyone has the peculiar mix of stupidly optimistic passion, and grit to survive the costs that it takes.
And I am not making this up in the abstract. I've done this several times to pick both research and business ideas to work on, and the process has never failed me. I actually use a ++ version of the process, where I maintain notebooks where I capture business ideas as and when they occur to me. Then when I am in need of a new idea to pursue, I pull out my notebooks, flesh out a few old ones, add a few new ones, and do my picking.
Once you've picked and committed...
... use all the tricks in the lean startup book, and all the money/resources you can beg, borrow, steal, and run with the idea as long as you can, as fast as you can (which may not be a steady all-out pace... it'll be like sailing; you'll make furious progress alternating with upwind tacking and being becalmed in phases). When you either have a positive feedback signal from the market, or you run out of money, passion or both, you're done. If you succeed, you're not done. You've just locked yourself into phase II. Success traps you more than failure does.