Business Idea Evaluation

The main pillar, but also the reason for the establishment of Innovation House, is to provide assistance to students who have conceived a business idea and want to bring it to market. Once a business idea is conceived, it is evaluated, in order to decide on the commitment of resources for its development.

One of the widely accepted approaches (O ’Meara, 1961) ranks 17 criteria evaluation of an idea in 4 categories, namely: 

From the multitude of criteria that can be used to evaluate a business idea, the most important and critical for the success of this business venture should be selected. However, this option is not easy and therefore requires the collection of as much and reliable information as possible in order to properly evaluate the business data.

After selecting the appropriate evaluation criteria and using a scoring model, the company can evaluate the business idea by giving it a score for each criterion and then weighing the individual scores according to the company's capabilities and the importance of each criterion. for the ultimate success of the idea. The higher the overall rating of a business idea, the greater its chances of market success.

For a better understanding of business evaluation ideas with the method of a scoring model is given below a relevant example.

First, 13 evaluation criteria or idea filters were selected. These criteria relate to both technical (eg use of a known production process) and commercial issues (eg improving the position of the company in relation to competitors).

Then, each criterion was given a weight according to its relative importance for the success of the idea in the market. The higher the weight, the more important the criterion. The weights add up to 10. In this example, the most important criterion for evaluating an idea is the size of the market (1,5) while the next most important is the improvement of the company's position in relation to competitors (1,3).

Then, the business idea is scored for each criterion depending on the degree to which it meets each criterion. The sum of the products of the idea score for each criterion and the corresponding weight determines the overall score the business idea receives.

The total score can range from 0 to 100 points. In case the idea gets from 0 to 50 points, then it is rejected. In case it receives from 51 to 70 points, then it should be re-evaluated in more detail, while if the score ranges from 71 to 100 points, then the idea is accepted.

In this example, the business idea tested scored 68.1 points. Therefore, it is advisable to gather additional information in order to reconsider the idea in more detail before making a final decision.