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Is Your Startup Idea a Killer, or Should It Be Killed? Follow these four steps to determine whether you have a good business, or just a smudge on a cocktail napkin.

By Adam Callinan Edited by Jason Fell

Opinions expressed by Entrepreneur contributors are their own.

Startups are the result of a solved problem or an unmet need that someone has figured out how to fulfill. The reality is, we're inundated with problems that need solving, most just don't realize it. If you are indeed interested in becoming an entrepreneur or starting a new venture, you need to pay close attention to your surroundings in order to get started on the right foot.

Think the generation of an idea is the hard part? Wrong. Anyone that has ever started a business knows that the execution of the idea is far more challenging. But if you want to start a new venture, an idea is important. So let's start there.

1. Open your eyes -- wide.

We are confronted daily with issues, typically personal, that are in dire need of solving. It's these solutions that present themselves as potential business models and are ripe for development.

Related: 5 Ways to Know if Your Idea Could Become a Business

At BottleKeeper we identified a problem: the distaste for steaming hot beer while doing nearly anything outdoors. We then created a simple solution: place the bottle within a neoprene sleeve inside a two-piece stainless steel water bottle and voila, we solved our own problem.

To do the same, set a mental alarm in your brain that "goes off" every time you find yourself thinking, "I hate it when that happens." When the alarm sounds, make a concerted effort to stop and recognize the opportunity slapping you in the face. Then develop solutions.

2. Research your solution.

You can spend a lot of time developing a new idea, only to find that it already exists. Your time is valuable, right? So don't waste it. Spend 30 minutes on Google going through the first five pages of results before taking any big steps towards developing a new business model.

Also, go to and do a basic preliminary search to determine if your idea has already been patented. If it doesn't immediately appear in the search results, that's good news, but you'll still want to have an intellectual property (IP) attorney do a patentability search later down the line -- when you're more prepared to spend some money.

3. Discover the need.

You, your friends and your family all think that your new product or idea is pretty awesome, right? Well, the masses may disagree. You must determine that there is truly a need for your product or service that extends beyond those that are emotionally attached to your success.

Related: 12 Critical Questions to Ask Before Pursuing a Business Idea

It's important that you test your theory without spending extravagantly. Develop a name for your product and register a domain -- it doesn't need to be perfect as you can change both at a later date. You can easily set up a template landing page for your new website through WordPress or Squarespace with your new domain name, and embed an analytic function in the page using Google analytics. This tool will allow you to see the traffic to your site. If you are unsure how to do something, Google it and thousands of "how-to" videos and blogs will guide you.

Now create a very defined and concise one-sentence description that will fit in 70 characters or less to use in a Google Adwords-style campaign. You can very inexpensively use Bing, Yahoo or Google to post your eye-popping text ad -- Facebook has also become a great option for testing conversion, where you can also use imagery. This will allow you to test how people perceive your new project by seeing how many click the ad and end up on your new landing page. This will help dictate interest level.

4. Determine your costs.

More often than not, we become involved with a new idea only to find that it's too expensive to carry out. You might have a fantastic idea for a new product that you think you could sell for $29.99, before discovering that it cost $24.50 to make. If this is the case, you don't have a functional business model.

You must figure out the cost of producing your new product. Keep in mind that you want it to sell for at least five to eight times more than it costs to produce, particularly if you intend to use standard distribution channels.

Selling a service can be a bit more tricky than selling a physical product. Just don't forget to include expenses such as the cost of manufacturing setup, molds -- with the number of uses per mold -- and the cost of shipping when determining your cost per unit.

Consider these points when deciding whether your idea could become a potential business or should remain in your head or on your cocktail napkin. Remember, there's no reason you should be spending your life savings on an idea when you are completely ignorant of its viability.

Related: When Your Big Business Idea Stalls, Ask These 3 Questions

Adam Callinan

BottleKeeper Founder and Venture Investor

Adam Callinan is a founding partner of Beachwood Ventures, a Los Angeles based early-stage venture capital firm at the intersection of technology and entertainment. As an entrepreneur, Callinan spent nearly a decade building small businesses in and around technology, medical devices and consumer products, which most recently includes an exit in 2013. Callinan lives in Manhattan Beach with his wife Katie and remains active as a founder of BottleKeeper.

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