Analyze Your Internet Business Idea in 5 Steps

Throughout this article, we will see how to evaluate and validate our business idea on the internet correctly and in a practical way. To do this, we will first see how to concretize our product, idea or service and then create a unique value proposition. Finally, we investigate the competition, analyze the relevant keywords and determine the economic viability.

Do not waste your time and money building a project on the Internet without spending at least 10 minutes to read this article, along which we will analyze the 5 steps to analyze our business idea online correctly:

The Product / Service / Idea (PSI)

Your unique value proposition




Throughout the article, we will listen to Steve Black in his methodology of client development and Eric Ries with his famous Lean Startup, methodologies or even highly recommended and useful philosophies to build projects on the internet and obviously start startups.

But what is your starting point? A business idea!

We assume that the idea we have had is viable and we throw ourselves into the pool. Without looking if there is water. Error! It should be mandatory to analyze your business idea on the internet, before starting your project and much more before starting a business and starting your startup.

We have experience analyzing business ideas on the internet, as partners with various networks of private investors “Business Angels”, we have experience building your own projects on the internet and starting and growing your own businesses and participated in the internet.Te explains in this article our method in 5 Steps to Analyzing Business Ideas on the Internet.

The 5 Steps to Analyzing Internet Business Ideas

Before we even start, let’s set a clear goal. If your goal is to develop a project on the internet to collect human knowledge (Wikipedia type) because our method is not the same.

The purpose of the analysis is to look quantitatively, this is in Euros or the currency of your country, the possibilities of the idea. If we classify products and types of business on the internet, we will see that in the end it is sold:

Physical, your or third party products (dropshipping)

Services, courses or info products yours or others (affiliation)

Advertising in any of its formats.

1) The Product / Service / Idea (PSI)

It is essential to specify, you must be able to describe what you sell in a couple of lines.

If you can not explain what you are selling in a couple of sentences, you may not know what you are selling, or maybe you want to sell several things, well, in this case, I advise you to focus on the one that has more possibilities and forget the others.

The analysis of the idea will be done from the point of view of an investor or an entrepreneur, I do not care, both of them want the same, to make money.

I would not think of investing or starting to build on the internet any project that could not explain in 30 seconds or a minute, the so-called elevator speech, do you have it? Practícalo!

It is necessary to expand that description, you can fill half a page by expanding in some paragraphs with more detail in which your idea consists and another half page with characteristics.

But only after having the description of two lines. Although you can now improve it.

It is here that we emphasize passion. It can be undertaken without passion, it can, but we do not recommend it.

You must love that product/service / idea (PSI), be willing to work in 24h 7d a week. Do not waste your life dedicating it to making money with something you do not love …

Convince me or convince yourself that you have full access to the product/service / idea because you are going to need it. Access to PSI product stock, to be able to have quality photos, to know their production costs and their sales prices, all their characteristics, etc.

Later we’ll need a couple of figures, it’s time to start thinking about them:

You must estimate (hypothesis) what will be the average income in each sale.

And you must know the cost and therefore the gross margin.

It is essential to have total access and passion for your PSI product.

This is the first validation.

2) Your unique value proposition

At this stage of the analysis, the key question is Why me?

Why is someone going to buy your PSI product?

At this point, my advice is to use the Lean Canvas methodology. The canvas of fast start or lean canvas was designed by Ash Maurya, starting from the existent work and is explained in his book “Running Lean”. If you want, you can expand here the information on how to use the Lean Canvas.

When you start on the internet a recurring error is trying to sell a wide range of products and not for any client or target audience that may be interested. That does not work, not in low-cost mode, as you probably intend to start.

Our experience with our own projects on the internet is that what really works is the strategy of the sniper, I explain, a very specific product for a group of very specific customers. I am referring to niche markets or micro niche, that may have possibilities.

For example, niche cemetery stones, wall tiles, not floor tombstones or pantheons, only niche tombstones, for clients who bury their family members away from where they usually live.

Or countertops to measure, only kitchen countertops and in three ranges of price, practical, elegant and personalized, to customers with the second residence for own enjoyment or rent.

And yes, I have several marble clients!

So specify your PSI product and decide which type client you want to direct.

Analyzing an internet business idea of a PSI product that already exists offline is simpler because parts of an ideal type client you already know.

If this is not your case, you must imagine that client, put his name (invéntalo, Sergio), where he lives, what family he has to dedicate, in short, put yourself in the customer’s shoes, wear his shoes to think like him.

Sergio and all who are like he is your main segment of customers.

The key is to develop your PSI product thinking about Sergio,

In the morning when he gets up What hurts Sergio? Regarding your PSI product.

What are the problems that surround him in the head ?, What worries Sergio?

Write down your problems on the Lean Canvas.

You may discover other ideal clients, another segment of customers, whether they have the same or different problems.

We have a group of clients who have common problems, what is your proposal for them?

We have reached the key moment in this second validation.

What’s your proposal? What value do you bring to the customer? How are you different?

In short, tell me your Unique Value Proposition.

Why me? Why is Sergio going to buy your PSI product?

This is one of the keys to the success of Internet businesses, if not the most important:

To design, develop and build unique value propositions (different and innovative) that better solve the real problems of a sufficiently large group of clients.

Forget about the features of the product, (forget your product). Think of solutions to customer problems. There you will find the value proposition.

This is the second validation.

If you have access to the product and a unique value proposition, it is time to continue with the three validations remaining: Competition, Keywords, and feasibility. But that will be another day.

3) Competition

You have a business idea on the internet and you have validated the first two steps:

You have unlimited access to the so-called PSI product (Product / Service / Idea) and passion for it.

You have a unique value proposition for a customer problem.

A brief intro to a famous book that talks about innovation in value, blue ocean strategy.

Its authors tell us about creating companies through fundamental differentiation, that is, changing competitive parameters or competing in different or new characteristics.

Instead of trying to outdo competitors, they propose to create new spaces in the market that are not well served.

This fits in with our step 2 of the validation process, locating unresolved client issues and offering them unique and differentiated value propositions.

It owes its name to the metaphor of many competitors (sharks) in a mass market of customers (fish) that form an ocean dyed red. In front of a product/service / Idea differentiated like a shark swimming in a blue sea with fish but without competition in sight.

Access this article to learn more about the strategy of the blue ocean through a practical example that is mentioned in the book: The circus of the sun.

To find blue oceans, you must first find and analyze your competitors first.

But I advise you to turn off the computer, do you miss it?

You will agree with me that the internet is not reality, not today. The Internet is only a part of reality, the reality is that many competitors and customers are not on the internet.

The Internet is only a part of reality

If we stop investigating offline competitors (who are not on the internet), we stop learning from them. And keep in mind also that offline competitors are very much in the market, you can learn a lot from them, start analyzing the competition. Yellow Pages

It’s time to think if this same idea has occurred to more people, I hope so! If you can not find a possible offline competitor, beware! Maybe you have a problem and you are a shark that wants to fish in a tank without fish.

I do not propose anything new, competition studies are invented. It is about investigating from the point of view of a customer, you must pretend to be a customer or find someone who does it on your behalf.

List the alleged competitors you know or find in a guide. Let’s make a kind of grid if you handle spreadsheets perfect! If I will not tell you about a competitor in each row and columns on the right with additional information.

In the first column write the name of each competitor (and how to find it)

In the second column to the right of each competitor, write the (one or more) Product / Service / Idea offered to your customers.

In the third column, write down which are your last customers, to what type of customers are you going? Are they the same types of customers you are targeting? The

In the fourth column write as it offers, what is your value proposition or said otherwise because you buy customers, which makes you different.

You can make more questions and answers better, but the previous ones are the main ones that you should know.

Once this analysis is done offline turn on the computer again, and try to see which of them have a presence on the internet, Do they have the same proposals as the Internet?

Then look for new competitors on the internet. Think like a potential client would do and put those words (keywords) into the google search box.

List the new competitors in the same table, lower than before: Competitor, offering, which customers and how it offers. In these online competitors, you can expand columns with other information.

With everything learned I imagine that you have improved your Product / Service / Idea to better adapt it to your ideal client and the problem that you solve with your unique value proposition.

If you have a unique and different value proposition than your competitors, perfect!

This is the third validation.

4) Keywords

Three paragraphs above in this same article you have placed a series of keywords in the google search box to find competitors. I asked you to do it from the point of view of your ideal client.

I want you to write down another list, this time with these keywords and all related ones that you can think of. Try to be relevant words, I insist that they have a lot of relationships or give a clear enough intention to acquire your Product / Service / Idea.

I give you a couple of examples:

If you offer a new acupuncture technique, your ideal client would put acupuncture (basic), safe acupuncture (I’m very cautious), innovative acupuncture, but I would not put acupuncture needles (that’s what acupuncture offers).

You offer tombstones for cemetery niches (they are wall stones, real case), as a customer who has lost a loved one would look for online lapids, cheap tombstones, original tombstones, but we are not interested in the search for phrases or epitaphs for tombstones Look for inspiration) or tombs (because they are tombstones placed on the ground)

This list of words are your relevant keywords, is the first step:

Internet search engines like google rank millions of pages per keyword, that is indexing pages for the most important keywords on each page.

Next, with a series of algorithms they order them from but to less important or relevant in function of what they say and who comments or mentions those pages, that is to position.

In this fourth validation we will try to find and find two fundamental things:

Homogeneous keyword groups, for each group of 3/4 homogeneous keywords we should create a page of our online project.

A number of local monthly searches (local = Spain, if our market is that) for each of the keywords on our list.

To help us in the search of keywords I advise this article in which I speak of how to use the keyword planner of google Adwords.

In short, you must place in this tool or others that exist in the market the keywords of your initial list and you will suggest other keywords related to the indication of approximate monthly local searches for each of the search terms or keyword.

You can easily go for the 500 or 1,000 keywords, do not worry about that now. The tool gives you the possibility to download them in an excel file, it is the best option.

Are terms or words searched on google? Are you finding enough local monthly searches? Do you find other relevant words that you had not thought about initially?

This is the fourth validation.

With the third and fourth validation we try to verify that there is a sufficient market for our Product / Service / Idea, let’s ‘ there are enough fish for our shark’

If in the previous article we fitted the problem-solution of our customers.

And in this, we fit the product-market with sufficient potential and growth.

We only have the fifth validation,

5) Feasibility

We only have to make four numbers to estimate the economic viability of your business idea on the internet.

Keep in mind that until now and also in this last validation we have done nothing but generate working hypotheses.

An analysis of an internet business idea seeks to generate the necessarily credible working hypotheses for then, I recommend using lean startup methodologies, starting a process of building a viable minimum product and validating the hypotheses generated. But that is the subject of another article.

On the internet we talk a lot about conversion funnels, we refer to a series of phases through which potential customers go through until they finally become customers.

These phases according to different authors are Acquisition, Activation, Retention, Monetization, and Reference. I insist there is a lot of theory and practice about it, but I will summarize it a lot.

I want you to be very practical and in this article, I will summarize the phases of the funnel to only three: Searches, Visits, and Sales. Let’s go with the feasibility hypotheses and I will do it with a totally imaginary example but you will have a model as an example in which to guide you:

Searches, I mean the traffic that exists for your list of keywords, you just have to add in the excel of 500 or 1,000 relevant keywords classified into groups.

Let’s say that they add up to 100,000 local monthly searches.

The next phase of the funnel is the visits, how many of the searches could end up in your online project (web, store or whatever). For this, you would have to talk about marketing strategies you are going to employ (go over this article)

Suppose you do things very well and in a year you are able to capture 10% of the traffic. This would give us about 10,000 visits a month.

The next phase is sales. In my experience I tell you not to convert more than 1%, it would be more realistic to think of 0.1%, ie a 1 per thousand.

Conversion hypothesis of visits to sales 0.3%. This gives us 30 sales per month.

Remember that in the first validation I asked you for a couple of data about the Product / Service / Idea, these data that you should know or intuit, I will now put you by way of example.

We assume an average order of $200 per sale and a gross margin (sales price) of 50%

Calculates: 30 sales per month x 200 $ = 6,000 $ sales with 50% gross margin = 3,000 $ margin per month to pay fixed expenses and the rest benefit.

This is the fifth validation

We have reached the end of the analysis of your internet business idea in 5 steps.

I want you to be aware that successfully passing the five validations is not synonymous with success with your business, simply that your idea, with all its hypotheses and assumptions, may be viable

Because it seems to solve a problem

Because there seems to be enough market

Because it seems that it can be profitable