The next thing we did was brainstorm the criteria we would use to evaluate each venture idea. The purpose of this exercise is to judge the ideas in an objective manner based on the common goals we had previously agreed upon. After agreeing on the general criteria, we decided on a weight for each. Here’s what we came up with:
Market (external) - 30%
- Market potential
- Competitive landscape
- Differentiation
- Trending
- Value to customer (willing to pay)
Revenue potential - 20%
- Short term
- Long term (including exit strategies such as acquisitions)
Personal growth - 7.5%
- business
- technical
- legal
- accounting
Interest/Passion - 7.5%
Cost - 10%
- Maintenance
- Implementation effort
Feasibility (for the 2 of us) - 25%
- business
- accounting
- legal
- accounting
We calculated a score out of 10 for each of the categories using the category detail as data points. Multiplying it by the weight, we were able to rank each of our opportunities against each other in a somewhat objective manner. While it is subjective because of our scoring system, they are relatively objective and provide a good baseline estimation in the absence of hard data.
If you decide to take this approach, I’m sure you’ll come up with different categories and weightings and, in fact, it took us a few trial runs to converge on what we have here. It all depends on what’s important to you in a venture. In our case, this is how we weighed it. We feel that it weighs a healthy dose of reality against personal interests so that we don’t go down a path that’s really “cool” but leaves us broke in the end.
I guess we won’t know how well our model works until we see the results of the venture…so stay tuned! At the very least, we’ll have a revision to the decision criteria for our next try 
Other Two-Bit Posts
on Jan 25th, 2006 at 3:34 pm
I hear “The Art of the Start” by Guy Kawasaki is a good reference book for anyone who is thinking of starting a business.
on Jun 7th, 2006 at 10:45 pm
[...] I love the name of this blog — How to Start a Two-Bit Operation. [...]