You ask the customers, and gauge their level of interest. Better yet, get yourself in front of some customers, and instead of telling them what you make or do, ask them what they need. When you notice that many of them need the same thing, and if it is something you can make or provide, you then have a business idea worth pursing.
I help companies find their most profitable customers working with everyone from pure B2B startups to $75M+ consumer businesses. First, I would separate whether you are solving a problem for a consumer or a business (they have very different ways of being sold to).
To build on what Daniel is saying, I would begin with meeting as many people as possible you think you solve a problem for. At first, ask them what's bugging them about the area of their business or lives your idea pertains to. Is what they currently do too slow, too complicated, too expensive? Shoot for talking to a couple dozen people. Clarity and your friend group are a great place to start these conversations.
As you have these conversations you'll start to see patterns emerge. Holes in what's currently being offered in the marketplace, etc. From there you can start narrowing the conversations. After they've discussed what they don't like about what's currently out there you can pitch your idea. "Hey, listen it sounds like you really hate changing your summer tires to winters. What if I could have a team come to your home, change them and store the summer tires for you all for $49.99?" And the last bit is the most important part, asking for the sale. People will throw out objections: "Too expensive." "Nah, it's actually not that important. I'll change them myself." Or they'll say "yes" which gets some $ in the door. That's when you can start doing the traditional business planning of determining market size, etc.
I hope that helps!
99% of the time Start-ups fail because there is no tangible "market" for what they are creating...this is why it is SO important to validate that the market demand truly exists and can power a business. I see over and over again this is the mistake a HUGE number of entrepreneurs make in the first 90-Days. You have to be diligent about testing your hypothesis and quantifying market demand - before you tae a single step.
Aside from everything the other experts covered, I would give you one easy recommendation:
1. Build out a quick landing page clearly explaining your product/service and make it interesting.
Set it up as a "coming soon" page with an email field so customers can be notified when it launches.
You can have this done by a designer or use a service like Instapage, Leadpages, Unbounce, etc that makes it easy for you to do it yourself using templates.
2. Send a bunch of people to your landing page using Adwords, Facebook Ads, etc.
Make sure you specify your market clearly so you only target the appropriate people (there are many courses out there on how to do this).
3. If you get a good response (many people signing up), you know there is a market for your product/service.
You can then capitalize on the list you created by giving everyone that signed up a discount or free trial once you launch.
Let me know if you try it out!
The main question to be asking yourself is this a product or service that people really want or need. I have been working with my own businesses and startups for over 20 years and I can tell you that on the surface sometimes a business seems like a good idea when it is not.
However, if you feel like it is a good idea, it has a high probability of success. That is if you understand a few basic business principles.
First, make sure there is a true need or demand for your product or service. Never try to create this need or demand unless you have as much money as Amazon.
Secondly, how many units of your product or service would you have to sell to return your total investment do not include any other costs in this initial calculation.
Next how long do you estimate it will take to sell enough units in order to return your initial investment.
Now if you got luck and sold twice as many of your units in the amount of time you calculated would it be a profitable use of you time and money?
This is a simplification of how I work this formula, but the point is to make sure that if everything goes perfectly that it still would be worth investing your time and money in the venture.
To Find Out If There Is A Demand
My suggestion is to first get a conversation started regarding your product then make sure that you are offering specifically what the market demands. You can do this be participating in LinkedIn groups, etc.
Make adjustments to the product or service to meet the real demand.
Don't Stop and Take Massive Action.
Michael T. Irvin
My books are now available on Amazon.com by searching for books by Michael T. Irvin
Worth Pursuing is a measure of your highest value. If its money, then google "Your business idea Statistics" and you will be able to see failure rates and revenue returns.
If you value a challenge, Any business will do.
If you value environment impact, "Go Green" And go fund me.
If you value People, then your business should directly solve the problem the masses are facing or at the very least a great majority of people.
If you value God, then it will be non profit.
If you value time then you would have started it already.
Spend time scotching out a business model and a business plan for about two months to see if the idea is financially viable. The key is to properly determine the target customer, the current problem and/or need that they have and how will your product address their issue. From my experience, most new businesses struggle because they have not articulated a value proposition accurately.
Value proposition: my product XYX is for customers ABC that have the following problems: p1, p2, p3. Unlike current solutions, our solution is about 30% better, faster, cheaper.
Obviously, to get to the value proposition above, you have to do extensive market research, industry research, competitive intelligence, customer discovery. All of that can be done without actually build a product.