After chatting with some friends and some collective hours of alone time in the shower, you’ve come up with an ingenious idea for a new business. Will it be a smashing success, or will it be just one of those “A-ha moments” that end up being a passing thought or a series of sticky notes in a journal until the enthusiasm passes?
The process of starting a business—from idea to execution—is a wonderful feeling. However, if you’re anything like other aspiring entrepreneurs, you’ll know that the tough part comes immediately after your “a-ha!” moment.
And we’ve all been there.
Ideas stall because the process of getting them to the market can seem overwhelming. Validating your idea rather than letting it linger at the “a-ha” stage will make the process much easier—not to mention more successful.
What does it mean to validate your business idea?
You probably remember learning a bit about the scientific method back in primary school. You created a hypothesis (you had an idea) and set up an experiment to test whether your hypothesis was correct.
Validating a business idea is the same logic!
Indie entrepreneur community Fizzle suggests,
“Idea validation is the process of testing and validating your idea prior to launching your business name, tagline, product, service or website. This is like the research and development process big companies use to test product ideas before they’re released to the general public.”
Research can include surveys, interviews, online research and much more, but why not try combining these methods (conducting research, then applying the information into an interview) to gain the best possible result?
When it comes down to validating your business idea, research is key in tying the process together.
Here are a few steps to consider the next time you come up with your next big business idea.
Step 1: Online Research
While the Internet may feel like it’s purely a hub for memes and funny cat videos, it’s actually a great repository for helpful information for small business owners—or entrepreneurs with a fantastic business idea.
When your idea passes the threshold of “a-ha,” you’ll likely want to jump online right away. Market research is a great way to start, but be sure to ask yourself questions at both a macro and micro level.
How to do it:
Ask yourself these following questions at the “macro” level to see if the “big picture” makes sense:
- Does this product or company already exist somewhere?
- What does the competitive landscape look like currently?
- Is there an upward trend in search volume and industry growth related to your idea?
- Can you find existing players in your market that are already doing well to demonstrate that there is a market demand?
And, here’s what you need to consider at the “micro” level (as Steve Blank puts it, it’s time to “get out of the building”):
Customer discovery is not sales, according to Steve Blank, and you can’t sell yet if you don’t know enough. Begin your validating by having a genuine conversation with someone who might be buying what you’re selling.
Frame your questions in a way that answers these questions:
- Who are your customers? This includes their age, gender, ethnicity, geographic location, as well as other info like their average income, educational level, and lifestyle. (Getting a peek into their lives (and inside their heads) can help businesses better communicate with and sell to customers.
- What problem do customers have? Is there a need your product or service will meet for your customers and if so, what problem are you trying to solve for them?
This will take your business idea from abstract to concrete by putting it to the test to see if your clients actually find your product valuable, and if they would be willing to pay for it.
Remember, just because a product or service already exists doesn’t mean that your idea is dead. In fact, that means the idea has already been thought through and successfully validated by someone else. A little healthy competition isn’t such a bad thing!
Step 2: Choose a Niche You Enjoy
A study from CB Insights showed that 22% of startup founders failed because they either didn’t have a real interest in what they were doing or they lost focus of their goal.
Investing your time into a niche or product that captures—and holds—your attention increases your chances of success.
How to do it:
During the early stages of your idea validation, reflect on these key questions:
Can you see yourself building a business around this idea for the next 5 or even 10 years? Will the product / niche bore you quickly? Does the idea excite you enough that you would want to work on it long term?
According to CEO of Human Workplace Liz Ryan, being successful goes much further than a statement such as, “I want to be a VP by the time I’m 36.” To discover a niche that you truly enjoy—for the long term—try reflecting on these questions to stimulate your thinking instead:
- What is it that I want to accomplish, experience and contribute to the world during my lifetime?
- What do I love to do, and what am I particularly good at?
- What topics do I care about more than any others?
- How can I manage my career so that my work supports my life goals?
Validating your business idea is more than finding a niche and problem that your business can help solve. Invest time into finding a niche or product that you are truly passionate about. Your business is more likely to succeed that way!
Step 3: Build Your Brand
If all your hypothesizing, testing, and reflecting goes well and you feel that you’ve got a winning idea under your belt, start building a brand around it now. In today’s constantly changing and innovating business landscape, an idea that is validated today may be obsolete tomorrow—so don’t hesitate!!
Throw away the fear of “exposing” your big business idea and that someone may steal it. These days, it’s better to go on the assumption that someone will steal it and develop a newer and better iteration if it. The keys to success will be whoever is the first to bring it to market.
How to do it:
Start by choosing a name and securing a website domain (URL) to create a sharp business landing page, preferably with an optimized user experience. Next, secure your business name with every social media channel you can. This way you can protect against others from securing and using them, improving your own search-engine optimization. Finally, start leveraging these resources to build a fan base.
Step 4: Hash a Customer Acquisition Plan
Once you’ve identified who your product will serve, gone through the research, and asked the right questions, you’ll likely want to ask yourself the most important question: how do I get my first customer?
How to do:
The time has come to create a thoughtful customer-acquisition plan and marketing strategy. Be prepared to explain this plan to potential investors, partners, and stakeholders as this will undoubtedly be the first question they ask.
Step 5: Price Your Product
While you’ve still got your potential client talking to you, ask them what they’d be willing to pay for your product. Then ask yourself, is this price reasonable to you? If not, negotiate a fair price.
Dane Maxwell from the Unconventional Life Podcast says, “You want to charge based on the end result you deliver. Generally, you want to charge about 10% of the value”. If the person tells you a price you don’t agree with, be honest and tell them you’d feel taken advantage of at that price. Remember, it is much easier to build a business around a demand than to build a demand around a business.
We wrote this article about pricing products for Etsy business owners earlier last year. Even if you’re not an Etsy business owner, it’s a great resource for learning how to keep track of your inventory pricing directly within Kashoo.
It’s That Simple
Validating your business is like a simple scientific method: creating a hypothesis, experimenting your idea, and determining if your idea is accurate, and worth launching as a business! For it to succeed, idea validation is key and once validated through the steps above, it will become that much easier to proceed to the next steps.
Once you’ve got your business idea set up and running, make sure you record all of your income and expenses directly within Kashoo! Don’t let taxes and bookkeeping mistakes be the bane of your business’ existence. Kashoo makes it easy for you to keep accurate records and file your taxes at the end of the year. Try Kashoo free today!