Do you have a brilliant idea but you are scared it won’t sell in the marketplace? If YES, here are 11 simple steps to validating your business idea with $100 or less.
One of the first things an entrepreneur is required to do after happening upon that light-bulb moment is to ensure that this great business idea would in fact be sellable. The only way to ensure this is to validate your business idea.
What is Business idea Validation?
Business validation is a research that is usually carried out by an entrepreneur to ensure that his or her business idea will have a sustainable, growing, paying audience in a matter of days or weeks, rather than wasting months or years building a final product that nobody will pay for. Validation is thus designed to give you your first paying customers and a foundation for future growth for your business.
While carrying out business validation is very important to the life of your business, but it should be noted that validation is not a guarantee that your business idea would succeed because it takes time for people to build trust in you, especially people who don’t know you.
If you have a business idea, but you don’t know how to prove that it will be a success, then the following steps below would help you prove the validity (or not) of your business in a short while.
11 Simple Steps to Validate a Business idea With $100 or Less
The first thing to do when validating a new business idea is to thoroughly research the idea and see how it is doing in the market. If you notice that there are very few people doing the business you hope to do, it should give you a cause for concern. This phenomenon sometimes means that entrepreneurs have realized from experience that this your business idea is not profitable.
Most people think competition is bad especially when they feel someone else has beaten them to it and built and marketed their product before them. Entrepreneurs, however, know that competition is a good thing because someone else has already spent the time and money to validate that idea for you.
Plus, you have an advantage coming in later – not only knowing that there’s a market for that product – but also knowing what can be done better. This then means that someone else has borne the risk for you. In this regard, you need to test your ideas well and not just assume that because no one, or very few people are doing the business that you would jump in a make a load of cash out of it.
- Does your idea have a clear profit route?
The major aim of any business is to make profit, so your business idea must have a clearly defined route of making money. You should note that it would be difficult to raise seed capital for a business that has no clear profit route.
Businesses need money to grow and flourish, so you need to determine if this your business idea would be able to make the money that would sustain it in the future. If your business has no means of making profit, then you should know that it is a hobby and you should treat it as such.
- Test your market size using Ads
The size of market available to your business would help to decide if your business would succeed or fail. One good way to test your market size is to run a small Ad campaign. It would help your narrow your market to get the particular market size that is available to you. You can run small ad campaigns using pretty much any platform you can (Facebook Ads, Google Adwords, Twitter Ads) for cheap or free.
All these platforms offer coupons for free advertising credits. You have probably seen them floating around the internet and they are fairly easy to get. You can used Facebook Ads to validate a new business concept by spending around $100 on Facebook Ads for a week to generate leads, which may lead to phone conversations and even making sales.
- Does your product or service fill a need in the market?
Every successful business has a role it plays in the market and so your business idea should aim at filling a need. This is the only way people would pay money for it. Think about what makes you unique, and the special spin you put on your business that sets it apart.
If you cannot find anything unique about your business, then it is best you don’t even start it as it would be lost in the sea of similar businesses in the industry that have already made a name for themselves.
- Rip the idea to shreds and see if it still stands
Our business ideas are often our babies, and we tend to treat them as such; but for your business to be able to stand the tough market competition, it has to be toughened up. You need to rip your business idea to shreds and see if it would still stand.
If your idea survives, then you should proceed with it, but if not, then you should start forming other ideas. Any idea that cannot stand up to scrutiny, test, competition etc. may be a waste of your time. If you are not able to do this yourself, you can hire an expert to help walk you through the process, or even get a friend, family or mentor to do it for you.
- Hold a focus group
Holding a focus group is another way to validate your business idea. The essence of creating a focus group is to make sure that you are building something they will actually need and want bad enough to pay for.
Here, you are required to put together a group of people who would likely be your potential customers. Some of the places you can find these people include the social media, book clubs, small groups, business networks, etc. You should try to avoid using friends and family in your focus group as it is impossible for them to give you unbiased feedback.
After texting, emailing and messaging friends, former co-workers and acquaintances for just one week, you would find that you have netted a tidy number of email subscribers for your focus group.
You can start building your focus group immediately by contacting friends, family, co-workers, former co-workers, other professionals you have worked with, classmates or former classmates from school, teachers or professors you have had, fellow members in clubs, societies, groups or meetup networks you are in.
You can also scroll through your recent text messages, browse through your last couple hundred personal emails, head into your Facebook friend list, LinkedIn connection list and check out your Twitter followers.
Look for people you know, who you think may have an interest in what you’re building. Then, out of the people who express interest in your idea, ask them if there is anyone else they know that comes to mind–that might be excited about what you are building.
- Float your concept on social networks
The main aim of floating your business idea on social networks is to see if you would get a good response. You can test it in a Linkedin group to gauge response, float it on Facebook to see if your post gets any likes or post on Twitter to see if it gets any Retweets. Quora is also another good network you can take advantage of because the crowd on quora would always give you objective feedback.
- Take your idea to town
Once you have familiarized yourself with certain aspects of your business idea, it is now time to take it out to meet real people who are part of your target market. The aim of this is to further search out if your business idea can find its feet in the market.
Here, you need to go to a coffee shop or fast-food restaurant in your area and aim to talk to about 20 of its patrons in the space of a day. You can open with, “Hi, I’m a researcher doing a project on XYZ. Can I ask you a few questions?”
If they say yes, the next question you ask is their consumption habit in your product category. Do they use XYZ product (your competitor)? Why or why not? When do they use XYZ? Is there anything frustrating about using XYZ? Their answers will tell you what kind of consumer you are talking to, whether they’d be your target customer and if there is anything missing in the market that you can offer.
If you find that people are politely putting down your product, then you have to find out why to see if you can further improve the product. If you at a point find that you are trying too hard to convince people about the product, then you know that your idea may never fly in the market.
If on the other hand the person likes your idea and says they would use your product themselves, know that you are getting somewhere, but don’t be too excited yet. Your idea is not validated until people are willing to invest some resources to demonstrate their interest.
Ask if they would be willing to sign up as a user, or give you their email address so that you can let them know when the product comes out in a few months. If they say yes, congratulations! You have just validated your idea on one person, and got a hot customer lead as well.
By this stage of validating your idea, you have had a number of meaningful conversations with your target audience and you have built a small list of people who are interested in getting updates on your upcoming business idea.
A competitive advantage is defined as your unique advantage that allows you as a business to generate greater sales or margins, and/or acquire and retain more customers than competitors. In short, it is what makes your business, your business.
Your competitive advantage can come in many different forms including your cost structure, product offering, distribution network, customer support, your own personal skill set, your experience, industry knowledge, strategic relationships, a powerful personal brand, large and engaged audience you’ve built etc.
The strength of your competitive advantage will greatly affect your early results in validating your idea.
To get to the competitive advantage(s) of your idea, start by carefully combing through all the feedback emails, conversation notes and ideas you have recorded from your target audience conversations so far. Look for commonalities, trends, surprising insights and particularly interesting ideas that catch your eye. Highlight them as potential value propositions to come back to for developing your competitive advantage.
- Get a proof of your concept
Now you have a small (but growing) audience, you know the specific offering you want to validate your idea with. A well-executed proof of concept is designed to help you verify that your solution solves the problem you are attempting to address, confirm that your solution is valued by your future customers and determine whether or not people will pay for your solution.
There is no definitive, across the board success metric for all proof of concepts, but it is always recommended to set a goal of generating a specific amount of revenue from a predefined number of paying customers. Here are a few popular examples of proof of concept goals that you can set for your business idea:
- 10 pre-orders for your upcoming product or service
- Generating $100 in affiliate commissions
- Getting 100 listeners on your first podcast episode
- Getting a book proposal accepted by a publisher
- 100 waiting list subscribers etc.
Once you have gotten people to trust your product to the extent of paying for a non-existent product, then you know that your product or business would definitely do well in the market. In essence, you have validated your business idea.
- Test, test and test again
After you must have gone through your initial validation, don’t just conclude especially if your results don’t correspond with the aims you have in mind. You have to modify your idea and test them again. You should continue to test every aspect of your Business model: customer segments, value proposition, sales channels etc. for validation until you have a product market fit and can scale your marketing, sales and delivery.
6 Reasons Why Business idea Validation Tests Fail
Quite a number of entrepreneurs have come up with the null result after conducting a validation on their business ideas. There are a few reasons why business idea validation fails and they include;
- Pitching to the wrong audience: if you target a wrong audience while conducting your business validation, then your validation would most likely fail.
- Not getting in front of a large enough audience: the larger your audience, the more accurate and responsive your validation would be. Some entrepreneurs just use one or two methods of validation, but that would not give them the desired result. You need to cover as much grounds as possible with your business idea.
- Not creating enough perceived value in your proof of concept: if your proof of concept is not enough, then you won’t get accurate results.
- Not having or highlighting the right value propositions.
- Pricing the pre-order of your business idea above what your audience will pay: it is great to esteem your business idea highly, but if you overestimate on price, then you would put potential clients away.
- Existing solutions on the market are already good enough: this is usually rare but it is still possible for solutions in the market to be enough, at least for the time being. What the entrepreneur can do in this situation is to re-modify his business idea and try again.
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