How to Validate your Business Idea
Originally published on APM Consulting Services November 26th 2012
I have been working with a few clients lately who are in the initial planning stages of their business. The toughest, and most critical, part of this stage is taking what you think your business should be, and figuring out if you are right. This is the process of Idea Validation.
How many times have you seen or hear of businesses open and almost immediately begin to fail?
- A restaurant that opens and fails to attract any real attention or good reviews.
- A new product launch that quickly fades after failing to catch on.
- Someone with the next big thing online, or a smartphone app, that never makes back the cost of development.
Whenever I hear these stories the very first thing I think is, they probably didn’t go through the process of idea validation.
Idea validation is easily the most important thing any entrepreneur can do. Whether you are starting a new business from scratch, making changes, or planning expansions, you need to validate your idea with you customers. If you can’t prove that people want it, and will pay money to have it, then you don’t have a business.
Idea validation is not limited to startups and small businesses it is a fundamental best practice for everyone.
Idea Validation 101
Put as simply as possible idea validation is just asking your potential customers if they would be willing to spend their money on your idea. That’s it. But, how do you go about doing that? What types of questions should you ask and how should you approach people. Here are a few ‘best practices’ to keep in mind when setting up your validations.
Validate 1 Idea At A Time
Whenever possible focus your validation efforts on just one thing at a time. Despite the fact that your idea is likely made up of multiple assumptions, you won’t be as effective if you design a test to validate them all at once. Start with your riskiest assumptions, the thing that everything else hinges on. If this is invalidated then so are all the other assumptions based on it. Focusing on one thing at a time will also help to make your validation focused, and easy to interpret.
Minimum Validation Level
If you are going ask the same questions to 100 people, how many do you need to answer in favor to give you validation? In order to set your level, think about how the people you are asking represent the market as a whole. This will vary, depending on your situation, but setting an acceptable validation level ahead of time will keep you from later convincing yourself that a bad idea is actually a good one.
Validate Your Customers
The opinion of someone, who is not your potential customer, doesn’t count for much. Asking your friends and family what they think of your idea is only useful if their opinions matter to the business, not to you personally. Even if your validation is focused on determining who your customer group will be, then target specific segments one at a time. Or, build your validation to capture key information about the respondents.
Idea Validation Should Be Cheap
One of the whole points of going through the process of idea validation is to keep you from spending a lot of money on a bad idea. Thus, it is important that you design your validations to be as cheap and efficient as possible. Free online surveys, landing pages or super basic websites to measure traffic and response, hitting the streets or your competitors place of business to interview people, the list goes on. The important factor here is designing low cost, low effort, yet effective tests to validate your idea. See our Resources Page for some suggestions of online tools.
Get Honest Answers
Not all questions are created equal. In order to validate your idea it is critical to get honest and appropriate feedback. A few to avoid when creating your idea validation:
Leading Questions – Questions that suggest the outcome that you are looking for will lead respondents and skew your results.
Example: I have created this new, amazing tasting, type of ice cream, isn’t it great?
Should be: What do you think of this ice cream?
Loaded Questions – Using language that plays on people’s emotions, stereotypes, and prejudices will prompt them to answer in a certain way. Keep it neutral.
Assumptions – Be careful you don’t assume people know the necessary background information. Make sure they properly understand what you are asking them.
Jargon – Similar to assumptions make sure you use language people are familiar with and will fully understand. Acronyms, slang, etc. will confuse people and they may answer without properly understanding the question
Double Questions – Ask only one question at a time. Asking “Do you like it and how much would pay?” should be two separate questions. This will diminish confusion and keep answers focused.
As you can see idea validation is fairly simple in concept, but it can definitely be daunting and complicated in practice. Figuring out the right questions to ask, analyzing the data you get back, choosing who to ask and what to do when you don’t get a positive response, it can all be a little overwhelming and time consuming. If you need help visit our Startup Solutions Page, or contact us and let us guide you through your idea validation process.