Once you have thought of a new business idea, consider taking steps to validate your new business will make money. Many times, entrepreneurs are so excited to start their business because of a new idea, they don’t take the time to research whether their product or service will really sell.
Sometimes, entrepreneurs start a business because they like the idea or they are passionate about the product. But not many others share that passion. They don’t find a need for that product or service.
Paul Graham, a successful author and entrepreneur, wrote an article discussing startups. He said, “The way to get startup ideas is not to try to think of startup ideas. It’s to look for problems, preferably problems you have yourself.”
Will your new business solve a problem that people have?
Here are some steps to help you validate your idea:
Conduct thorough research
Find out if your idea already exists online and conduct detailed market research. It is crucial to understand your customers and what they want. Gather data to understand who will be using your product.
Know the demand for your product or service idea. Here are some sites that will help you conduct your online research. Since everyone can find this information online, consider going to your local library to ask for help as well. They have some other tools which are not available to everyone (unless they go to the library).
Is there a lot of competition and others who offer this product or service? Can you improve the product or service? Could you make it better?
Talk to everyone you know about your idea and ask for feedback
Is this something they would pay for? Send messages to former colleagues, friends, and family on social media.
If you feel you may not get honest feedback because they are afraid of hurting your feelings, compile an email list of everyone you know. Ask them to take an anonymous survey about a new product or service you are thinking about offering.
Also, ask everyone to be truthful. Find out what they would like to see to enhance the product or service. Ensure you aren’t defensive. This is not about defending your ideas. It is about gaining honest feedback.
Conduct online focus groups and surveys from anonymous sources
You can either hire a focus group company or conduct your own focus groups. Some businesses ask for participants on their social media sites or Craigslist.
You can also develop your survey and hire some freelancers for a low-cost through online sites like Upwork or Freelancer.com. Focus groups don’t have to be expensive. Develop and research your ideas of how to gather participants to give you honest and reliable feedback.
Run test ads to see if people are interested in your business idea
There are several ways you can run online campaigns to determine if people want your product or service. Run ads online on Google and other sites to find out how many clicks you get. Create a landing page for your business and place your ads. If your target customers click, you may have a good business idea.
You can also place your survey on your landing page. If they click the ad, put up a 3-5 question survey for them to complete and gather information. Create a sign-up for customers so you can let them know when your product or service will be available. Also, this helps you create a mailing list for new customers once your product or service has launched.
Go to networking events
Find local meetups in your area. Look for meetups where you can go discuss your business ideas with people. For example, if you are considering developing a cookbook app, find cooking meetups and introduce to yourself to potential new customers. If you are thinking about starting a landscape business, consider joining gardening or landscaping meetups. Run your innovative ideas through people you meet. You may find out something you never knew as well.
Consider joining your community chamber and network with people at their meetings. Run your ideas by fellow business associates. People love to give feedback and advice at meetings. Most likely all feedback will be good. But, listen for the other things they say that could enhance your idea.
Conduct a break-even analysis and other financial projections
Once you have gotten feedback from the community and you have conducted your research, you should conduct a break-even analysis. This will tell you if your business will be profitable. It will show you the revenue you need to cover your expenses.
If you cannot break-even, consider making modifications. Maybe you will find another supplier who is cheaper or you will find a cheaper location. Whatever you decide, your break-even analysis will help you make decisions regarding your expenses. This will help you validate your idea further.
You should conduct other financial projections as well. Consider conducting a profit and loss forecast, a cash flow projection, and a start-up cost estimate.
Learn from others
Find out what other entrepreneurs did to help validate their business ideas. Talk to other business owners about their start-up issues and what they would have done differently. Look online for start-up entrepreneurs who validated their ideas. This could help you find some creative ways to ensure your business will make money.
Conduct lean start-up on your business idea
Once you make your decision to go ahead with your business idea, consider conducting a lean start-up at first. Create a MVP, which is a Minimum Viable Product. It is a product or service that offers just enough qualities to satisfy customers but needs more to make it great or to solve a problem for people. Then, you listen to feedback for future product developments.
Game and app developers do this. They create a minimum game or app and push it out to platforms for people to play or use. Then, they ask for feedback for improvement. They want to hear negative reactions such as what the game or app is missing so they can have more product improvement ideas.
You don’t have to be a game or app developer to do this. This can be used for any product or service. You just have to be creative to get your feedback. Run low-cost experiments with your lean start-up to find what works and what doesn’t. This helps you capture more ideas from your audience.
You will know whether your start-up idea needs improvement quickly. Once you start your business, keep doing experiments even when you think you have done everything you can. This will help you stay ahead in the game and come up with new, innovative ideas.
Although many of these ideas may seem time-consuming and expensive, the more time you invest in your future business helps it to become more successful. By conducting thorough research, financial projections, and experiments, you will know exactly what your business needs. Also, you will have few surprises. Learn from other people and listen to feedback.
Jeff Bezos, founder and CEO of Amazon said, ““I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not trying.”
Don’t let the work of validating and starting your own business stop you from trying. If anything, it will give you more ideas to invest in your start-up.