It’s often said that the riskiest thing you can do in business is guess. And it’s especially true when you’re starting out on a new venture, particularly in these uncertain post-lockdown times.
Every new business idea is based on assumptions we make about the world around us. Yet so many aspects of our lives, habits and behaviours have changed due to the pandemic – how can you tell if your assumptions still hold true?
So before you go all-in on your latest, greatest idea, you need to test your thinking in the real world. Here’s a simple seven-step process to get you started:
1 - Outline your idea
Ideas often need to be written down before you can see them for what they are. So the first step towards validating your idea is to get it down on paper, see if it still makes sense and work out if there’s anything missing.
2 - Define your audience
‘Everyone is my customer’ is not a strategy for success. You need to define who your specific audience is and who it isn’t. Think about who is most likely to buy your product/service, where they are based, what motivates them and what they are trying to achieve.
Try and establish a well-rounded profile or ‘persona’ for your ideal customer. If you can’t work out who they are, it might be time to rethink your business idea.
3 - Define the problem
Another thing you need to understand early in the validation process is whether your product or service is a ‘must have’ or a ‘nice to have’. If it solves a clear and obvious pain point in customers’ lives, it will be easier to persuade customers to pay for it. And if it doesn’t really solve a problem or add value, what exactly does it do?
4 - Speak to your audience
Once you’ve created your persona and defined the problem, you need to go and speak to some real-world prospects to get their feedback. Find them wherever you can: on social media, in your neighbourhood, or your local high street, on listings website, online searches, through media articles and blogs.
Make sure you speak to customers who genuinely match the profile you’ve built, and not just family and friends. And always ask them ‘why?’ questions – why is this a good idea, why are you interested/uninterested, why would you only be willing to pay X for it?
5 - Determine the competition
It’s worth knowing who your competition is, because this will help you to figure out what makes your idea stand out in the market (e.g.. price, unique features, customer service, location etc.). Put yourself in your customer’s shoes. Do they have a good reason to choose your business over anyone else’s?
But don’t get too obsessive about what other people are doing. In most lines of work there’s plenty of room for healthy competition.
6 - Price it all up
Work up a basic financial plan, including how much it will cost to make your idea a reality, what you’ll need to charge to reach your target revenue, and what expenses you’ll incur along the way. If the numbers don’t add up, your idea needs tweaking.
7 - Try selling it
Positive feedback on your idea is great, but it doesn’t always guarantee future sales. So it might be worth going one step further and trying to sell something – for example, advertising your services on a local website or listing a prototype of your product on an online marketplace. Just make sure you can deliver the goods in the event that you receive a positive response!
Validation is the starting point, not the end goal
There are many strategies for validating a business idea, some of them lengthy, complex and potentially unnecessary (unless you’re seeing large amounts of external funding). It all depends on what you’re trying to achieve.
And whatever your idea, at some stage you’re going to have to go beyond validating and start turning your idea into a business reality.
So keep things simple, stay focused on the essentials and remember the single, overarching goal: sense-checking that your idea works in the real world with real people.