Idea validation is the method of testing and validating your idea before launching your business name, tagline, product, service or website. The whole objective is to present the idea to your target audience before you develop and release the final product. It’s like the research and development process large companies use to experiment product ideas before they are delivered to the general public.
Gone are those days where the ideas were developed without any research and would be a big flop, now entrepreneurs build the minimum viable products, also know as MVP and experiment them with actual consumers before investing in the production process. By engaging with consumers very beginning in the process you can validate your business idea with much lower investments and risk.
There are numerous ways of validating ideas for business and also ascertain if you can formulate a profitable business. Here are steps to guide on how to validate your business idea.
Experiment idea on your trusted connections
Before starting your new business, you should first discuss the idea you have with your trusted connections. We need not to worry about the idea being stolen. They may have important and worthy feedback and suggestions on how we may develop the product or service further. A Startup is all about seeking a scalable business model that is repeatable. Before start you should estimate the market size – will there be a market for your products or services?
Check the competition
Examine your competition online with an easy search on Search Engine and Social media platforms. You might be surprised by related or similar ideas that are out there. But keep in mind because others are offering similar products or services, that does not mean that your business model is a defective idea – in fact, that is a validation that there is a scope for your product or service.
Many successful startups are disrupting existing markets. These companies have all built a presence with huge competition from existing players. Looking at what your contenders or rivals are doing is sometimes the best way to reinvent your own products and services.
Related Post: Got a Startup Idea? The next step – Validate it!
Build a Minimum Viable Product (MVP)
Ask yourself what minimum functionality your product or service needs for the consumer to be willing to spend for it. Do not attempt to develop the perfect product before you launch. You might end up spending a lot of money into something for which there is no. Then find buyers who are willing to pay for it. When your MVP is ready, you should connect with potential buyers after you identify potential mentor and request for their feedback and review. Ideally, you should refine your idea with paying customers. Welcome the feedback you gain, as this will be the turning point for your business. It is sensible to treat it like a testing process. There is nothing more important than customer feedback to help besides developing your business model or promote your products and services. In this way, you will soon realize if your product idea works or not, without spending huge amounts of money. By talking with your potential buyers you can perform necessary changes according to their feedback and then re-launch until you can determine a successful business model that will work.
Look for proof that it will fail
It is equally significant to look for causes why your idea will be a flop. Several entrepreneurs have so high belief in their idea that they ignore to see at factors that may end in failure. You should be just as serious about determining possible reasons for why your business idea may fail. Prepare a list of reasons and experiment them with your trusted contacts and your initial and first customers. If you discover that there are major restrictions, you may leave the idea or even better, improve it into something new that does not include the defects you have discovered.
Assess Customer Acquisition cost (CAC)
In many situations, Customer Acquisition Cost is the solution to a new business idea. In short, it means that having a product or service that likely customers are ready to pay for is not sufficient unless you can manage to gain the customer at a lower value than they are prepared to spend. Depending on your business plan and your actual customers, we usually observe that Social Media channels and different other online marketing are the perfect way to measure CAC. That is because you can get a much-targeted campaign and begin with a very moderate budget. A small amount of money or investment is enough to get started. Unless you have a plentiful start capital, your first-year profits from a new customer should meet the CAC for that customer.
Take control over the numbers
If your business idea requires outside investors, the primary and first rule is to get control over your estimations and funds – this is an excellent approach even without investors. Now that we have discovered that the CAC is fundamental, you need to also count numbers that actually mean, which is the Customer Lifetime Value (CLV). This is the presumed value of a customer during the time they will be a customer. A potential investor will be more impressed if you can explain a CLV that is largely higher than your CAC. The solution here is the proof, so make sure you document all your decisions when testing your MVP with real-life customers.
Related Post: Market Research? It’s Easy If You Do It Smart
Test again and again!
Presently, we have various solutions that enable businesses to put together a minimum viable product at an affordable price. And with social media marketing, you can efficiently target small groups of potential customers to experiment your product ideas in the market at a small amount of cost when compared to the cost of traditional marketing. Later you should proceed to test all aspects of your business model that is Customer segregation, Value proposition, Sales techniques etc. for validated learning till you have a “Product market fit” and can estimate your marketing, sales, and delivery.
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