The process of creating your own business from the ground up is rife with rewards: a sense of fulfillment, being your own boss, and bringing a new product or service to life that solves a problem.
On the other hand, starting a business can be difficult and expensive. One study estimates that starting your own business from scratch costs an average of $30,000. The U.S. Small Business Administration notes that micro-businesses and home-based franchises can cost in the range of $1,000-$5,000, depending on the niche and business model.
Regardless of the details, launching a new business or product takes time, effort, and at least some cash. To avoid toiling away trying to find a business idea that ultimately won’t work out, doesn’t it make sense to do your homework?
Here, we’ll round up some methods to validate your business idea so that you can move forward with confidence.
What does it mean to validate your business idea?
Back in primary school, you probably learned a little bit about the scientific method. Essentially, you created a hypothesis (you had an idea) and set up an experiment to determine whether that hypothesis was correct. Well, validating a business idea follows the same line of logic.
Indie entrepreneur community Fizzle offers an apt definition: “Idea validation is the process of testing and validating your idea prior to launching your business name, tagline, product, service or website. This is like the research and development process big companies use to test product ideas before they’re released to the general public.”
This process of doing your research can include surveys, interviews, online research, and much more, all in the pursuit of testing out whether your idea—whether it be for a new company, product, or both—has legs.
How to validate your business idea
You can validate your business idea in a multitude of ways. Not all of these will make sense for your product or idea, so choose the ones that will work best for your purposes.
While the Internet sometimes feels like it’s purely a hub for memes and funny cat videos, it’s actually a great repository for helpful info for entrepreneurs.
When you nail down a particular idea, you’ll likely jump online right away. Does this product or company already exist somewhere? What does the competitive landscape look like? Just because a product or service already exists doesn’t mean that your idea is dead. In fact, that means that someone out there has likely gone through this process and successfully validated the idea. A little healthy competition isn’t necessarily a bad thing.
If you don’t already have some insights, do a little digging online to learn a little more about the niche. Read up on industry trends and recent news articles. Even doing this kind of cursory research can give you some background on your potential industry and your target market.
Online feedback groups
Another great way to leverage the Internet is with feedback groups. Sure, you might first want to bounce your business idea off your friends and family, but once you’ve passed that milestone, it’s time to debut your idea to the world (at least online).
Some great places to gather feedback on your idea include:
- Facebook groups (industry-specific groups, entrepreneur groups)
- LinkedIn groups (topical and entrepreneur groups)
- Reddit (specifically the r/Entrepreneur and r/startups subReddits)
- Online communities (GrowthHacker, ProductHunt, Quora)
Another step in validating your business idea is to interview your target market. Ideally, find people who would be your target customers down the road and ask them:
- How do they feel about the problem you’re trying to solve?
- What are they using now to solve this problem? And what are the shortcomings of those solutions/products?
- Would they be interested in your product/service as you envision it?
You can conduct these surveys in-person or online with a tool like SurveyMonkey. But just an FYI: People’s time is valuable, and you’ll likely need to compensate them for sharing it. That could be a gift card, cash, a voucher, or some other token of appreciation.
Create a prototype or mini version of your product/service
One of the best ways to understand how customers will respond to your product or service is to actually see them use it.
By creating a prototype or offering a free version of your service, you can put your idea in the hands of customers and gauge their reactions. From there, you can further flesh out your idea based on insights gleaned from these interactions.
An example of this would be restaurateurs who test out a food concept with a food truck. Food trucks are restaurants on wheels—but they only require a fraction of the financial commitment of a standard brick-and-mortar restaurant. So, chefs can test out their menus and concept on would-be customers, and if the idea gains traction as a food truck, then it could potentially be scaled up to a full-service restaurant.
Sell before building
This method of validating original product ideas has grown in popularity with the advent of crowdfunding sites like Kickstarter and Indiegogo. Entrepreneurs can test out their ideas with a crowdfunding page, gauge interest, and encourage people to fund their project or buy their product before it’s even built.
While there are many instances of this, MVMT is one successful example. As the second-highest funded fashion brand on Indiegogo in 2013, the two founders were able to validate their idea: that there was a demand for stylish and high-quality but reasonably priced watches. Now, the pair have sold over half a million watches and haven’t needed to take on outside investors.
Three tips for finding a great idea to validate
Did the research process nix some of your ideas? Or maybe you want to come up with some fresh business ideas to validate?
While the creative process can’t be completely forced, there are a few methods to find and hone in on a great business to validate.
Set aside brainstorming time (and focus on your best idea)
Use some of the most productive time of your day (whether you work best in the morning or are a night owl). Block it off in your calendar and focus entirely on brainstorming some ideas.
Perhaps your brain is brimming over with ideas or you simply haven’t had the time to flesh them out. If you’re drawing a blank, try some of these tactics:
- Focus on a problem you want to solve and work backward—then consider what solutions you could create to solve it.
- Get outside of your typical work environment. Whether you go to a coffee shop, your local library for some quiet time, or visit a coworking space, get outside of where you normally work. A change of scenery can sometimes spark a change in perspective.
- Try free writing or free association to spark some new thoughts.
Once you have a few solid ideas down on paper, hone in on your best idea. Determine who your target audience would be for each idea. Identify potential roadblocks that you might encounter if you pursued your ideas. Once fleshed out, rank those ideas and focus on the top one.
Build on your current skill sets
Many early-stage entrepreneurs already have multiple, impressive skill sets. Maybe you’re a seasoned marketer or are an excellent brand strategist. Or perhaps you’ve worked in a particular industry for several years and know it inside and out.
Whatever your skill set or employment history, you likely have some expertise you can build on when coming up with a business idea. Have you encountered problems in the past that don’t have a viable solution? Or perhaps you use tools or products in your professional life that you’re confident you could improve upon?
Leverage your existing skills and expertise wherever possible to brainstorm ideas for your business.
Choose a niche that you enjoy
Investing your time into a niche or product that captures your attention can also help increase your chances of succeeding. Based on a study from CB Insights, 22% of startup founders that floundered said they failed because they either didn’t have a real interest in what they were doing or they lost focus of their goal.
So, during the early stages of your idea validation, remember to reflect on a key question: Can you see yourself building a business around this idea for the next five or even 10 years? Will the product or niche bore you quickly? Or is the idea exciting enough that you would want to work on it long term?
Moving forward with a new business idea
Now that you’re equipped with a handful of ways to test the waters with your new business or product idea, you can move forward.
Doing your due diligence by validating your idea can allow you to confidently try your hand at it without sinking tons of time or effort into a concept that’s bound to fail.
The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.