Why should you validate the business idea? When exploring new business or product concepts, it is important to test your ideas early in the development stage. Here is the ultimate guide that will lead you through the whole process when you want to validate the business idea.
Validation is not relevant only to potential entrepreneurs and future startups. When it comes to existing companies, they also need to prove the concept of the initial business idea. They will need to validate their ideas to analyze their potential impact on the organization’s goals.
According to many pieces of research, one of the biggest reasons for business failure is the lack of a market need for their product. So, if no one wants your product or service, you can not have a business.
If you validate your business idea first, you will not have reasons to scare that your new venture will fail.
As someone who works with entrepreneurial individuals, I’ve discovered that most of them have an endless source and supply of ideas. But, also, most of them keep their ideas only to themselves. They are afraid that if anyone hears about their business ideas, they will use them to create their company and will succeed.
If you keep your ideas only for yourself, you cannot validate them. If you don’t validate them, you will probably fail. You can also check the entrepreneur’s foolproof 5-step guide to finding and validating business ideas from Foundr.
Now, let’s start with practical steps you will need to take to validate your business idea.
Business Ideas Validation Process – How to validate the business idea?
You need to create a process that you will use for the ideas validation purpose. In this guide, I will use some primary processes that I use with my clients. But remember that you will need to tweak it according to your own needs. Here you will find many useful and practical information to help you do the work for yourself.
Let’s start by simply breaking down the whole process into three different stages:
- Market validation stage
- Idea validation stage
- Product validation stage
Don’t worry. I will explain all three stages in this post. First, open your business ideas book or use these 50 questions to develop a business idea or generate business ideas that match your skills. Maybe you have already found the gap in an established market so that you can use this business idea. It doesn’t matter how you find a business idea. It is more important to have a business idea you want to validate.
1. Market validation stage
Market validation is the first stage of your validation process. If your idea passes this stage of the validation process, you can continue with the next stages.
The purpose of the market validation stage is to find the answers to the following important questions:
- Is there a market for the product as a result of your business idea?
- If there is a market, is it big enough?
- Are there on the market people who are starving for the solution to the problem your product will solve?
- Are they willing to pay for such a solution?
I will share some tools and steps you will need to find answers to these questions based on facts, not assumptions.
1. Use Google Trends to research and validate the business idea
You can start your market validation with Google Trends to see the trend when people search for a solution that your business idea will produce for them. Google Trends is based on Google Search and shows how often a particular search term is used by real people when searching something on Google relative to the total search volume across various regions of the world and in various languages.
Let’s say that we will base our product on Chia seeds. I will go to Google Trends and type in the search term Chia seeds in such a case. The results will be as shown in the picture below.
As you can see, we have a growth trend about Chia seeds, according to Google Searches. You can see that according to Google, in January each year is the biggest interest, while in December we have substantial declines in searching trend.
Congratulation, you come to an important fact when you validate a business idea!
But, I want to be more specific because I want to produce Chia seed oil or Chia seed powder. So, let compare these two terms in Google Trends.
As you can see from the results, Chia seed oil is more popular than Chia seed powder. This result is an additional sign that there is a market for two products, but the demand for Chia seed oil is higher than Chia seed powder.
You can dig deeper by analyzing the interest by regions or cities or look at related rising queries.
Use Google Keyword Planner to research and validate your ideas
We can continue our research for market validation of our business idea to produce products from Chia seeds. Let use the Google Keyword Planner tool to check some more details about our two most important keywords: Chia seed oil and Chia seed powder.
Go to Google Keyword Planner and search for new keywords using the phrase, website, or category.
Next, you will need to put your keywords in the picture below and click “Get Ideas.”
The results I get for my “Chia seeds” business idea is the following:
As you can see, Chia seed oil has ten times more searches than Chia seed powder. Also, you can see that for both keywords, there is high competition. This result is a great sign for our purpose because we are in the stage of market validation. If there is no competition, maybe there is no market for such a product, as another important fact tells us if there is a market for Chia seed oil and powder. If you look at the “suggested bid” column, you can see that Chia seed oil has a higher suggested bid, so companies pay more to advertise Chia seed oil than powder. Again, this result is an additional sign that we have a market for both products.
As shown in the picture below, I will continue with my research to check about other similar suggestions.
From these results, I can see another term closely related to my primary keyword – Chia oil. Also, something important for this stage of the validation process is that there are several results for keywords containing where to buy, confirming that the Chia seeds’ niche is the right niche for our business.
Use Amazon to research and validate business ideas
You can use Amazon to check if there is a big enough market for your business idea. Why Amazon, you probably ask? Because it is similar to the search engines where people search for something, and in this case, they search for products they want to buy.
Go to Amazon.com and type in your target keyword or niche related to your business idea into the search bar. For example, if my target keyword is “Chia seeds,” I will get these results.
As we can see from the results, there are great possible products that persons buy related to Chia seeds like Chia seed oil and Chia seeds powder. If I continue to write about Chia seed oil, I will get additional more specific products as:
- Chia seed oil for skin
- Chia seed oil capsules
- Chia seed oil supplement
So, these can be some specific type of products that my business idea will generate if it passes the validation process.
But, I will continue my research on Amazon. I want to search for different products that exist as Chia seed oil. In the search box on Amazon, I will write “Chia seed oil” in quotation marks to get the exact match with the words in quotes (see picture below).
We can see that there are many different products related to Chia seed oil. This result is another proof that we have a market for our business idea. But let’s dig deeper to find more insights.
I have sorted the results according to the average customer review, so the best products come first. Now it is time to work on research.
Open products from the list one by one and look at the following sections: “about the product,” “product description,” “frequently bought together,” “customers who bought this item also bought,” “Customer Questions & Answers” and “Customer Reviews.”
Look at the “about the product” section and write what you see on a piece of paper or an Excel (or Google Drive) spreadsheet. You will need this information later because you can use this copy of some of the best products reviewed on Amazon when you need to design your total offer at the idea validation stage. Also, you can analyze the package from the copy of some of the best products reviewed on Amazon when you need to design your total offer at the idea validation stage. You can also analyze the package from the images section.
Next, look at the product description and see the product’s description to potential customers on Amazon. Again, write this information and use it when you work on the design of your offer.
When you look at the “frequently bought together” and “customers who bought this item also bought,” you will need to see some other related products you can use in the future.
Next, look at the section “Customer Questions & Answers” and read all the questions and answers. If there are many questions, then this is an additional sign you get about the existence of the market. You will also find useful information as the biggest customer’s problems, challenges, and care that you can use to develop the product when you move through the stages of the validation process.
When you look at “Customer Reviews,” you can find additional information about what customers like, dislike, and how the product helped them. You can also look close to the lowest review ratings to see what the complaints are from the customers. Think about the possible solution you can include in your product to escape such complaints.
Don’t forget to write all the things that you find while you conduct this research. It will be helpful in the next stages of the development of your business.
Create the survey with Google Drive
Until now, you have already collected many interesting answers and analyses. So, you can go one step further to start gathering information directly from potential customers on the market. The best way to do this in the market validation stage is to use a survey.
Log in to your Google account and open Google Forms.
You can now start creating your survey using recommendations that I will share with you below.
When you use surveys for market validation purposes, you cannot use structured questions with already prepared answers that potential customers from the market will choose one or several of them. You want to validate the market, or existence of the market, the possible size of the market, the presence of starving potential customers for the solution, and their willingness to pay for your solution.
Your survey will be structured only in two parts that will contain several open-ended questions. The first part is about the market and potential customers. With these questions, your purpose is to identify your market more accurately to segment your audience. In this part of your survey will be questions like:
- How can you describe yourself concerning (market, problem, solution)?
- What is your profession?
Use open-ended questions in the survey when it comes to describing the problem and possible solutions.
- What is your single biggest challenge/frustration with _________?
- How you currently solve this problem?
- Do you want a solution that will solve this problem?
- How many times will you use this type of solution?
- What the solution needs to give you to pay for it?
- How much will you pay for the complete solution, and why?
- How much will you pay for the partial solution, and why?
When you finish creating your survey with Google Forms, you can send it to potential customers. You can send this survey to your email list if you have one. Also, if your research until now gives you some contact details of potential customers, contact them and ask them to respond to your survey.
You can also share your survey on your social media accounts, or better on the social media groups or forums that cover the topic related to the product or service you want to validate.
You don’t need to have a hundred thousand answers at this stage, but you will need to have enough potential customers to make the right decision. Depending on the product or service you are validating and the target market, the target number of answered surveys can be between 100 to 500.
If you prove that you have enough big market, with potential customers that are starving for your solution and are willing to pay you for your solution, then your business idea has passed the market validation process. Now, you can continue to the next stage of the validation process.
2. Idea validation stage
In the previous stage, you have validated your market. Now you can start with this stage only if your previous market validation process proves that you have a market for your business idea, it is big enough, there are starving potential customers for your solution, and they are willing to pay you for the solution. Still, your solution is only in your head as a possible business idea. So, you don’t have a product or a service to offer to the market, and you haven’t designed or built anything yet.
At this validation stage, you want to be sure that it is worth to start spending time, money, and effort. Additionally to go one step further to design and build your primary product.
Use a landing page for idea validation.
You can start with a simple landing page. But, before you start building a landing page, translate the features of your product into customer’s benefits. Using these benefits, you can quickly begin making your total offer. Be sure that your landing page will have:
- Your total offer with short descriptions of customer’s benefits;
- Order form, subscription form, or phone number that visitors can use to take the first action on a page.
Your goal is to measure and check if there is enough interest in the problem for your customers. The best way to measure the interest will be the conversion rates. You can calculate the conversion rates by the following formula:
Conversion rate = The total number of visitors / The number of visitors that take action.
For example, if you have generated 1000 visitors to your landing page, and 50 of them ordered your product or subscribed to your list to receive the information when they can buy the product or call you on the phone, your conversion rate will be 50/1000 = 0.05 or 5%. How much is larger this number, your business idea will have higher potential.
If your conversion rates don’t pass the process, you will need to go back and improve the offer.
If you use pay-per-click ads, you can quickly calculate how much cost you will have per one potential customer. So, you slowly build your product and connect different dots related to marketing and sales.
Validate business idea through in-person interviews
The second test you will need to implement at this stage is to interview your customers. But, the interview will be talking with them face to face. Your goal with such an interview is to check if your potential customer will buy such a solution. In many cases, they will not tell you directly that they will not buy from you or don’t want your solution. So, your job will be to analyze their non-verbal communication while you explain to them your product/service concept.
The answers you can get from such an interview can be:
- No, I will not buy your solution.
- Maybe, I am not sure now.
- Yes, I will buy it for sure.
Your job through these tests and interviews is to tweak and improve the product/service concept. You will not stop until all interviewed customers are in the group of “yes.”
When your business idea passes these tests, it passes the idea validation process. Now, you are ready to move forward to the last stage of the validation process – the product validation stage.
3. Product validation stage
The product validation stage is the last stage in the process when you validate a business idea to become 100% sure that the idea will succeed.
When you come to this stage, you are already sure that there is enough big market for your product/service. People are starving for the solution and willing to pay you. Additionally, you are sure that there is enough interest for a potential product through the idea validation stage. Also, you want to ensure that people will buy from you.
What you need to do is to acquire early adopters for your MVP through different forms of teasing. You already have surveyed potential customers or potential customers with whom you have talked in person in the previous stage. It is important before you launch your MVP to have a critical mass of testers and early adopters. You need to get enough feedback from them to validate your MVP.
It is important to ask for payment on day one when you launch your MVP. In such a way, you can also analyze your pricing model and check if you need to change something. Your prices will impact your sales quantity. Sales and prices will impact your income and the profitability of your products.
Decide what to include in your MVP
At this stage, you will need to build an MVP (Minimum Viable Product). MVP is the smallest thing you can make to start the validation of the product. On the other side, it is important to work on your MVP. Include all desirable functionalities you have approved from the previous two stages in this validation process. In such a way, you can be able to prove or disprove your business idea.
The first thing you will need to do at this stage of the validation process is to decide what to include in the MVP. So, you need to check all the information you have collected from the previous two stages through analysis, surveys, and interviews. The purpose is to use this analysis to decide what features to include in your first MVP and what needs to contain your total offer. Cut everything out that previous stages proved that not bring substantial value to the customers.
As an MVP, you can use wireframes, prototypes, and mock-ups. You want to get a strong positive reaction from customers at this stage when you validate the business idea. You have already invested enough time and effort in the whole process, and you don’t want to screw at the end.
Do the customers buy and use your product (MVP)?
When it comes to product validation and what you will need to measure, you need to do the two most important things. The first one is to check if the customers buy your product or service or they are only interested in a solution but not ready to buy yet. Pre-selling is a way to validate the product is an excellent way to gain experience and prepare yourself for more successful launches that you will use when you validate the business idea.
The second important measure is related to how your customers use the product or service as an MVP at this stage.
- How much time do they spend on your product?
- How they use and are they satisfied with your product?
- Are they falling in love with your product?
- Are they using all features or only some of them?
You need to check if these two measures at this stage prove your expectations related to purchase and how customers are using the product. Remember that you cannot expect that everything will be ok and pass this stage for the first time. In most cases, you base your expectations on assumptions, and now you will get the facts. And facts aren’t the same as expectations based on assumptions. You will need to tweak your features, total offer, and rebuild your MVP. In such a case, you will have not one MVP but several until you come to the results according to your expectation.
When you come to the final MVP that passes the customer’s control, you can say that you have a validated business idea.
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