The importance of testing and validating your idea before you decide to take the plunge and make it your whole life cannot be repeated enough number of times. Your idea could be brilliant but if people don’t need it or are not ready to pay for it, then you might as well be throwing your time and money in a river.
Percentage of startups that fail because of developing an idea not needed by anyone is as high as 42%
The question is how can you be sure if your idea is worth investing your time & money in?
Is it worth going old school?
You can go with the traditional method and hire an agency to do detailed market research, but that comes with its own pros and cons.
- Source of great insights
- An effective way of brainstorming with your target consumers
- Surveys can be a quick way to validate if your idea is already well formed
- Sometimes not suitable for progressive/tech related ideas
- Difficult to get representative target consumers together
- Fake respondents
If you are a startup, then most likely the cons of the traditional market research will weigh against the pros. So what do we do?
We consulted experts, talked to fellow entrepreneurs and worked out a cost-effective way to test & validate your idea.
Step 1: Identify the problem you want to solve and who is impacted by it
After 10 years of running startups, that’s definitely some of the greatest mistakes we could have a done. Your good idea is worth nothing. Your way of solving a problem encountered by people is worth something.
We’ll see in step 3 how to actually test your idea. At first, the goal for you is slightly different. You need to list all the elements that make you think people need your awesome solution.
I usually use:
- Quora to ask questions or read the other questions
- Google Keyword tool to measure if there is any evolution or interesting data showing that people are looking to solve a problem
- Competition and semi-competition, it’s good to contact them directly and ask if they have a solution to solve the problem you identify (yeah I know you’ll think “hell no I won’t tell them” but relax the chance they actually do it are low and maybe they already tried and maybe they’ll pay you to try)
- Facebook groups to ask the question in the targeted communities and see how people react
- I contact blog post writers who wrote on similar projects
- I check reviews on online stores
At the end of the excercise, you should get an excel looking something like this.
|What I think is the problem?||What data confirms it?||Who tried to solve it?||What do I feel doing?|
|Ex: Chinese people in Indonesia need bigger umbrella because it’s raining a lot more than home||Google KW show 20% more KW research in China before people go|
In average 3 complains on tripadvisor per week about the weather
|Startup tried to rent umbrella but failed|
Mr John made a blog about it
|Test/Investigate/more/Stop this one|
Step 2: Oranize your idea in your head and so a simple Canvas
Age old wisdom tells us to start any new venture with a business plan, it has various benefits: you get a clear vision about your idea, what you plan to do and how & most importantly if you are planning to raise funds, that’s the first thing business investors would expect to see. However, the traditional business plan much like traditional market research is outdated. It takes too long to make it and as a startup, your plan and solution will change almost every day. So you need something as dynamic. This is where the Lean Stack Canvas comes in handy.
It’s a simple 1-page business plan that lets you cover anything anyone needs to know about your business in less than 20 minutes from the problems you are planning to how you plan to solve it to who is your target consumer to how you expect to make money from it. All on one page!
Key elements you will cover in your business model using Canvas are:
- The problem your business is going to solve
- If there are any existing alternatives available in the market
- The solution you are proposing
- Key metrics that will help you track your success
- What is the Unique Value Proposition that makes you different from others
- Any unfair advantage that your business has that is difficult to copy or to be bought
- Who is your target consumer?
- What channels do you plan to use to get to these consumers?
- The cost structure that explains the outflow of money for any fixed or variable cost
- Revenue stream, which shows how you plan to get the money back
It allows you to capture all the relevant questions that anyone else might ask about your business plan and most importantly for you to be sure of before you decide to go any further into it.
Here’s a video by the creator of Canvas Ash Maurya himself on how to use Canvas to develop a business model in less than 20 minutes. https://www.youtube.com/watch?v=7o8uYdUaFR4
Canvas is a tool we recommend you to keep in handy and update it as often as you improve your project. If you’re not able to fill a simple canvas don’t expect people to really understand your project.
Step 3: Validating the interest of people
Now that the first step is done and you have defined your business model, you need to test it to validate it. Depending on your business idea, the way to validate your idea might differ, but for most B2C products/services, a 4-step strategy has worked the best for us.
Before you start investing in developing a product or a detailed website, start with a simple landing page
- Talk about the problem you are trying to solve
- Briefly describe your product/service
- Focus on the key benefits for consumers
- Most importantly, ask them to buy your product/service or download your app. Yes, we know that none of that is ready right now but all you are asking them is to click on a button buy or download. This works better than focus group discussions as people are not just saying a hypothetical yes but actually showing intent to purchase by taking an action.
A lot of entrepreneurs argue with this method saying that we will lose our credibility among consumers if we don’t deliver after they click the button but there are many solutions for that issue. E.g. asking them to register as an early user.
Tools you can use: Unbounce.com is a simple tool that lets you make easy drag & drop landing pages without needing to do any actual coding.
Setting up Google Analytics
It will be vital for you to set up Google analytics on your landing page to be able to track KPIs like how many people are visiting your landing page, from which source are you getting your audience, who is your target audience and most importantly, how many people are showing interest in your product and actually clicking on that Buy or download button. This is the step, which will give you all the data to base your validation on. Now, if you are not an expert in Google tools worry not, Google analytics is pretty simple to use and they have multiple easy to use tutorials that will teach you how to use it. And like most Google tools, it’s free to use.
Setting up PPC campaign
The battle zone is ready and now it’s time to send out the soldiers. Depending out your target audience you can set up PPC campaigns on Facebook & Google to get people to visit your landing page and have the first contact with your product. Depending on your budget, you can take our $200 – $300 to invest in PPC to test your idea.
Once your PPC campaigns are active and you start getting visits on your landing page, you can start collecting all the relevant data, which will help you know from your actual consumers if they would be willing to use and pay for your product/service. This will also give you an initial idea about the CPA you will have to pay to get consumers via paid marketing.
Some of the key metrics to track will be:
- Number of clicks on the website
- Conversion on the website
Of course, later on there will be tons of other metrics that you will need to track, but for now these metrics will give you an idea about the interest in your product/service.
Weather you are doing this just to decide for yourself if your idea is worth investing in or if you are trying to raise early stage investment or if you are trying to add a new service/product in your portfolio, these few steps can come in quite handy to validate your idea and the demand for it. What’s better? It can be done in less than 10 hours and $500.