5 Ways You Can Validate Your Small Business Idea
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5 Ways You Can Validate Your Small Business Idea. Is this actually going to work?Is there a market for your new business idea? Will people buy what you’re selling? Is starting your own business even a viable option?
You have a multitude of questions when you’re starting a new business—but, those are the ones that keep you up at night.
Considering the risk, you’re often left with more questions than answers. However, working to validate your business idea before investing serious time or capital can give you a clearer understanding of the risk, and provide you with some reassurance.
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Validation Matters
One recent study by CBInsights shows that 42% of new startups fail because there’s no market demand for what they’re offering. Your target potential customers should be your source of business validation. They’re the ones who hand over the money, so they should be the ones to see the value in what you’re offering. At this point, you should be intimately familiar with your target market. You should know things like:- Basic demographics (age, gender, location, etc.)
- Income level
- Education level
- Personal values
- Problem your customer is facing (and how your business solves that problem)
- Major goals of that customer
Method #1: Dig Into Existing Market Research
The numbers matter. A few topics you will need to know are:- Size of your target market in your area
- Outlook for your industry
- Performance of your competitor
- Has your field been increasing in popularity—or has it been on a steady decline?
- What do economic experts project for the future of your industry?
- Have larger corporations been acquiring smaller businesses?
Method #2: Create a Survey
Surveys are a convenient and effective way to get valuable insights from your target customers. If you already have a way to get in touch with your prospects (like an email list, industry forum, or even social media), you can create a simple survey using tools like SurveyMonkey or Google Forms. Creating the survey is a start, but the magic lies in asking the right questions. Let’s say that you’re planning to open a neighborhood craft brewery. In your survey, you should inquire about things like:- Behavior: What do they like about craft breweries? How many times per week or month do they visit a craft brewery?
- Competitors: Are they regular visitors of other craft breweries in the area? What do they like about those? What don’t they like?
- Pricing: What’s the maximum they’re willing to pay for a pint of craft beer? What does it take to make a visit to a craft brewery worth the price?
Method #3: Capture Emails to Gauge Interest
You want to get a read on the level of interest out there, but you don’t want to commit the time or the capital into developing a product for a beta or soft launch. That’s smart. Your goal is to validate a business idea—not lay all the groundwork of your business and cross your fingers that people are interested. A better use of your resources it to launch a “coming soon” page for your business. On that page, provide an overview of what you plan to offer and include an email capture form where interested people can enter their information and receive updates when you’re preparing for the launch of your business. Doing this accomplishes a couple of things for you:- You can gauge market reaction. When people are interested in learning more about your business, that’s validation that you’re onto something worthwhile.
- You can build an email list. That’s a captive audience for those surveys we just discussed.
Method #4: Host a Focus Group
Surveys are quick and convenient, but they also yield surface-level responses. A focus group allows you to dig into the psychology of buyers. In a traditional focus group, a select number of your target customers gather in a room to learn about your product or service and respond with their opinions. If you have the budget, you can search for market research companies in your area that will coordinate the focus group for you. But, you don’t need endless dollars to make a focus group work for you. You can go the simple route and rent a room in a local library, co-working space, or other event venue and have someone on your team lead that face-to-face discussion and gather those insights. This is another scenario where people won’t offer up their time for free. Provide some form of incentive or compensation—whether it’s cash, a gift card, or a catered lunch—to make it worth their while.Method #5: Solicit Honest Feedback
Feedback isn’t always easy to hear, but it’s crucial in the early stages of your business. People might not be forthcoming with the criticisms you actually need—it’s up to you to actively solicit those. Let’s go back to the craft brewery example from earlier. You’ve already been making some brews in your basement as a hobby, and you’ve found a local craft beer club who loves to sample new beers. Offer to bring some of your product into one of their meetings. In exchange for the free samples, all you ask is that they provide honest feedback. After they’ve tried your beer, ask tough questions like:- Do you like this?
- Would you pay for this?
- What would make this better?
- Is there anything I’m not doing that I should be?
- What you’re planning to offer as part of your cleaning service
- What an average cleaning would cost
- What sets you apart from other cleaning services
Validate Your Business Idea and Make an Informed Leap
We’d all love to live in a world where every one of your seemingly smart business ideas is guaranteed to succeed, but that’s not reality. In the real world, you need to validate your business idea to avoid setting yourself up for failure. The key with validation is to have a complete idea to present to real people and then gather their feedback and measure their interest. This is an experimental phase where you should be constantly learning and refining your concept and determining if there’s a real market for your business. It’s not a step where you should over invest time and money into development of your product—or you run the risk of starting your business at a loss. Fortunately, it’s possible to get validation for your idea, without a huge investment in resources. Put these methods to work, and you’ll ease those stomach flips and move into business ownership with a greater sense of confidence.Discover more from My Business Web Space
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