There is no dearth of ideas for new business. But is your new business idea worth pursuing? Nine out of ten startups fail. But why? Often, people produce products or services that no one wants. According to a study conducted by CB Insights, 42% of startups fail due to poor product-market fit. Even though this study focused on startups but there have been instances which proved that even big corporations fall prey to these mistakes.
Amazon’s Firephone failed to impress customers despite excessive publicity before its launch. The reason was its expensive cost and the features which were substandard compared to other smartphones. It was also incapable of providing services to some wireless carriers in the U.S. Ultimately; the company was bound to make a $170M write-off due to its declining sales. Another big house Coke launched ‘new taste of Coca-Cola’ in the year 1985 so as to perk up its flagship soft drink. But it failed miserably since people rejected the product leading to boycotts and protest. All this shows that even renowned business firms are not immune to big flops.
So if you are an aspiring entrepreneur, it is a must that you perform an idea validation test so that you avoid big mistakes. Idea validation test will help you get insights from customers before the launch of your products or campaigns to the market. This helps you to acquire correct information instead of depending on your gut instinct. Here is how you will perform the idea validation test –
1. Brainstorm and Come up with a Business Plan
Implementing a well thought out business plan is a must. It could help you in more ways than one. You could identify your goals and specific market. You could evaluate your business condition by conducting a SWOT (SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis. Identify your competitors and opportunities that will help you earn revenue both on a local and national level. Back up your proposal with graphics, financial projections and historical data. Also, you know what needs to be done to let your business idea become a reality.
Moreover, with a good business plan you could secure your funds and it will also act as a guide for future market engagements.
2. Conduct an In-Depth Market Research
Conducting an in-depth market research before getting rolled-out in public could be beneficial for your business. The information that you will gather from your research will help you understand your demographics, will guide you in the right direction and help build correct strategies. It will also inform you about things that you want to know, draft questions around them and form suggestions on how people will answer.
It is also important to have the right persons for your market research. Once you have the right group of persons, you can then start gathering data through face-to-face interviews, group discussions, polls or surveys. You can also use free tools such as SurveyMonkey, Typeform, Google Forms, ZoHo Survey, Survey Gizmo and Survey Planet to gather customer information and feedback. Each has its style of working with the number of respondents, number of questions, question type, templates, customization, data export and reporting capabilities.
You can also gather data from public resources, government information and statistics to find out if your business idea is workable or not.
3. Consult an Expert
According to the International Franchise Association (IFA), franchised small firms have higher success rates than small independent businesses. It has also been found that 92% of U.S. franchised businesses are still operating after five years of inception, compared to just half of 28 million independent small business. Small Business Association also conducted a similar study where they found that the average franchise earns five times the revenue of average independent small businesses in their first year. So, why this disparity?
The reason is there is a proven system of work model that is followed by franchised businesses, and they are supported by franchisors with resources in IT, HR, sales, training, accounting and marketing. They also receive timely intervention and guidance, training, expert advice and consulting so that the companies can work smoothly. They are backed by experts guiding them in their journey due to which they already start running immediately after launch.
To gain real world insights, start joining online communities where you will get to interact with fellow entrepreneurs. Some such good communities are Startup Nation, PartnerUp and SmallBusinessForums.org. At the same time, start exploring active Slack communities such as #FemaleFounders, #Startup, #Launch, #nomads and Bootstrapped Chat. To get an all-inclusive session on targeted topics, check out MOBE’s live events and masterminds. These expert-hosted summits provide a wealth of information to help businesses start, grow and manage their business wealth.
4. Test Your Idea
Now is the time to test your idea. The test will help you verify the sustainability of your idea. You don’t have to shell out serious funds for the test. One way to do this is to create landing pages or simple Facebook advertisements with a call-to-action. This will determine whether anybody is interested in your idea.
Running a Facebook ad using geo-location and other metrics according to your target market’s profile is another good idea. Click-through rates, signups, and downloads provide an indication if it has the potential to generate demand.
This is the time to identify the facts so that you can work on it no matter how intimidating the results can be.
5. Review Your Findings and Decide
This is the final step where you examine feedback and results. Based on these feedbacks, you will take the next step. Also remember to embrace the insights – positive or negative – because everything you are doing, you are doing for the customers. When people say good things about your business, you know that it’s time to take a step forward.
You can take inspiration from, “How We Did It: 100 entrepreneurs share the story of their struggles and life experiences” by AnandSrinivasan where entrepreneurs share their experiences and also how they implemented ideas by taking cues from market feedback. If the feedback is more negative than positive, accept the fact that you have to drop the idea. But that should not discourage you from trying another fresh idea.
Now you know the step-by-step process to find out if your brilliant business idea has that earning potential. This validation process will tell you whether you need to push through the idea or not. Wasting money and resources on something that has no value in the market is pointless.
Your results will give you insights from which you will take the next move. Businesses exist due to customers so keep in mind to satisfy their needs rather than your own.
Founder of BusinessBoost.xyz
Award winning author | Serial entrepreneur | Business coach