How to validate a business idea.
Long before you set up a business and hang your shingle, your job as an entrepreneur or founder is to spend as many cycles as you can validating whether your business idea even merits a logo.
Validating your business idea isn’t rocket science. It’s literally asking people whether they would use or buy what you’d make. The challenge is: How exactly do you go about doing that? Since most Founders are only validating a business idea for their first time, they don’t have a great sense for how to validate a business idea well or how to interpret what they are learning. The result is often a heavily skewed view of what the market thinks—or worse—no view at all and a long run into the abyss.
The right ways. It’s all about that early validation. The good news it doesn’t take too long and it’s generally free.
As it happens, there are really only a few parameters to consider before you put a lot of effort into pursuing your idea. It’s all about that early validation. The good news it doesn’t take too long and it’s generally free.
Do not allow the responses take you off track
The moment you share your business idea for the first time you may evoke a very positive response “Dude that idea is amazing!” or a very negative one “No one will ever rent a room inside someone else’s house—Your ‘AirBnB’ concept is horrible!”
The problem, in both cases, is that it’s just one response. You don’t get a true consensus until you validate a business idea with as many people as possible (a dozen starts to form a bit of a trend line, but even more would be helpful). Remember that the larger the sample size, the lower the margin of error—Not the more “right” or “certain” it is.
Choose your advisers wisely.
All advice is not created equal, and that’s because all advice comes from humans with vastly differently experiences and opinions. There’s a real danger in how you pick your “experts”. No one in my family would have told me to start Facebook, Google, or Twitter and yet somehow those worked out.
Choosing a good expert is about knowing what to look for and where to look. You can find people to tap on anything from Quora to LinkedIn to Clarity.fm (our platform for speaking to Experts).
The person you’re looking for is knowledgeable about your industry, has ideally built what you’re trying to build before, and already has seen some version of your story play out. That’s the experience you’re looking for.
If you’re sharing your business idea (and you should!) and the “experts” are telling you it won’t work, be mindful that unless they are the ones who are buying your product—they are still just one point of validation—and not the most important one!
The most important expert is a potential paying customer. I say paying customer because it’s easy to say you’d use a product if you don’t have to pay for it. But a vote with your wallet is the most important vote of all. That’s why crowdfunding has become such a great source of real world market validation – people are willing to support their opinions with their paychecks.
After going through the process to validate a business idea a few times, you’ll start to understand if you’ve struck gold—or, if your idea is just another piece of rubble.