Ep. 78 How to validate your business idea

how validate your business idea

In today’s episode, Anna looks at how to validate your business idea and how you can go about working out whether or not your idea can actually be viable as a business.

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How to validate your business idea

Transcript:

Hello there. I hope you’re keeping well and you’re excited to listen to this week’s podcast. We are looking at validating your business idea. Last week we looked at coming up with your business plan to really test what exactly your idea is, to identify any gaps, to clarify your thinking, and above all to keep yourself organised and focused. But okay, you’ve written the business plan. Hooray. Success. Here you come, you can just go ahead and that’s it, it’s going to be executed perfectly. Everything’s going to be hunky dory and you’re going to get the results you want. Well, the danger is, of course, that you invest time and money in building the perfect website based on this beautiful theoretical plan, or worse, you build an app and you invest in fancy, high end photography, videography, comprehensive, beautifully designed resources, advertising, whatever that is.

And then when you finally go live after months of work, little or probably no sales because writing a business plan, having a clear idea that makes sense in theory is no guarantee of success, unfortunately. So what do you do once you have your business plan? How do you check if it’s viable? And I should emphasise here that the first thing is to have that business plan. So before you can test your assumptions and see if it is viable, if it is actually going to work financially and work for you as well, your personal life and so on, your lifestyle, you do need to have that business plan clear. So who is your ideal client? What problem are you solving? And also in addition to the business plan, it’s really helpful to have a bit of an elevator pitch when running the idea by people.

So when we talked about the business plans last week, we talked about the lean canvas by Ash Maurya. The lean canvas has a value proposition section and also calls it, I think, the high level concept, which is a bit like… You know what, I’m sure you’ve heard people say, if you have any contacts who are in the startup world, they say, “Oh, it’s like the Uber for restaurants or…” Well, Uber Eats I suppose is the Uber for restaurants. “It’s like the Airbnb of weddings.” I don’t know. So having that so it’s the X of Y can be a really simple way to pitch something to them. And then they go, “Oh, okay, I get it,” and then you can go into the detail. And we’ve talked about elevator pitches in terms of your personal brand before where it’s along the lines of “I help X people do Y so that they can Z.”

So I help corporate professionals, early stage entrepreneurs transition out of a nine to five, build a sustainable business so that they can get more freedom, flexibility, and fulfilment. And then you can play around with that and you want it to be super simple, roll off the tongue, and people get it right away. And of course you want to intrigue them so they follow up. But you want to be able to, in one conversation go, “Hey, this is the idea. Want to check it with you, want to run it by you,” and then of course you go to the detail. So having mapped out your business plan and an elevator pitch, which may in fact be on your lean canvas if that’s what you’re using.

So a few steps to go through. The first thing I want to propose, in case you haven’t done this is to search, is to Google online. See what you can find in terms of existing solutions, and not just solutions, but also of course your brand name and so, and that’s a given that if you have come up with some very clever brand name, make sure you know that the domain name exists, make sure that there isn’t some massive company or something with a very similar name. You don’t want to have to end up going with a .net or whatever that might be. Or a funny spelling. So make sure that you can get the domain, make sure that you don’t have a very similar or the exact same trademark existing already.

But beyond the brand, name the trademark, really in terms of solutions. Now, if you find, and it’s surprising how few people have done this, and I sometimes mention Dragon’s Den, Shark’s Tank as it’s called in America, the Dragons, Sharks are pretty shocked when the entrepreneur says, “Oh Hey, yeah, this is a really unique idea. It doesn’t exist.” And then they say, “Well actually I’ve invested in a business where it took me two seconds to find five other companies who do this.” So you need to do the due diligence of seeing what exists out there. Now, the fact that there are existing solutions out there when you’re searching does not mean that you can’t go ahead. It doesn’t mean that it’s such a saturated market you can’t go ahead. In fact, it’s actually a good sign that there is a market, if there are competitors there. If you find nothing, you might want to be a little bit concerned because it’s possible that you’re incredibly pioneering, and good for you if you are, however more likely it’s not the right time or there’s a reason why that solution doesn’t exist. You’ve misunderstood something. So it is a good sign if there are existing solutions.

However, it does mean that you need to make sure that you have a point of difference. So you need to make sure that you’re offering something more or different to what already exists. So you can do a bit of a competitive landscaping, assessing the landscape as we used to call it back in my P&G days, to really understand, “Okay…” Or like a SWOT analysis, if you’ve heard about strengths, weaknesses, opportunities, threats. Very simple, this is their solution, this is how that works, it’s an app, it’s a website, it’s this service, that service, and what can I do differently. Now what you don’t want to do is ask your family and friends, because either they don’t care because they’re not the target audience, so they’ll be a bit indifferent because it’s not urgent and important for them. Or they’ll be quite supportive. “Yeah, that sounds great. Oh my God. Yeah, you should definitely do that.” They’ll follow your Facebook page, Instagram profile, and then of course they’ll never buy from you. So family and friends, unless they are 100% in your target audience, which is unlikely, they’re probably not the best bet because they’ll just say what you want to hear. They won’t give you useful feedback.

Instead, the key thing, once you’ve done a bit of Googling at least, bit of basic research, is to talk to real clients.

So that’s why, of course, you need to know who your prospective ideal clients are. Get them on the phone, have a short interview. It’s not as hard as you think to get people on the phone to talk to them. You’re not selling at this point, you actually don’t even have anything to sell, so you can even say that to them, “What I’m talking about doesn’t even exist yet, so I’m not trying to sell something. I’d really value input.” You’re just asking them to share their insights, and to be honest, most people will be willing to do so. Literally grab you for a coffee, 10 minutes, 15 minutes, and then it’s really important to have specific questions you ask them. Mostly they need to be open-ended so you get really rich answers. We’re not talking about massive quantitative analysis here. You’re talking focus group size. You’re just doing a handful of interviews at the beginning to get really rich answers from people who you think would be ideal clients.

You can say, “Hey, I’ve got this idea. I’m not sure if it’s any good, but I just want to run it by you and see. I’d love to pick your brain and bounce this off you and see if it’s something that could be valuable for you.” So questions you might want to ask them is, and to go deeper, is, “What are you looking to achieve in this particular area?” I don’t know, if you’re a nutrition weight loss coach, you might talk to them about, “What is it that you’re actually trying to… What is your goal here? And what are the current solutions you’re using? What have you used in the past? What have you tried? What’s frustrating you at the moment about those solutions? What hasn’t really worked in the things that you’ve tried? What features, what aspects, elements would you really want to be included in order to really help you? What would make the big difference? What have you been missing, again, from those solutions that do exist? Do you have any fears? What are your hesitations in terms of investing in this or trying to find a different solution? What’s holding you back at the moment? And of course, would you be willing to pay for a solution that does X, Y, Z for you?”

Now, just on the last piece in terms of would you be willing to pay, it is an important question.

However, it’s very different for people say, “Yeah, I’d pay a $100 or whatever for that,” than it is to actually put their money where their mouth is and we’ll talk about this in a moment, but it’s great to get that input initially if they sound, “Oh my God, yes. Hell yes. This is the thing I’ve been looking for for years.” That’s a good sign. If they go, “Yeah, I think so. Yeah. Maybe $50.” Then maybe that’s not so compelling. So you could follow up with that and say, “What would make you willing to pay?”

Now you might also want to take this further. You might want to consider creating an early feedback group. It could literally be a Facebook group. You could start sharing, and I encourage you to do this behind the scenes on your Instagram, let’s say, to get early inputs rather than fully develop something and then put it out there. You start building your audience actually by sharing insights into what you’re thinking and what you’re developing. You could find existing online communities. You could contact people you know manually. But again, you want them to be in your ideal client group. And you can ask if you can, for example, add them to an email list and you can share updates and feedback opportunities and so on. There might need to be an incentive that you offer them a free coaching session or a resource or a discount or whatever that might be.

Now what are you listening for? Well, I’ve given you some examples of questions there, but you’re really trying to understand their pain points. So what is the problem they’re experiencing, how your product and service solves that pain, and again, if they’d be willing to pay. So those are some really key issues. Key questions that you’re trying to answer. Now, ideal clients is one target group to speak to. Another is experts. Now, especially if there’s an aspect of your business plan where you’re not an expert, maybe you’re moving into new area, maybe have done lots of research, but there are some aspects… We can’t all be experts in everything, so if I’m from more of a branding marketing background, maybe I don’t quite have the tech know how in order to know if this software solution is really going to work practically, in which case you might want to run that by a software engineer, or vice versa, of course, if you’re a very techy person, you want to talk to someone maybe from that industry or someone who has complimentary expertise to you.

Now, I guess the caveat here or sharing a little bit around the idea of being too open and honest with your idea. I know a lot of you might have a concern, “Oh, someone’s going to steal my idea,” but generally the best practise or understanding among experts now is that, you know what, an idea is pretty worthless. We can all say, “Oh, I had the idea for [IBA 00:10:02] before they started,” or, “Yeah, but I had the idea for writing a book like Harry Potter.” Yes, but I didn’t, so the execution is where you pay. We’re all sitting, and in fact, the classic thing is the Apple guys are sitting in their garage, someone next door is sitting in their garage too.

Even back in the day, centuries ago, you sometimes had two scientists in two different parts of the world actually discovering the same elements in the periodic table. The reality is that society is in a particular place right now, technology is in a particular place and it’s very likely, if not completely unlikely that nobody would have the same idea as you. So yes, by all means, be a little bit careful. Don’t go around sharing with your competitors, if you have any competitors of your ideas, but certainly what you don’t want to do is keep it completely secret, working in isolation and then launch something that’s a bit shoddy. You want to make sure that you are including the right people, getting feedback from people who know better, who can tell you, “Oh, you know what? This would never work because of X, Y, Z.”

Maybe it’s legal people you need to talk to. Maybe it’s the practitioners, whoever that might be. Maybe it’s other coaches or consultants or whatever.

Now importantly, when you’re listening to this feedback, don’t be too attached. Don’t be too precious about your idea, because at this stage it is just an idea and you may have thought it was amazing, but let’s be honest, most likely it’s going to evolve and take a very different form as you move on. So really be open to the feedback and be open to the opportunity, the possibility that you might need to pivot. And we talked about this, of course, a few weeks ago, but you might need to tweak your idea, even redirect it in a very different direction in response to the feedback you’re getting. And this is exciting because maybe you had an idea over here, but actually the pain point people have is over there and that’s much more burning. They’re much more willing to pay for that solution.

Now, as we get a bit more concrete, you want to actually build what we call a proof of concept or an MVP. If you’ve heard of that from the lean startup model. It’s a minimum viable product, which is really the least thing that you can develop in order to test it. The core of your idea. And we talk about this in the context of tech startups. I’ll do a really simple app software solution, and but if you are, which is more likely perhaps, a service business, so that’s your idea. Literally you could write a small free ebook on the topic that you’re hoping to consult on or coach on, let’s say. You could do a little how to video. You could create a simple sales page for your offering and then put that out there. You could also run, and I had a client who did this just last week, run Facebook ads to AB test specific wording, is this lead magnet better than that lead magnet, this service, that service, just to see what people are clicking on.

Now again, it’s not going to be quantitatively significant, statistically significant. We’re not talking about investing millions into ads here, or even thousands, hundreds. You could spend, as she did, 30 pounds just to get a bit of an idea. It’s just a little bit more evidence to help you make those choices. So set yourself a goal for that proof of concept. If you’ve put out an offering or a simple sales page or you’re running an ad or something, say, “Okay, well if I get 5 preorders, 10 preorders, then this is good to go. I’ll keep working on it.” Or, “You know what, if I get this many downloads or that many subscribers to my waiting list,” maybe create a waiting list or whatever you decide to do. So having a goal in order to know, “Okay, well the trigger point, the decision point for me to go ahead with this idea is if I get five people signing up to this, a hundred people signing up,” whatever it is, depending, of course, on the type of business you’re thinking of, “then that is good to go. That means I’ve validated it and I feel confident that I can take it to the next level.”

By the way, another thing that comes to mind in terms of validating, which is not something I’ve personally had a lot of experience with, but I have seen people do successfully, is to actually run a crowd funding campaign.

Now, this is a whole different beast, but of course it’s a very good way to test your concept because you’re basically getting the funding before you do it, and if you don’t get the funding, then you don’t have to build it at all. And that’s the key piece here, I guess. What you don’t want to do is spend a lot of money, a lot of time on creating the perfect membership site, those beautiful resources, weeks and months of designing all this content and then nobody wants it. So much better, let’s say, and you know, if you’re a coach and you can put up and people do this all the time, “Hey, I’ve got three new spots open to help freelancers really refine their services or to help offline business owners take their business online,” or whatever that might be. Then you’ll see, if nobody responds, then probably, hey, either you haven’t publicised it enough, in which case you might want to push it out more. Or actually there’s no need for that. Doesn’t matter. You haven’t created anything. The following week you go, “Hey, I have three new spots for…” And then you’ll see where the response is.

So obviously hearing or getting feedback from, getting input, getting people going, “Oh my gosh, yes.” When you share something and they go, “When is this available? I must have it now.” That’s probably a good sign. So you want to be listening for those kinds of… Not just, “Yeah, okay. That could be interesting.” But really, “Hell yes. Please let me know when that’s available because I would love to work with you on that.” Or, “That’s exactly what I need right now.” So those are a few ideas starting with the basic of Googling and talking to real clients is really the key one. Making sure that you’re getting that feedback and you’re not being too attached to idea. You’re ready to pivot and respond to that feedback. And above all, get something out there into the real world. Don’t spend lots of time behind the scenes perfecting, revising, and so on, and creating. So you just want to get something out there, put up a sales page, tweak a LinkedIn profile, put out on offer on LinkedIn, Facebook, whatever, and see what comes back. So I hope you found that useful. Best of luck with validating your idea, and I’ll see you back here next week. Bye for now.

 

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