How to Validate Your Business Startup Ideas in 8 Steps
Disclaimer: This Article is updated by Yusra Qasim.
We see so many entrepreneurs start a company because they want the ‘wild, free. Entrepreneur lifestyle’ so they can go golfing every second day and do cool stuff at their own pace. This vision is far from reality that waits!
Often an entrepreneur will start a company with little more than an idea, an interest and no plan on execution. There is a sequence of events involved in validating your start-up ideas. Done methodically and with earnest the start-up is far closer to success than my poor ex-client.
Let’s start with the basics so, ask your self the following questions:
1. What Problem Will this Start-up Solve?
To create a business and expect it to be successful indicates you have done your research and have found an untapped market, a niche in an existing one or a product or service that people can’t live without.
A business with no uniqueness, no consideration for differentiation will be just another start-up that will eventually fail.
2. What is Your Solution to the Problem?
I bought a better mousetrap the other day. This is one of those idioms meant to indicate to people that innovation will make a start-up successful by developing or inventing something superior to a device that is widely used. (From the old saying, “If you build a better mousetrap, the world will beat a path to your door.”
If you do find a unique solution to fix a problem ask yourself if it can be protected (patent) and can it be easily copied?
3. What are the Key Benefits of Your Start-up?
To differentiate you need to be easier, better, cheaper, and more innovative than your competitors. An old client manufactures green rechargeable power systems (generators) for the movie industry. Niche, niche and niche and it works for him. He doesn’t want to offer something for everyone; he is specific as to his perfect client.
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4. Research Your Target Market
Who do you want as a customer? Millennials like socially relevant value driven businesses and show their loyalty.
When I owned my commercial photography studio I loved my customer. My typical customer was a progressive medium size business that understood the value of good advertising, had the money to commit to working with me and it gave me the ability and opportunity to work with decision makers usually the CEO.
The green generator guy didn’t just wake up one day and decide he was going to sell his generators to the movie industry. He did extensive research on who was using powerful generators, what industry had a greater need for that product, what features were critical for differentiation and who could afford it.
The movie industry fit all the criteria especially the feature that these generators were noiseless. If you have ever seen a movie set on a city street look for the mile of cables leading to a diesel generator positioned several blocks away because of the incessant noise.
He has no competitors in his niche. While he is cleaning up in sales and rentals, he is moving into new markets like building contractors.
5. Some Critical Criteria
Before your company can be successful you need to be honest with yourself and decide if you are the person to implement and operate a start-up. Ask your best buds for advice.
Do you have the resources to pull it off and be in business many months
before revenues or investments come your way?
How hard or long is the sales cycle? The old adage would you rather sell one thing for $10k or ten for a $1000 is very relevant? If your sales cycle is too long will you be able to keep yourself afloat?
Is your start-up scalable? If your tech start-up is a labour-intensive business requiring highly skilled workers it may be hard to scale it into a regional, national or international operation. It all comes down to your expectations and goals.
Do you have a large customer base? I had a imitator come to my office to talk about investment in a folding traditional, non-electric scooter. He was too young to have seen the Razor scooter trend many years before. The market was gone! Starbucks once did a study in Vancouver that found that the city would support Starbucks on every corner in the downtown core, now that’s a customer base.
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6.Your Support Mechanism
I mean people support. Have you asked your friends and family if your idea sounded good to them? They tend to be the bellwether for your business. If they like the idea (and better still they invest) you are well on your way. If they give you the stamp of approval it means they have taken into account your personality and the possibilities of the product being successful.
Doing things in a vacuum without outside influence rarely works. Find someone to bounce things off of whether it’s a buddy you have a discussion over a beer once a week or a paid mentor, it will make validating your idea easier before committing money and resources in a start-up.
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Finance needs to be mentioned again because validating your success hinges on having the money, getting the money and sustaining yourself until revenues start.
Creating financials as part of a business plan will tell you whether, or when, you will break even. If you are diligent and your financials show that it will take three years to be fluid you may reconsider your options. People fail to take into account all the expenses when starting up.
The main reason start-ups fail is that founders have failed to plan. Planning doesn’t start with designing the layout of your first warehouse; it starts with validating whether your idea will even get off the ground.