08 Jul 5 Steps to Validating Your Business Idea
Setting up a business can cost a lot, both in terms of time and money: make sure your idea is worth the investment.
Why you should validate a business idea is simple. To find out whether or not you are solving a problem or fulfilling a need that your potential customer has. Your idea for the latest gadget might be an amazing creation to you, but if it’s of no use to your target market, it won’t sell.
While being an entrepreneur is a risk, it does not have to be a blind one. For many people, business ideas stem from their personal interests and passions, or simply the desire to live the “workcation” lifestyle that locations like Innisfil offer, but it’s important to distinguish between passion and problems. Validating your business idea before you invest a lot of time and money into it is critical and here are five steps to help you do just that!
Step 1 — Identify what problem you’re going to solve with your product or service
If you’re not solving someone’s problem, you don’t have a business. You might think your idea is on the cutting edge, that everyone will love it as much as you do but if it turns out you’ve developed a product or service that no one wants or needs, you’ve got a problem, but you’re not solving one.
Here’s an example, to make the steps more concrete:
An engineer turned entrepreneur named Joseph has an idea. In addition to his long background in his field of study, he is also an avid online shopper. More than once, he’s had packages delivered and stolen right off his front porch. Joseph decides he wants to create a box system for homeowners to install so that their online shopping packages can be delivered safely, even when they’re not home.
The problem that he’s solving is clear: the inconvenience and loss of time and money due to theft. The number of packages left on doorsteps that are being stolen is climbing. Creating a safe place that packages can be delivered to would also be a bonus for major online retailers, who don’t want to compensate for lost packages.
Step 2 — Figure out who your target market is who have this problem (and is it large enough to build a business on)
While any number of business ideas might legitimately solve a problem for someone, the question becomes who these people are and whether or not there is a large enough target market who have this problem or need to sustain a business.
Finding a small niche market—which is very specific—can be helpful because it’s much easier to identify your target market. However, an overly restrictive niche could also mean that you won’t have enough of a market to build your business.
Going back to the example of Joseph and his anti-theft box, his market potential is huge. In April 2019 for example, over 1.56 billion dollars in e-commerce retail trade was produced in Canada. That’s a lot of packages, and a huge dollar value overall. The target market would need to be honed down to a type of online shopper: one who would likely not be home when packages are being delivered. Professional people, between the ages of 25-50, for example, might be a good start.
Step 3 — Assess your competition and what makes you different
The obvious ‘next question’ is: who else has had the same idea? If there is a similar product or service on the market, you have to define what your unique selling proposition is that will have people interested in your product over another.
Going from the abstract to the real, the idea of a package delivery box has been created by multiple entrepreneurs, but one company, in particular, has found an interesting way to make themselves unique in the US.
The Box Lock has not only developed a secure way for deliveries to be locked up, but they have established processes with all of the major US shippers to ensure that the system is used, including FedEx, UPS, USPS and Amazon Prime. This unique selling proposition makes them more interesting than a standard box system with a key code. Per their site:
“Delivery drivers simply grab BoxLock and press the button on the top to scan the tracking number on your package. Each time a package is scanned your BoxLock instantly connects to your Wi-Fi to confirm whether or not the lock should unlock. Only packages that are for you and that are actually out for delivery that day will unlock this smart padlock.” – https://www.getboxlock.com/how-it-works
Step 4 — Get feedback from your target market
Once you’ve identified your market and honed your idea to make it unique, you can start getting feedback from members of your target audience. One way to do this is through focus groups.
Whether you conduct interviews with members of an online group of potentially interested buyers, or reach out through surveys to an email list you’ve put together (always observing Canada’s Anti-Spam legislation if you go this route!) there are many ways you can engage with your target market to see whether they would be interested in your product or service, its price point, packaging and so on.
Step 5 — Build an MVP to test your entire process and the market’s willingness to buy
Engaging in a soft launch of your product or service is also a useful way to see whether your idea has merit. After all, focus group members might say they love everything about what you are offering but when it comes time to actually reach into their wallet and pay, will they do it? This is the ultimate true test.
One way is to create an MVP—minimum viable product. It will have enough features or service offerings to really see if your market audience will pay to solve the problem you are helping them with before you commit to full scale production or launch.
The great thing about this kind of launch is that it gives you a chance to make changes to your business model, product or service before you try to grow it to a larger audience. In these early stages, a pivot is much easier to accomplish.
Another option is to build a crowdfunding site to launch your business: if people really believe in it, they’ll invest! This will give you a stronger sense of how viable your idea is.
Validating your idea before you launch can save you a lot of effort and investment, helping you to hone your idea or your market so that you can have the best possible outcome.
If you want to learn more about validating your business ideas, join our mailing list to keep updated on our upcoming Innisfil Accelerates programs, workshops, and other business services.