Lesson 4: Validating your business idea
In today’s lesson, you’ll learn how to conduct research to support your business idea and find your ideal customer.
Validating your idea gives you some certainty that your business plan is sustainable and scalable. It tells you if customers are willing to pay for your products, instead of waiting months or years to build an audience and customer base. Remember: this whole journey is about being able to see what's in front of you, both now and in the future.
What validating your idea doesn’t tell you how easy it will be or guarantee your business idea is successful. It’s important to remember that validation provides a solid foundation that you can go back to each time you want to make a change to your business. So, if your idea isn’t working as you hoped, go back and re-validate. Ideally, you’ll do this each time you introduce a new product or new concept to your business.
Throughout this lesson we'll be checking in with Kelly to see how she's validating her idea.
The first step in validation is to understand what skills, knowledge and abilities you can apply to your business idea, and what you need to outsource.
Do you remember the exercise from Lesson 1? It sets the pace in what you need to outsource, and how important it is your business – do you need it immediately, or can you wait a while?
Does it need to be ongoing, or can you contract it out in parts (for example, you may not know about accounting but you don’t need a bookkeeper daily or weekly).
Do you need to:
- Create a prototype product?
- Do you have design experience?
- Will you be creating a website?
- Will you be selling a service?
In our case, Kelly knew she’d be putting together a box of materials needed for baking in order to validate her boxed goods idea. She didn’t need to create a new box from scratch; she could use one she already had in her house. All she’d need to validate her idea was a group of people to use for feedback, and her knowledge.
Activity 1: Create a feedback group
Start asking yourself these questions, to see how your business idea aligns with your goals, and to get a solid view of your ideal customers:
- If you could only work with a few customers, who would you choose?
- Why are they ideal for you?
- What do these customers want from your business? Think not just about the service provided, but how doing business with you specifically makes them feel.
- What do you want from these customers?
- What kind of story about your business will you tell customers about why you are the best fit for them?
- What story will you tell customers about why they are the best fit for you?
- How many of these customers do you need to build a viable business? Are they recurring or one-off?
- Where will you find these ideal customers?
- How will your customers find you?
- How will you price your products and services to attract only those ideal clients?
- Are you relying on sponsorship or advertising as a revenue stream?
Download the worksheet to record your answers:
We’ll go through income in the next lesson so you don’t need to dwell on this too much right now, just have a basic idea of how money your target audience is willing to spend and how much you want to price your products/services.
Activity 2: Making your own brand
Try out your brand and see how it feels.
Branding is important as it appeals to the specific audience you have in mind. It signals to them that you’re the ideal business for them: you’re essentially speaking the same language. There are many ways to develop your brand, but it will always start with your business name and logo.
One business name generator we like is Namelix. Kelly knew her business would be around cupcakes, biscuits and baking boxes, but she isn’t sure of the name. On the first screen she selected her keywords, and these are some of the options that came up:
Kelly kept going back to 'Scakes', it spoke to her, but she wasn’t sure about the colours and branding. She clicked on the name and played around with her options, trying to convey a whimsical but mischievous feel. She settled on this:
Activity 3: Reach out to people you know
This is a very efficient way of validating your idea. Just know that not everyone who provides feedback will be in your target audience – so if they aren’t, ask them to put themselves in your customer’s shoes.
Great places to start:
- Trusted family
- Former colleagues
- Others you’ve worked closely with
- Acquaintances – people you have met at networking events, former classmates
- Past teachers, past professors
- Members of clubs, societies, association, groups you belong to
- Online communities
If you aren’t sure where to start, aim for about 15-30 people to speak to. Also try reaching out to online communities – local Facebook groups, relevant forums etc.
There isn’t a specific way to get feedback. Kelly ran her idea by people she trusted and for those who fit her ideal customer base, she presented them with personalised cookies and her bake boxes. She took notes as they went through her bake boxes and afterwards, asked about their experience.
During this feedback loop, it’s important to have authentic experiences. Kelly took her friends out for coffee and talked them through her idea. She also asked a few select people to speak to their network and get back to her with any feedback they had.
This feedback loop is important because it gives you an idea of your customers while also giving you the chance to pitch your idea to others. You might notice you’re refining your idea the more you talk about it. That’s a good thing.
Activity 4: Which niche is right for you?
Decide on the right niche. At this point, Kelly knows that only doing baked boxes is too small a niche. But, supported with biscuit gifts, it’s just right. If she was looking at creating biscuits without any competitive edge, then that niche is too large – there would be too much competition made of larger, more established companies.
Your business opportunity is somewhere between a niche that’s too specific and one that’s too broad.
Download the worksheet and create a list of 3-5 workable ideas. Remember, like Kelly’s idea, it can be a mix of products and services.
Look at your list and ask yourself: which idea am I most excited about?
Do you have an answer?
Congratulations, you’ve found your business idea! 🎉
In the next lesson
It's all about the money – how much you need, how much you’ll spend, and other important information.