How to start my own business? Part 3. Validating Your Business Idea
There are numerous innovative ways for coming up with a business idea. If you are still in the stage of creating your business idea or asking yourself should I start a business, we recommend you read our first two parts, where we discussed why you would want to start a business and how to create your business idea. After reading through our previous articles, you can move onto stage 3 which is validating your business idea.
If you still reading, then you believe in your opinion that you have a great idea / concept for a business, or maybe you are already starting the preparations to get the idea off the ground. However, like many other novice businessmen validating your idea is critical. Is the concept of your business going to attract an audience? or investors? Is it the right time for this product? These are some examples of vital questions that need to be answered, as more than a great idea is needed to allow your company to flourish.
Here at Crowdholding, we have listed 6 methods for validating your business idea. These are fairly well known concepts that are tried and tested. So let’s begin!
The Crowdholding way
Various validating methods require adequate financial clout, but you can overcome these issues by directly involving your targeted loyal customers to help tailor your ideas to solve specific customer needs. Crowdholding connects the crowd with entrepreneurs, allowing you to receive ideas and feedback in exchange for future revenue.
The involvement of targeted customers or consumers in the product development process would immensely help with the formulation of the final product or service and position it to be customer-centric. Hence, it would have a better chance of projecting its advantages than a product that has not had customer inputs in it’s development.
As a business owner, you would spend less on market research with the positive help from your customers who co-create the product and eventually becoming the end user. This innovative way of validating ideas and involving the crowd has produced a creative way for small businesses to stand a chance against big organizations.
The way of Thomas Edison
The world renowned inventor Thomas Edison had several different ways of validating his ideas.
Firstly, Edison focused on quantity. He understood that the more different variants of the same invention created, the sooner he would find the result he was looking for. On top of this, he would push his co-workers into inventing one small device every 10 days and one large one every 6 months. Although this may seem aggressive, it allowed inventors to generate ideas at a very rapid rate and from this Edison could make several inventions in a short time period.
Secondly, he was constantly experimenting with his developments. Many people know that for the creation of the final version of the bulb, Edison ran more than 9,000 tests. But not everyone knows that he created more than 50,000 tests to create a battery.
Thirdly, he never stopped once he had completed an invention. At the same time, he continued to modify existing inventions. This is the same model modern manufacturers adhere to as they are constantly striving to improve the quality of their own products.
Walt Disney Testing
The great Walt Disney created his own way of checking his creations and he coined the term “Imagineering”. This is clearly a combination of the two words imagination and engineering, and this technique was used to transform the most outlandish ideas from a creative person into something real and understandable to the general public.
In this concept there were 3 different parts / perspectives that all his creations were subjected to. It involved the “dreamer” creating a substantial amount of ideas. The “realist” considers those ideas from a cold, ordinary logical standpoint. Lastly, the “Critic” discovers and outlines all the shortcomings of the idea.
At Disney’s studio this method was actually physically put in practice as each of the different perspectives were separated by rooms. Once a idea was created in the first room (the creative room), it would move to the second room (The realist room) where the actual sketches were created. Lastly it would go to the final room (the critique room) where the project had to stand up to criticism. If the project received heavy criticism, it would return to either the first or second room. If the project did not get one comment, it means the creation was successful.
Eric Rice’s Lean Methodology
Eric Rice outlines his “lean method” of validating ideas in his book “The Lean Startup”. The main concept of his method is that the product shouldn’t just be intriguing for your customers, but they should be willing to buy your idea / concept / product using their own funds.
This concept requires you to create the ability to pre-order your idea before you even launch it. For example, once you have created a simple landing page with a small bio and images of your product, track the users that are willing to pre purchase it.
Eric Rice simply states “First ask, later do it.”
From this, you can can easily see what percentage of the people visiting your page are potential buyers. Therefore not only just validating your concept, but this also gives you a good representation of how well your creation will do in the market place.
The method of validating ideas of Scott Anthony
Scott Anthony devised his validation technique in his book “The First Mile” It divides the entire testing process into 5 successive steps.
The first step is to analyse your competitors, their experience, the success of their companies, etc.
The second step is to mentally imagine what issues could arise if you were to get into the market. This is simply done in a question and answer session. For example “How will my product impact society?”, “what would happen if the price of our raw materials drastically increased?”. Following this step will show how sustainable your product is and if it is high / low risk.
The third step is similar but is connected with capital. It is worth analyzing the size of the audience, its solvency, the likely methods of lowering costs and rising prices, the payback period of the project are some examples.
The forth step is calling suitors for your idea. Test your idea on a suitable person. Repeat this step a few times, as frequent critiquing will show you whether this is a great idea or there is no hope for your idea.
The fifth and final step is obtaining confirmation of the viability of the idea. The most common method is a coffee test. You invite friends in a cafe, pay their coffee, and they, in return, they will share their views on your future product or service. This test allows you to quickly realize what the general public likes or dislikes about your idea, what should be changed, and what should be abandoned.
Ten-second test by Janet Kraus
Janet Kraus, senior lecturer at Havard University offers another way to validate business ideas on it’s strength. Her test is called the “10-second test”. And it consists of asking yourself one single question — “Is your idea Oxygen, Aspirin or Jewelry for potential buyers?”.
Oxygen — It is something that we need to exist, it is as simple as that.
Aspirin — This is a product that is not vital, but is an item that solves an serious issue, i.e. physical pain.
Jewelry — Is a product that causes positive emotions, gives pleasure and satisfaction.
For your business idea to be 100% viable, it is necessary to ensure that your product or service is solving a real customer problem.
CrowdholdingCrowdholding connects the crowd with entrepreneurs, allowing you to give feedback and ideas for a future share.
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Upvoters get 35 % of the reward.
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