Why should you validate your business idea? This might be a question for young and budding entrepreneurs who are exploring to build their business empire. Honestly, coming up with an idea for a product or service is not the hardest thing for startups and entrepreneurs but making it work is a herculean task and most of the people fail here. The markets today are as competitive as never before and it is important to test your ideas early in the development stage before getting into the market. The process of testing your ideas before going to market is so-called as idea validation and validating your business idea is critical nowadays. Without validation, you could end up completely wasting your time and money on something that no one wants or needs.
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What is idea validation?
Idea validation is the process of testing business ideas & gathering evidence around ideas through experimentation to understand their viability. In general, those who prefer to skip the process and don’t clarify if their potential customers want to buy a product, fail too fast. Without getting connected with real people, the money you invest to make your startup stable will be a dream forever! The idea validation process starts from idea conceptualization and typically ends with acquiring a paying customer. The need for idea validation is to expose the idea to the practicality of the real world before you go to market.
Reasons to Validate your Startup Idea:
According to researchers, the biggest reason for business failure is the lack of a market need for their product. The business idea validation phase reduces the risk and speeds up the delivery of a value-based service offering that also helps in cost reduction. There are 3 key reasons to perform the validation process and this includes:
- The first is about validating the market parameters and suitability of your product to sustain. Your idea might be unique or exceptional, but without a market need, the idea is worth nothing.
- The next reason is purely about risk mitigation and related factors. It is advisable to test your startup idea to easily ascertain whether there are early adopters to make sure they are ready to spend cash on your product.
- By understanding the market and risks, you could enhance/add value to your startup idea that potentially has a huge demand.
- Plan the marketing & sales strategies more efficiently through the insights you gained during the idea validation phase.
Steps to Validate your Startup Idea:
There are different ways to validate your business idea and it entirely depends on the nature of that particular idea. If there is no such risk factors or uncertainty, idea validation is not required. However, when it comes to new business ideas, products and concepts with more risk, idea validation is highly recommended. Here are the steps to formulate your idea validation process:
A. Define your product concept:
Before starting your idea validation process, it is necessary to clarify what do you want to see as the final product. Here is what you need to do in the concept definition process.
- Define a problem – Entrepreneurs often face difficulties in business development because the world doesn’t need their product. To avoid this, identify a pool of relevant problems that you can solve more efficiently.
- Define a customer – We cannot cover the entire market from the very beginning. But you can gradually scale if the product goes well and it is essential to define the customer range during your initial conceptualization.
- Define an innovation. During this phase, it is essential to focus on the value you offer, but not the existing market players for now. Define how your product is helping to solve unique problems and you could shape your project accordingly.
B. Set Goals:
It is essential to hold evidence that your idea is viable to solve in the real world. Thus, set measurable and clear goals: Examples:
Pitching your idea and getting approval from 10-15 potential customers
5-10 successful pitches to organizations and companies
1-5 successful sale of the product/concept
C. Hypothesis Formulation:
After defining your goal for idea validation, it is essential to formulate/develop a hypothesis based on that goal. In general, a useful hypothesis can be defined as a testable statement, which often includes a prediction. The best example to show how a hypothesis formulation works are that, AirBnB did a critical assumption on a critical assumption on whether people are willing to stay at a stranger’s house and that homeowners are willing to rent out their homes for strangers. This was their most critical assumption because the entire idea depends on other people willing to share their homes and they succeeded on the same so why they are unicorn now.
D. Start Experimenting & Validating:
After developing a hypothesis, you can start validating the assumptions by running experiments where the focus on this experimentation is to find the fastest and cheapest way to test your assumption in practice. Often, the initial idea is just a starting point for a better and more refined idea because you almost always need to improve to be more agile and competitive. Surveying customers, creating prototypes, building an MVP are some basic validation methodologies that help to track your hypothesis perfectly.
As soon as you finish with validating your business ideas, it is time to make a decision. You can continue with the startup idea that has been validated or in case of traction if any, you can make a pivot - change the concept of the product. It is always essential to move forward to give the real value.
After you’ve gone through these steps with your business idea, you might also get a chance to realize that your original concept doesn’t hold up as well as you thought. Do the necessary iterations to boost your business idea and then keep involving to convert your idea into a business. And it is always essential to note that it is much easier to build a business around a demand than to build a demand around a business.