Last time I talked about the three steps that are necessary for having a successful business. I focused in on the first step, choosing an idea that is marketable. Today, I want to talk to you about the second critical step, validating the marketability of the idea.
Back in 2007, I made the mistake of not validating the marketability of my idea. This caused me to waste five years.
In 2012, I had a different approach. I asked the market what it wanted and delivered. Now I have a thriving online business that makes money for me every month.
You can have a successful business, if you follow the three steps in the Business Startup Success Formula.
When you are choosing an idea that is marketable, you are making an educated guess about the market and its needs. You don’t just jump on any idea that seems good. You do research about the three key factors – need, market size, and potential profits. Once you have ensured that these three factors are present from a general investigative study, you need to validate them.
Validating the marketability of your business should encompass four steps.
Minimal Viable Product (MVP)
Real World Test
Measure and learn
Iterate on the first three steps with lessons learned
To discover if your hypothesis is valid, you need to place a real product in front of your potential customers. This is called the minimal viable product. You don’t want to create a full featured, highly polished product. You want a product that is focused on solving the problem you are solving for the customers. The MVP can be anything from a sending an email to working physical product. The key here is to create the least amount as necessary to test the hypothesis.
Once you have the MVP, you need to get in front of real customer to see if it will solve their problem to a point they are willing to pay for it. This is one of the hardest things for business owners to do. But, if you fail at this point, you are risking your business, money, and time. This step is so critical, that not doing it will probably cause your business to fail. Do it, and you give yourself a really good shot at winning. And that is what you deserve, to win.
When you put the MVP in front of potential customers, you want to record their reactions and feedback. Then you have to measure and learn from the data. One of the key parts of measuring the data is figuring out if it is relevant to your hypothesis. First you eliminate any data that is not relevant to your hypothesis and then you learn from the good data.
The lessons learned from the measure and learn phase will determine how you proceed at this point. If the data shows the hypothesis is valid then you can proceed into developing a scalable business model. If the data shows that the hypothesis is partially right, then you should make the necessary changes and go back through the validation steps. If the data proves the hypothesis to be completely incorrect, then you should move on to a new idea.
This framework for validating the marketability has changed the way I start businesses and launch products. It has also changed the way many other entrepreneurs start businesses and launch products. At the same time, it is sad that many startups are not following these steps.
The reality is, it doesn’t take a lot of time to do this. It is quicker to find out what is going to work for you and what is not going to work now, rather than wait until you are months or years into a project.
In the next article, I am going to talk about finding a business model that scales. I look forward to sharing this with you.