Kathleen Parker FCCA explains the importance of testing your business idea.
It might sometimes seem plain sailing coming up with the next big concept, but before you invest thousands of pounds and endless hours into it, first you should ask the vital question, is my business idea viable? That means the next step will be to test your assupmptions, to find out if there’s potential demand for it to sell.
Before turning your idea into a business you want as much evidence as possible that points to, or otherwise, if people will buy into your concept and will be prepared to spend their money on it. Is your idea realistic? Will it succeed in the existing marketplace or forge a new one?
Whilst there’s no way to guarantee the success of a new business, there are things you can do that provide pointers as to the commercial strength of your idea. Remember, it’s easier to build a business around demand than demand around a business. Without likely customers, your vision amounts to nothing.
What is validating a business concept?
Validating your business idea(s) should give you reasonable certainty that your potential business will have paying customers and ensure you’re not investing in something which nobody will purchase. There’s an abundance of ways to validate your idea.
Often entrepreneurs will obtain feedback from family and friends however, whilst they may genuinely buy into the idea, they can be too close to provide you with the honest opinions you need.
It's preferable to survey people you don’t have a connection with as they will not feel ‘awkward’ expressing their true thoughts. Ultimately what you're seeking at this stage is that which will benefit you most - brutally honest feedback.
Why you need to validate an idea
Validating your concept and the demand for your product or service, is one of the most important aspects when starting up. It can prove to be more important in the early stages than the design and unique features you have in mind. You don't want to spend your time working on a business concept which doesn't solve a problem for a large enough audience.
So be sure to undertake this process, by-passing it is easily done when you're caught up in a whirlwind of excitement with visions of success. This is often where many entrepreneurs fail, they enter the market not fully understanding their audience and how they address their pain points at a price that represents value. It's akin to going into the world of business wearing a blindfold.
Ultimately establishing a realistic view of demand for your idea can prove vital when it comes to creating a business plan, forecasting, talking to potential customers and winning investment.
How to do this
Firstly, you should identify your target buyer. Consider who will be the type of person to purchase your product or service? What are their goals, needs and desires? Not only should you create them, you should speak to real people with the same profile as your personas and put your concept to the test.
Ask yourself, does your idea solve their issues? Does it address their wants and aspirations? Then address price by asking your target buyer how much they'd be willing to pay.
Remember, people encounter problems on a daily basis, but your idea should aim to be one of their top 3 re-occurring ones. You should also research your concept thoroughly, has it been done before? If not, why not? Has it been attempted before and failed? If so, why not? You can use this to your advantage and hopefully avoid making the same mistakes.
When should you validate an idea?
You should look to validate your idea as early on as possible and prior to any opening. That way you won't be spending too much time, energy and money on something with limited to no potential to succeed. Many entrepreneurs lose valuable time and money on an idea which didn't succeed primarily because they didn't spend the necessary time testing it properly before launch.
Validate your idea before you spend your resources doing anything else. Sure, a business plan is important, but it should be formed off the back of your findings to help you make the case as to whether there is sufficient appetite in the marketplace for this latest innovation.
Whilst you're most likely to be focusing on other, more exciting aspects of starting up your business, it may slip your mind but validating your business idea is essential to start-up success. It will help provide you with the confidence, or otherwise, to know if your idea is worth the time, effort and attention that starting and running a business requires.
The content of this post is up to date and relevant as at 18/10/2017.
Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.