4 Ways to Test and Validate a Startup Idea
In this post, we show you how to test and validate a startup idea in four ways. Since 42% of startups fail from building products or services with no market need, it’s important to validate your idea first. That’s because nobody wants to waste their time building a product or service that people don’t want. Right?
And I bet you don’t want to waste your hard-earned money and precious time on an idea that won’t make money, either. We all have bad ideas from time to time, so don’t worry if it doesn’t work out. But hopefully, it’s a really awesome idea!
With this guide, you’ll be equipped with tactics to validate or invalidate your idea or product and either prove or disprove its worthiness in the market. And while doing so, you’ll begin to create the building blocks of a startup, so if it’s a good idea, then you’re already making great progress!
I suggest reading through this article once over so you learn the process. And then come back to it as you’re working on your idea validation in real-time.
Then, once you’ve found a good startup idea, I recommend you follow the steps in our post How to Start a Startup, which has 30 steps for you to follow as you build your startup.
What Makes a Good Startup Idea?
Your startup idea needs to fulfill a need in the market and you need to know how to fill it. Another way of saying it is that a good startup idea solves a problem for a specific audience of people and you can do it. An idea worth pursuing needs to be cost-effective to produce so the startup can grow without too much constraint. Startups should be able to become profitable and scalable without too much overhead.
It’s usually only when someone is an expert in a niche, should they be able to identify the gaps in that market which allow for the vision of a worthy startup idea to develop.
However, if you’re clueless about how to fix the problem you want to solve, then you’ll have a lot of trouble successfully building your startup. In addition, our parents, other family members, and friends should not be the people to determine if an idea is good or not.
You’ll have to put some real work and research into invalidating or validating your startup idea. But, it’s a lot less work than building an entire startup based on an unsubstantiated idea.
In this quote below, Paul Graham shares what he believes makes the best startup ideas. He’s a co-founder of the first and arguably most successful physical startup accelerator, Y-Combinator.
Microsoft, Apple, Google, and Facebook disrupted the status quo and created something beyond what was available at the time. Except for Google — their differentiator was speed, initially. They made something that was unique. And, they knew how to build their products themselves.
As you know, these companies continued to innovate so they could stay ahead of the curve and compete with new and rising competitors, but their core offerings have generally stayed the same.
Knowing how your idea will solve a problem in people’s lives will help you validate your idea when you do market research, competitive analysis, and personal outreach.
A unique selling proposition shows how you’re different from the competition and shows what makes you stand out.
A value proposition shows people what problem you’re solving for them and how they’ll benefit.
4 Steps to Validate a Startup Idea
Use these four steps so you can implement a process for your idea validation. Process beats no process 100% of the time.
4 Ways You Can Test and Validate or Invalidate Your Startup Idea
1) Validating Your Startup with Target Customers
If you want to validate your startup idea, then you’re going to need to know who your customers are because these are the people that will use your product or service. People actually using your product or service are the ultimate gauge of idea validation. But before you get users, you need to know who those users are going to be.
There are usually a few different customer personas, or buyer personas, that will match who your target audience is.
A customer persona is a fictional representation of who you believe is your ideal customer.
The customer personas you develop will be really useful when it’s time for you to do your market research and when you do outreach to validate your startup idea. Moreover, the outreach you do to discuss if your startup idea is something they’d be into using will be your next best friend when trying to validate your startup idea.
However, before we get ahead of ourselves, we recommend you read the guide, How to Build Customer Profiles and Buyer Personas and develop your customer profiles/personas.
Once you do that, then it’s time to move on to doing market research and competitive analysis.
2) Market Research and Competitive Analysis
Market research and competitive analysis are vital pieces of the puzzle when you’re trying to validate or invalidate your startup idea. It’s important because you need to know if your startup idea has been implemented already. In today’s technologically advanced world, so many startup ideas have already been done by someone else already.
Part of having a successful startup is finding a gap in the market and being able to exploit it and fill that gap. In today’s world, if you want to thrive in a big market, then it helps to stand out, be unique, and provide solutions which are cost-effective.
People shouldn’t just start a startup with an idea that’s not unique and offers no difference to consumers. A difference in price isn’t a differentiation with your product versus theirs unless you’re doing something groundbreaking and cheaper.
Too many people make that mistake.
One can have competitors and still have a unique idea. It’s all about your approach, the value you add to your audience, and the problem(s) you solve for them. But you have to add a serious amount of value that is above and beyond that of what the existing competitors out there provide.
In addition, you must know your competitors and what they’re doing to be successful.
Ask yourself: How are you going to successfully build a multi-million or billion dollar company if you don’t know this information?
That’s another reason why you need to have an extensive analysis of your competition and the market. Below, you’ll find out how to do just that.
Steps to Perform Market Research and Competitive Analysis
Step 1) Research
Start off by researching on the web to see whether your product or service has been implemented by someone else already. This is one of the basic preliminary actions to perform before you build a startup. You can go about this by researching keywords and phrases on Google that describe your idea.
Step 2) Record the Research
Keep a record of every website you visit that is similar or equal to your idea via Google sheets and the search terms you used to find them. If you’ve signed up for our Startup Incubator Kit, then use the market research and competitive analysis template made available to you.
Step 3) Analyze Findings
Analyze the offerings and differences between them and your idea from within your spreadsheet.
Step 4) Scout Competitors Automatically
Set up Google news alerts to notify you when your competitors are mentioned in the press so you can keep an eye on them.
Step 5) Keeping Track of Competitors
If your idea turns out to be good, then you’ll want to check out your competitors monthly and keep track of any changes you see occur. This will be regardless of whether or not you see a Google news alert. Set up a monthly repeating calendar notification to help you stay on top of this task.
Step 6) Market Research
Look up market statistics for your target market. Find as much data as you can on:
- The size of your target market (worldwide and in other countries/continents)
- Information about your target customers such as demographics, interests, behaviors, and devices used.
After Market Research
When you’re developing your concept, you have to ask yourself and answer a handful of important questions.
The purpose of these questions is to identify if your hypothesis still has merit based on the market’s saturation or lack thereof. However, there’s still work to be done to validate or invalidate your startup idea.
Answering the following questions will help you solidify your idea and the framework of your startup.
Questions to Ask and Answer:
- Do I have a business model that will allow my startup to make ample profit?
- Has your idea been done by anyone else?
- Can you offer something different that adds value to and solves a problem for your target customers?
If there are too many competitors and no opportunity, then maybe you shouldn’t pursue your idea any further.
However, if your idea is unique, then that’s great, but your idea still isn’t validated yet. You have more work to do. More work — It’s the story of our lives! Haha.
You should be making sure that you have a business model that will be profitable and attractive to your target customers. See which of these 10 B2B and B2C startup business models will work for you and for your target customers. It usually has to work for both ends. There are a few exceptions, but they’re generally outliers to this rule.
The next section outlines the next steps you should take to validate your startup idea via feedback collection.
4) Idea Validation by Feedback Collection
Below are two ways you can collect feedback to help you validate your startup idea.
1) Individually contact target users asking them for feedback on your idea.
You can find and talk to target customers through social media channels, message boards, and forums. Contact a few hundred of the people you describe in your customer personas. Tell them about what you want to do with your startup idea and ask them the all of the questions except for the first question as described in #2.
2) You can validate your startup idea by collecting user feedback from a survey on a landing page you create with the description of your idea. The survey could look like:
- Was this product idea what you expected when you visited?
- Is this something you would buy if it was available?
- Would you recommend our service/product to a friend if it were available today?
- If you would buy it, what is the most you would pay for it?
- At what cost would you consider it to be too cheap?
- Do you have any suggestions on how to make our product/service better?
You can also have a call to action to get people to sign up to your email list for updates.
If you had an overwhelmingly good response to this from your target market from your marketing efforts (hundreds of subscribers after marketing it for a few weeks), then it’s probable that you’ve found a worthy idea. However, a landing page is also considered a vanity form of a minimum viable product becase it’s not actually a product or service.
Feedback collection, in my opinion, is the best way to validate your startup without building a real minimum viable product, which is the next step once you’ve gotten the green light from doing your outreach.
4) Build a Minimum Viable Product (MVP)
A minimum viable product is basically a barebones version of your startup’s product. An MVP is used so you can test the hypothesis of your startup idea in a real-time environment. Because of this, not much can take place of a minimum viable product.
It’s the cheapest workaround for actually building your idea into a product or service without completely building it out. But it can still cost a lot of money if you don’t have much money. If you are a developer or have a developer, then there should be no need to worry.
Even though you can validate your startup idea with a minimum viable product from early-on, I’ve found it’s best to test the market first with one of the three former methods to validate a startup idea. Then, once it’s validated, you can move on to the MVP and see if that matches the behavior of the three former ways to validate a startup idea. This way, you save time and money from having to build a MVP
For a complete description of how to build an MVP, we suggest reading the guide How to Build a Minimum Viable Product – StartupDevKit.
In it, I show you seven ways of building an MVP, as well as provide resources for tools and service suggestions.
If your idea holds up after all of the above, then get started on your executive summary and find a co-founder to build an MVP with. However, many people that want to launch startups can’t code. If you don’t code, then look for a programmer/developer who might co-found the startup with you.
To find one, check out the article, How to Find a Co-Founder and What to Look For to help you find a developer and other co-founders. Alternatively, you can hire a developer, which is obviously more expensive. In that circumstance, you should check out the post we have regarding where to hire contractors and freelancers or you can go with a development agency.
Whether you can or can’t code, you’re going to need to write down how your product/service will work including the features and functions of your website. That’s called a functional specification.
If you’re having someone else build it for you, then you should be serving the contractor, vendor, or manufacturer a non-disclosure agreement to protect your idea. You’ll use it to help share your vision with the developer you work with.
The prospect of creating a startup is so exciting. Before you even start building your product, always make sure you validate your startup idea.
Be smart about your startup idea. Don’t blindly build a startup without determining if it’s something your target market actually wants and needs. Do a competitive analysis, market research, feedback collection, and executive summary.
Save yourself from the heartache, headache, and empty bank account stemming from a bad idea. You’re better off spending a month on idea validation than spending a year building a product to find out that too few people want what you made. It will save you time, money, stress, and relationships.
Moreover, the actions you take to validate your startup idea will be of great benefit to you if your idea holds up. This is because you’ll need all of the information you compile countless times in the future.
Make a product people will want. Better yet, make a product people need.
What’s your biggest takeaway from this post?