Not doing market research and validation is a common and very costly mistake that entrepreneurs make far too often when evaluating new business ideas. It is an unforced error of sorts, which can easily be avoided.
In the midst of overall excitement about starting their venture, many people neglect to test the idea in real-world scenarios. Instead, with all their will and optimism, they dive right into building their company.
As a very prudent step, entrepreneurs are encouraged to test their ideas out on a small scale in the real world, and observe how well their ideas/products/services are received by their targeted consumers.
If you feel like you want to get deeper knowledge about starting your business, try either my business plan book, or my book on how to start a business. Here is a list of all my books. And if you want extra help, my business coaching is a great way to get personalized help, have all your questions answered, and get ongoing help and support.
In addition to learning how viable your overall idea really is, there are many additional benefits of doing this. You can cheaply discover early glitches in your process, areas where your quality could be better, and where you are not meeting the needs of your consumers. This is actually something you would be doing if you were running the company on a larger scale as well. The only difference is that the early versions and early mistakes would be more costly and would read more people if you don't perform them in some sort of a test and small scale environment. Another benefit of early market validation of a product is that you can more accurately identify your target market since this is the first step of taking the idea out of theory and testing it in the real world.
Keep in mind, that not every type of business or product can be tested equally well. Sometimes you have to get creative.
Many people are reluctant to market test their product or service early because they do not want their idea stolen or copied. The topic of protecting business ideas comes up so often that we devoted a full article to it on our site.
If you are thinking of opening a restaurant or have a new and unique food item, why not experiment with a food truck or a food cart. Food trucks can also be very expensive but you can either lease one, or work with an existing one to see whether people like or dislike your menu.
If you have a clothing or fashion item that you design and want to sell, do not have large numbers of them created right away. Have a relatively small batch made, and try to see how well it would sell at local fashion events or fairs. That way you could see how potential buyers react when they see and try the items on. It will also give you a chance to talk to them to see what could be better, and why they do or do not like it. Plus the sales metrics that you would get from doing this would give you a better sense whether the risk of printing many such items is a good risk to take. Also, you can approach various smaller fashion stores to see whether they would carry your items. The feedback from them would also help to get a sense of how people who are savvy in your fashion space perceive the products.
If you want to create a website for anything, look at other similar websites, and possibly contact the people who run those sites. They may turn out to be kind enough to share what the difficulties of that space are. Or if your idea is complex, and would cost tens of thousands of dollars to build, consider simplifying it and making it possible to launch a very lite version of it with a service like squarespace.com which can cost as little as $8/month and get you up and running within days without needing tech skills.
If you have a business that requires sales, and want to know how much demand you will have once you invest into launching the company, one interesting but slightly controversial approach may be to start selling your services before you can actually perform them. It will give you a sense of how much sales you will be able to do. And if people do want to buy it, just say you will put them on a waiting list for when you are able to fill their order. You can also simply tell them you cannot provide what you were selling. I do not recommend doing this approach, but it is an example of how people may get creative in order to test their ideas inexpensively.
Whatever your business is, just be creative and make sure you get real-world market data. It will help you more deeply understand the merit of your idea, and find flaws in it cheaply so that the overall plan of action can in turn be refined and perfected in a least expensive way.
When you go out to validate and test your business idea, the one thing you must do is to be clear about what your business is. For that reason, check out my article on how to pitch your idea. After you perfect your business pitch, you will be able to get people to give you better feedback because they will have more of an understanding what you are doing.
Once you get through the business idea tutorial, check out the video below which is a full tutorial on how to create your business plan.
I can help you validate and test your business idea or a product idea as a business coach. I am available in person in the New York area, or via Skype if you want to get coaching remotely via Skype. Check out my business coaching page to learn more about my business coaching services.
For more on evolving and perfecting business ideas, take a look at the work of Eric Ries and Steve Blank, and the learn startup movement. Also, check out my full list of business and marketing books, and my online course discounts. And if you need to create a website, check out my full tutorial on how to set up a WordPress website.
Article by Alex Genadinik