An outstanding business idea should provide a solution for an existing issue while being something people are willing to pay for.
Ideas that do not meet these criteria should not be pursued, and using validation techniques will help avoid costly errors and save time. Here are some tips on recognizing and validating profitable startup ideas.
1. Conduct Market Research
Market research is an integral component of your business plan. It allows you to test and refine your product idea and assess whether or not it can be profitable for your target audience, identify competitive advantages and fill industry voids, reduce risk and ensure your business starts growing from day one.
To conduct effective market research, it’s essential that you first define your goals. For instance, if you’re testing out a new product, evaluate how its customer base responds and the price they would be willing to pay. When it comes to competitors, your goals could include measuring brand perception or specific performance metrics.
Select your data collection methods carefully. Different techniques yield various kinds of information; online surveys and polls tend to produce quantitative information while interviews or focus groups may produce qualitative insights.
2. Create a Minimum Viable Product
Successful startups rely on providing customers with products they will buy. Conducting market research and validating your business idea are vital steps toward understanding your target audience and crafting products that stand out amongst competition.
Step two is creating a minimum viable product (MVP). MVPs serve as prototypes that enable you to test out ideas without spending too much money, an approach taken by many successful companies such as Groupon and Spotify.
Before selecting features for your MVP, ensure they align with your strategic goals. For instance, your product should address a specific problem while providing users with an enjoyable user experience.
Remind yourself that just because people like your product idea doesn’t mean they will buy it. When validating it with potential customers, make sure you ask questions designed to gain an understanding of their motivations and pain points; this will enable you to better comprehend its worth as an aid to customer lives.
3. Test Your Marketing Strategy
An effective marketing strategy is one of the keys to making sure that your startup product or service succeeds. It helps set you apart from competitors, engage your target market, and measure its success.
CB Insights reports that market demand is the second-biggest cause of startup failure. Too often, however, startups don’t take enough time to identify their audience and assess if there is need for their product in the marketplace.
To avoid this from happening, it is wise to always have market research tools on hand like Attest ready for use. With its quick baseline measurements of brand awareness and product demand in just hours, these tools save valuable time with tailored demographic filters and ready-to-go survey templates that enable you to get to the truth of your product quickly. Once discovered, then its path forward can begin.
4. Test Your Business Model
Financially, a strong revenue model is key for any startup’s success. This allows you to fund marketing strategies and recruit skilled team members. When testing out your business model, take a close look at competitors, discover their pricing structures and devise plans to attract customers – the SCORE chapter can provide free counseling classes to startups. Also assess consumer spending habits to see if your idea aligns with current consumer spending priorities (i.e. cutting back or purchasing more costly products).
Many teams at Startup Weekend waste precious time debating minor details that ultimately don’t matter in the long run. To save valuable time, I strongly suggest adhering to lean market validation principles and testing your assumptions about what people want and the costs involved by going out into the world for market validation.
