A small business owner, running a tailoring business from home, holds fabric while examining designs on a sewing table. Text overlay reads 'Ensuring First-Year Business Success: Business Validation Guide

Did you know that more than 90% of startups fail within their first few years of operation? Some of the reasons are that they failed to validate business ideas.

Despite having innovative ideas and putting in dedicated efforts, many entrepreneurs face the daunting challenge of navigating through a highly competitive market landscape. In the vast sea of businesses, standing out and succeeding requires more than just a good idea. It demands thorough business validation. In this comprehensive guide, we’ll explore 7 key steps to validate your business idea and prevent first-year failure.

What is business validation?

Business validation is when someone checks to make sure a business idea (product or service) is good enough to gain traction and scale up before they start it. The business owner wants to understand what he/she is getting into, foresee what the firsthand experience and market response will be like, and see if it will work and people will like it. This helps them make sure the business will be successful.

The Importance of Idea Validation

Validating your business idea is incredibly important. Imagine spending a lot of time, effort, and money on a business only to find out that nobody wants to buy your product or service. By validating your idea, you can gather proof that your concept has potential. This reduces risks and increases your chances of success. So, before diving into the details of your business idea, make sure to validate it first.

The simple six steps to validate business idea: 

1. Understand and identify the problem (need): 

To run a successful business, it’s essential to solve a problem that your customers have. For instance, have you ever used a product or app that seemed like it was made just for you, with features you never even knew you needed? That’s what happens when you do this step right. To create a strong business idea, follow these steps:

  • Start by defining the problem your business idea aims to solve. You might ask questions such as, “What do people genuinely need? Although customers don’t know what we need sometimes, as Steve Jobs stated, it’s your job to think deeper.
  • Think about the features and benefits of the business’s products and services.
  • Ask tangible questions, like: does the business idea exist, and do they have existing customers?
  • Look at the statistics, case studies, and look around you both online and offline to help highlight the problem’s significance. 

2. Market Research (Know Your Audience):

In-depth market research will help in understanding your target audience’s preferences, behaviours, and needs. Most importantly, it helps confirm whether there is a starving market for the business idea: “Will they be willing to afford the pay?” and “Is it worth the time, effort, and funding?

  • Gather valuable insights and use tools such as online surveys, focus groups, and competitor analysis. 
  • Google Trends can help you see if people are searching for a solution to your business problem. 
  • Google Keyword Planner can help you research and validate your ideas. 
  • You can also visit popular e-commerce websites like Amazon and Alibaba to see reviews and marketing. 
  • To gather information, type the product or service into Google Surveys. Survey questions can be open-ended, such as: Are you interested in finding a solution to your problem?. How does the problem affect you?How do you currently solve this problem?. How would you love to see your problem solved?. How often would you use love to solve a problem?. How much do you think you can afford the solution?.

Would you love discounted membership payments? Ensure your questions are well-detailed to prove whether your business idea is valid.

3. MVP (minimum viable product) testing: 

When it comes to validating ideas, the minimum viable product (MVP) is a game-changer. It involves testing a new product or service while it is still in development after conducting market research and analysing customer needs. This is not a new concept, as companies frequently use this approach. For example, Instagram recently offered beta testing features to selected countries, while skin care companies give out small samples for customers or influencers to try and review honestly.

To validate your business idea using MVP testing, 

  • Create a simpler version of your product or service and offer it to a select group of potential users. This will help you get faster feedback to see what works well and what needs improvement. Dropbox is an example of a company that started with an MVP and evolved based on user input, showing the effectiveness of this approach.
  • Connect with experts, mentors, and potential customers to gain insights and endorsements. A trusted endorsement from an expert can add credibility to your concept. Look for networking events, online forums, and social media groups related to your industry.
  • Use A/B testing to validate different aspects of your business. Create variations of your product or service and test them with your target audience to validate different aspects such as pricing, marketing messages, or product features. You can use platforms like Google Optimise or Optimizely to set up A/B tests effectively. Paid advertising like Google Ads can link individuals to product or service testing, and websites that accept test runs of products or services can be other options. 
  • Meet your customers in person. Offer your products in small sizes and ask your customers to help you test them in return for feedback.
  • Consult family and friends to help you test your product or service and give you genuine feedback. 

As long as customers can ask for your products or services and gain access, this is also known as an MVP.

4. Landing page or prototype testing: 

You can consider developing a landing page or prototype. Such a page or prototype can also serve as a virtual testing platform for your business concept.

  • Craft a straightforward landing page showcasing your product or service and its advantages.
  • Monitor metrics such as click-through rates and sign-up conversions to evaluate interest levels. 
  • Tools like Unbounce or Wix can assist in swiftly and effortlessly creating professional landing pages.

5. Feedback collection: 

Your feedback collection matters in validating whether your business idea is scalable because this helps you improve your business concept. So, create open channels for honest feedback while emphasising the importance of impartial opinions. You can gather insights through online surveys, feedback forms, or direct interviews, then use the feedback you receive to evolve and enhance your business.

6. Pre-sales and pre-orders: 

Before launching a new product or service, it’s a good idea to secure pre-sales or pre-orders. This can help you validate demand, generate early revenue, and gauge genuine interest among potential customers. It also helps you finance the production process, especially if you don’t have enough cash to start. 

To do this effectively, you’ll need a well-crafted marketing strategy and various channels, such as social media, marketing hubs, and offline channels. Make sure to organise to reach your target market.

7. Financial Feasibility: 

Before launching a business, it’s important to assess its financial viability, which will strongly hep you validate the business idea. To do so,

  • Start by evaluating your business’s cost structure, which should include production, marketing, and operational expenses. 
  • Next, create a clear pricing strategy that covers your costs while remaining competitive. 
  • Finally, explore potential revenue streams and projections to ensure that your business can sustain itself over time. 

By taking these steps, you’ll be better positioned to build a successful, sustainable business.

Let’s Go Practical: Let’s make things simple and easy to understand:

Business Idea: We can create a helpful guide called “SCALE-UP” to help you validate your business idea. Each letter in the acronym represents a step in the validation journey, and we’ll provide a practical example for each step.

S: Silly Test Scenario:

When testing an idea, start by putting it through a humorous and unlikely scenario. For example, imagine pitching a skincare product to a group of boys by telling them how it could help them save their relationships on special occasions like Valentine’s Day. If the audience laughs and approves of the idea, it shows that it has the potential to be entertaining and relatable.

C: Conversations with Colleagues:

You could discuss it with your colleagues and engage them in conversation. If someone expresses interest and says, “I would use that product or book the service, pre-order, or purchase it immediately when it’s out,” then you are tapping into great business success. 

A: Awkward Friend Approval:

When presenting your concept to a friend who always orders from your competitor, pay attention to their reaction. If they can’t find a reason to object, it might mean that your idea has better appeal than you’d expect, and you’re getting positive feedback from someone who knows a lot about apps. This can help you understand how your idea fits into the app landscape.

L: Leisure chat:

When you’re relaxing with friends, why not pitch your business idea? If your idea resonates with them, they’ll talk about it with excitement and genuine interest. When they start imagining how they would use your product or service, you’ll know you’ve struck a chord. So grab your chance to share your idea with your friends during your free time and see where it takes you.

E: Elderly Wisdom Evaluation:

If you’re thinking about starting a business, consider talking to your parents, grandparents, or elderly relatives. They might be able to give you valuable insights. If they seem happy and nostalgic when talking about a brand from the past, it could be a good sign that your idea will be successful in the long run.

U: Unrelated:

If people are discussing swapping staplers for ergonomic chairs, your idea might be useful in an unrelated field. This means that your concept is sparking creative thoughts.

P: Playful Delivery: 

To get feedback on your business idea, you can offer free product or service testing to some potential customers. If they can tell you about the features they like the most, it will help you understand if you’re on the right track.

In conclusion, validating your business idea is a continuous process that requires effort. Remember that the business landscape is always changing, so it’s important to stay in tune with market changes and customer preferences to continue growing. 

If you have any additional steps that you’ve found helpful or have any personal business experience to share, please feel free to leave them in the comments. We’d love to hear and learn from your insights!

You might want to check out these two blog posts:

6 Ways You Can Use Your Skills to Make Money

7 Smart Business Strategies That’ll Catalyze The Growth Of Your Startup