How (and why) to test a business idea: 6 step process
For most of us, thinking of a business idea is the easy part. Testing your business idea is where the real challenge begins. You’ll face choices like how long to test your business idea, where and with whom to test it on, and how much money you should invest in testing.
There are many reasons why you should test out a business idea:
- First, you need to determine if your specific business idea is needed.
- Second, you need to determine if your local or reachable market needs your specific business idea.
- Third, you need to determine if you have the resources early on to make your business a success.
This article will give you tangible steps and ideas to answer those three questions. Our goal isn’t just for you to answer these questions but to do so quickly and cost-effectively. Let’s gather early feedback, improve your idea, and improve your odds of early success.
Why testing your business idea is important
You can assume that most business ideas are solid if you’re not the first to do that specific thing. How you test your vision depends on where your business fits on the “continuum of uniqueness.” Yes, we just made that term up.
Does your business offer something unique and relatively unheard of? Then start at step one and take your time building an MVP and testing. Here’s an example on the opposite end of the spectrum. Take a landscaping business. A business like this is necessary but a dime a dozen. You test a business like this by finding out what your competitors are doing wrong and improving on it. Make your landscaping faster, better, and more accessible.
I’m getting a bit ahead of myself.
Here’s why you should test a business idea:
- Refine Your Offer: In your head, your business idea is infallible. You may only see the chinks in your armor when you test it against the opinions of others. Testing your idea isn’t just about getting a yes or no to starting a business. It’s about refinement. The better your product in the beginning, the more momentum you can build as you earn raving customers from day one.
- Assess Demand: Demand is one of the top reasons you may pivot or tweak your offer. You will only know what customers want once you present them with your offer. More importantly, you need to understand why they want what you have. Businesses that know why market better than those that don’t.
- Prove That YOU Can Sell: It doesn’t matter how good your product or service is. You're toast if you can’t sell it to your target market. Testing your business idea isn’t just about testing the validity of your idea. You’re also testing your initial systems, including delivery, sales, and marketing.
| Testing your business idea isn’t just about testing the validity of your idea. You’re also testing your initial systems, including delivery, sales, and marketing.
Steps To Testing Your Business Idea
Here are six steps to test your business idea.
#1 - Build An MVP
An MVP (minimum viable product) is the simplest product/service you can put to market to collect the maximum amount of customer data. We want to put extra emphasis on the “minimum” part. That idea might scare you because you want to put out the perfect product from day one. Be wary of this thinking because it can bog you down.
Are you scared you’ll only have one shot with your target market? Then narrow your focus to people you trust.
#2 - Test The Market
Hopefully, you’re reading this article well before building an MVP, because step two should start very early. To properly test your market, you need to find your market. This is easier if you’re an influencer with 100s of thousands of followers. If not, you need to do some handshaking and sleuthing to find viable testers.
To put your business idea to the test, hand select at least 50 potential customers to test what you offer. Drop that number down to something more manageable if you provide a labor-intensive service. Increase it if you’re starting a volume business.
Ideally, you want to look for people who have experience with similar products/services or are involved in your niche.
Questions you should ask are:
- Who needs my offer?
- Who needs what I offer but with a burning desire?
- Why do they need what I offer?
- Who doesn’t need what I have to offer?
- Where can I find my target market? (and why are they there)?
- What problems am I solving for them?
You can glean real insights from your target market by putting on your detective hat. Again, just because you got your offer or target market right doesn’t mean you can’t.
“Spy” On Your Competitors’ Customers
Does your business have clear competition? Then you can easily weave the good and bad things their customers say into your offer. The only question is, “how do you spy on your competitors”?
There’s an interesting phenomenon with reviews where people who have average experiences rarely leave reviews. Review sections are jammed packed with people who had 5-star experiences or extremely underwhelming experiences. Find out where your competitors are getting reviews (Google, Yelp, Amazon, Facebook, etc.) and use that data.
In a stage where you may have a limited amount of customer data, this can be an invaluable way to test your product without spending any money.
#3 - Adjust Your Offer
Peter Sondergaard, a former VP of Gartner Research, once said, “Information is the oil of the 21st century, and analytics is the combustion engine."
What did he mean by that?
Information or data is your most valuable resource in any stage of business. More importantly, the insights you can glean from that data should inform the decisions you make in your operations. Categorize every bit of information you receive from customers.
Categories may include:
- Good insights
- Bad insights
- Wants and needs
Look for patterns in how many times people say certain things, what type of person says certain things, and why they say those things.
Remember, the further your business gets down the road, the more expensive it is to pivot. Even the process of business dissolution can be costly.
#4 - Market Your Offer
As the word gets out about your product, you may start receiving organic traction. You may also continue to test your offer to get feedback and find more target customers. With all this happening, you’ll need somewhere for people to go to learn more and become a part of your story.
Here’s a simple marketing gameplan:
- Build a website that tells potential customers your story.
- Create an email list to collect potential customer info and send offers to repeat customers.
- Build social media profiles to expose your offer to a segment of the billions of people on social media. Social media is the best place to tweak your message because the feedback is nearly instantaneous.
As you launch your offer, keep in mind that in the testing phase, you must collect and analyze data on what marketing channels your audience responds to best.
#5 - Launch Your Offer
With your market analyzed, your offer refined, and the proper marketing channels in place, you’re ready to go full tilt into your business. Determine what marketing channels (online and in-person) your market responds best to and put your focus there. This isn’t an article on launching an offer, so we’ll keep this section short.
#6 - Refine, Refine, Refine
You should always take advantage of this 6th and final step as a business owner. You will never lack for feedback from your customers, employees, and the market in general. With these inputs, your job is to refine every piece of your business until it’s a finely tuned machine. Even if you’re a solopreneur, break your business down into “mini-businesses.” Each part of your business should have its own processes and SOPs. Use your customer data to determine what pieces of your business are doing well and which need refinement.
How ComplYant Can Help
Congratulations on your business idea, and kudos on taking steps to turn your idea into a business. Launching a business idea can be scary, so you should take every action to launch your business successfully.
One meaningful action is tracking your finances and keeping track of tax deadlines. Old wisdom says there are only two certainties in life: death and taxes — and as a business owner, taxes can give you the jitters. There’s no way to avoid them, so you should set up systems early to tackle your finances. This will save you time and money so you can invest more into growing your new business. One platform that can help you is ComplYant, a tool that helps businesses manage tax deadlines and budgeting.