You have an amazing idea for a business – one you’re sure could make you rich. It’s been sloshing around your mind for the last few days, weeks, months…maybe even years. And you’ve decided that today is the day you’re going to start that business.
Now where do you start?
Logos, business cards, website, brochures, oh, and what are you going to name your business? Should you incorporate? Do you need an office?
You wonder how much a lease on an office space would be. You start thinking about the advertising and billboards you could create. Radio spots. TV commercials. Internet advertising. People are going to be so impressed with your business by the time you’re done.
But this is where the trap lies. This is where the 80% of businesses who fail in the first five years start their journey.
Why do I say that?
Because it’s easy to get caught up in the excitement of starting a business. It’s easy to do all the research, hire someone to start designing, pay to get a website done, create brochures, design all your print materials, and start advertising so you can sit back and wait for that first sale.
But, it can also be a giant waste of time and money if you don’t have a product or service that anyone wants.
WHOA! Wait a minute! You have a great product – a great service that anyone in their right mind would want!
Well, then I’m going to ask you to prove it. I want you to do some testing, get some sales and verify that the product or service you’re creating is something that has a market.
As an entrepreneur with a startup, the first thing you need to do is verify that your business idea has merit.
In the second part of this article, I’m going to cover five tips that you can use to help successfully start a business that is going to be profitable and that is going to last.
Tip 1: Start With An Idea…Then Test It
First, we need to take your idea and flip it on it’s head. Start thinking of your idea in terms of how your customer will perceive the product or service and, more importantly, how it solves a problem that they’re experiencing right now.
For this, we use a validation board.
A validation board is a chart that you can use to map our your customer and product theories, your testing plan and eventually your solutions (i.e. your products and services).
It’s a really valuable tool when you’re planning out a new product or starting a new business. It gives you a great foundation on which you can then use to write a business plan if you need. Plus, it gets you to write out all your assumptions (we all know what happens when you make assumptions) before forcing you out of the office to test those assumptions on live humans who you’ve identified as part of your market.
If you create a hypothesis, make your assumptions, then head out of the office and test those on people who are actually a part of your market and get a return higher than 75%, you’ll know you’re on the right track.
Think of how much time, money, and energy this one process can save you. If you run through the system and don’t find customers, you probably need to change your idea to a market that needs your product or service.
We’ve used this process on more than one occasion. It’s a great tool and has saved us from a few ideas we thought were great while our customers had no need for them.
To make it easy for you, we’ve put together a PDF validation board that you can print out and use to write out your customer ideas, and your product ideas and solutions
Download your copy of the Validation Board at the end of this article.
Tip 2: Interview Your Potential Customer Base.
Technically, this is really Part Two of the validation board exercise outlined above, but I think it’s so important that even if you gloss over Part One, it’s valuable all on it’s own.
Get out and talk to your customers. Interview people in your market, or the people who you think will be in your new market. Ask them for an hour of their time to help you with some research that you’re conducting to help find a better solution for people with their kind of problems.
Ask them questions like:
- What problems are they having?
- What is the worst part of their day?
- What do they hate doing everyday?
- How do their problems affect both them and their family?
- How do their problems hold back their business or their life?
There are a ton of questions you can ask your target market, and it’s important because you need to find out what’s really bothering them. Also, keep in mind that a problem doesn’t always need to be a real problem. A problem can be something perceived as something along the lines of, “I don’t like the way this floor feels when I walk across it. I hate opening emails. I can’t get products from my suppliers fast enough.”
Once you get out into the world and start talking to your potential customers and really listening to what they have to say, you’ll have a better idea of what their problems are and what solutions you can provide to get your idea off the ground.
We always recommend finding and interviewing at least ten real market customers with the same questions to uncover what they’re looking for. Once you find the commonalities between them, you’ll have a really good idea of what they need and how that fits into your product or service idea.
Tip 3: Get Your First Sale
This is a big one. And believe it or not you can even get your first sale during your interview process in Step Two. After all if you’re already talking to your market, interviewing them and finding out their problems, and then realize your product fits perfectly, you can ask them for the sale.
Ask them to pay up front, and if you’re able to communicate their problems and tailor your product to meet their needs (which you should be doing) then there’s a good chance you can close the sale right there.
Remember, there’s a difference between someone saying they’ll buy your product and someone actually buying it. Friends and family in particular will often tell us that we have a great idea – that they’d gladly buy our product – just to feed our ego and make us happy.
And of course, sometimes the opposite of that is true. Everyone thinks they’re an expert and if you happen to have a negative person in your circle, you may find them shooting your idea out of the sky before you even try and get it launched.
So the best thing you can do is test the market.
Another great way of testing the market besides pounding the pavement is by creating digital marketing ads. Create ads in social media, sponsored links and ads within search engines or even Native Ads which all direct to a sales page.
If your ads work and your sales page is set up, you’ll get a good idea if people like your product idea or not. If you start getting sales, you’re off to the races. If you’re testing and you don’t get any sales, it may give you a hint as to whether or not your idea is going to fly.
And while setting up your ads and sales funnels may cost you a little bit of money upfront, it’s a whole lot cheaper than investing in inventory, setting up an entire website, a marketing campaign, branding and licensing, and then working at it for two years only to find out your idea is a flop.
Tip 4: Survey Your Market
Last year, our friend Google launched a new system that allows you to create surveys for people in your target demographic and location. It’s called Google Consumer Surveys (and it’s really awesome).
You can create surveys for your market, then have Google send the surveys out to websites your market frequents. Since Google is basically taking over the world these days, they know who’s browsing which sites and when an ideal person for your market visits a site, they use consumer surveys as a revenue stream. Basically your target person will get presented with the survey before they can even see the site’s content.
It’s kind of similar to popup ads or ads on YouTube. The cost to you is roughly 10 cents per survey participant, so it isn’t free, but the results are invaluable.
You can use the surveys to ask questions, get feedback on logos, and determine the viability of a product. There are many uses for these surveys, one of them being validation of your product or idea. I’d only suggest using this tool as one cog in your validation and marketing research wheel, not as your be-all-end-all, but if used properly, it can give you some really cool information that would take you a lot longer to gather through other sources.
Tip 5: Test It With A Webinar
Webinars seem to be all the rage these days, and for good reason. They’re awesome! (If you want more info on why, I have a blog on Why Webinars Rock you may want to read later.)
One of the cool things you can do easily and inexpensively in order to test your idea is do a webinar about it. This has been done many times, and often people create webinars to sell a product that doesn’t exist yet.
You can create your ads online, attract your customers, and deliver a webinar for relatively little money up front. If your idea is as rock solid as you believe it to be, you can sell them at the end of your presentation.
I was really surprised to learn that pre-selling online courses, services and products via webinars is a very common thing. And the great thing is you only need to be prepared to fulfill those purchases if your presentation and idea is a hit.
For infoproducts and services, webinars are a great tool and an awesome way to test the market without spending weeks or months developing workbooks, video courses and project templates.
Imagine having $10,000 in sales before you even start working on your product or service. Trust me, it gives you the motivation to get everything off the ground. It’s a great feeling to know that people want the product or service you’re delivering.
Webinars give you the opportunity to speak directly to consumers without them or you leaving your home or office.
Our Lesson to You:
Back in the late 2000s, we had a profitable hair salon that my wife ran with great success. We had great clientele and wonderful staff, but ultimately, we had our sights set on a bigger business and with more amazing people working with us.
Without doing any market research and only trusting our gut, we expanded the salon to 3000 square feet, opened up a bunch of new chairs at a new location, and then waited for everything to fall into place. Except it never did!
Before we even had the new space renovated, our staff started leaving our old location, telling us that we weren’t spending enough attention on them. Of course, we had a bunch of excuses as to why that shouldn’t bother us, that staff turnover could be expected, etc. All because we had a vision – without any research to back it up.
We found out the hard way over the next four years that the market wouldn’t support our vision. We envisioned top staff from all over the city working with us, helping us build an amazing business, and it never worked. We couldn’t find the staff, and the other problem was the market wouldn’t support the physical location of the salon. We also had the plan of treating stylists differently; treating high-end hair styling as a career with wages and benefits as seen in cities all over the world, but the trouble was Regina was a chair rental town that didn’t want to change.
And it all meant that, ultimately, we failed.
Because we didn’t do our initial marketing research we instead learned about the market the hard (and expensive) way. After spending hundreds of thousands of dollars and years of our lives, we scaled back to the small boutique salon we had originally started, something we knew the market could support. And things got better again.
Something that’s important to always remember is that as a business owner, your market isn’t always just your clientele. Sometimes you need to look at staff as your market too, and make sure you know where and how you’ll find new staff as your operations grow.
All this brings me back to the importance of testing your market. Don’t learn the hard way. Test any and all assumptions before you invest one penny into a website or a logo or a business card. Make sure you can find buyers – and in our case proper staff – to fulfill your vision. Then and only then move forward with your business plans.
Nowadays, we test everything. We track everything, and are very keen on the analytics of running our business and the campaigns of our customers.
Testing your ideas, market and product before you get in too deep will save you days and weeks of frustration as you scramble to make your business a reality. You can’t afford to waste a single dollar in a startup environment, and getting those first sales are the lifeblood of building cash flow to keep you and your business healthy for years to come. So be efficient by doing your market research first.
You’ll thank me if you do.