Everyone has advice for new entrepreneurs ranging from how to hire employees to how much profit they should make within the first year. While their words of wisdom may vary and it’s good to listen to mentors with experience when starting your business, there’s one rule that all entrepreneurs must always remember: always validate your ideas.
At Bridge for Billions we incubate entrepreneurs online with the help of volunteer mentors like Oscar Longares who provides us with great insight – including that need for validation. Longares is an entrepreneur himself who started ActivaConocimiento two years ago, a start-up based in Zaragoza, Spain that offers an online educational platform focused on management and leadership courses. He also has vast prior experience in business development which, in addition to his entrepreneurial experience, has made him a truly valuable mentor to our entrepreneurs.
Longares’ mantra is often repeated to our entrepreneurs throughout the incubation process. “This is what you think will happen, and it’s a good hypothesis, but go out and validate it.” He is extremely insistent on the need for Bridge for Billions entrepreneurs to back up their claims at each of the eight steps they must complete.
This is important not only for investors to measure the viability of your business idea, but also for you to do the same.Go out and get your hands dirty; do some field work.
There are many different ways to validate and support the claims you make when creating your business plan.
Survey your customers
Surveys are a quick and relatively painless way of gathering information about who your customers are and how they feel about your product or services. There are many online tools that can help you create surveys to send out to potential clients such as SurveyMonkey, and you can also conduct surveys in person.
It’s important that you gather this information from people within your target group. Family, friends, and even fellow entrepreneurs are not good sources for you to survey and interview if you want truly accurate and unbiased results. For example if you’re trying to open a new organic coffee shop, you shouldn’t ask your mom or your best friend to review your special strain of organic coffee because they’re not as likely to give you an unbiased opinion. You should try to first narrow down what group of people would be interested in trying an organic coffee shop. This requires a large survey of coffee drinkers to see what groups of people would be interested.
Once you’ve narrowed the pool of coffee drinkers to customer segments such as health conscious women between the ages of 25-35, you can then conduct surveys of that group to find out quantitative facts, such as how much they’d be willing to pay for coffee, or what they value in a coffee shop.
These surveys help you in various ways. Not only does it give you concrete proof that people will be interested in buying your product; it also helps you figure out what features of your product your customers truly value. Finding people to take your survey can seem challenging, but thanks to the internet the options are endless. You can look for specialized Facebook groups from your area such as “San Francisco organic coffee lovers,” or online forums such as Quora and Reddit can also be good places to find people who would be willing to take your survey.
Talk to your customers
This is your chance to gather qualitative research straight from the people who will be buying your product or service. You should talk to as many people as you can from your potential customers and try to find out why they chose your product over the competition. This is where you can delve into the psyche of your customers and find out their motivations for using your product or service, which can help you identify the qualities of your product or service that your customers value most.
These interviews can also help you identify your minimum viable product, as well as any points of weakness or what your Product Roadmap, a plan of what you should develop next, should entail. For example if you interview the target group mentioned in the step above and they tell you that they value organic and fair-trade products, and would be willing to pay more for coffee that carries that label, then you know that you should try to maintain the organic coffee, while trying to expand to include fair-trade products.
Since they’re the people who will be buying your product you should always be in tune with their needs and desires. There’s no sense in developing features that don’t interest your customers like offering teas which are of no interest to your target market.
The time you take getting to know your customers will save you time in the future. A willingness on the part of your customers to participate in these interviews is also a good sign that your product produces a strong enough reaction that they’re willing to give up their time to sit for these interviews.
The internet is also a very useful tool for doing market research. While online research will not give you as much relevant information on your own product, it’s a wonderful place to research your actual or potential competitors, as well as keep you informed about your sector. It can give you a clearer view of current issues with products that compete with yours, as well as the competitive advantages of your product. There are also very useful resources online about different sectors. McKinsey, PriceWaterhouseCooper, Deloitte, and similar consulting agencies create specialized reports that can be found online, which are useful in becoming familiar with the trends of the sector you’re trying to enter.
Keep an eye on your competitors
Being an entrepreneur takes time and dedication because you have to always be keeping track of your competition. You need to be aware of any company that is providing services similar to the ones you plan on providing. You can also see what specific features their product has and then compare those to your features and measure how you stack up.
Not only do you have to make sure you’re aware of anyone providing services similar to the one you offer, you also need to be aware of any companies provide services that can replace yours.
So keeping with the coffee shop example, coffee shops are places where people drink coffee, but they’re also places where people work or study. So while Starbucks or Costa will be direct competitors, libraries also provide the same service of study space. You must be aware of these kind of competitors as well so that you can make your product unique.
Beta/ Market Testing
Beta and market testing is a step taken once you have developed your product. Once you have a working prototype you allow a number of people to test out your product. Beta testing is used with technology based companies. This allows the company to test out how the software works when used by people, while also gathering feedback on the ease of use and possible bugs that may spring up during the use of the platform. It is recommended to get a vast audience to test out your project.
In terms of software, both very tech-savvy people and less computer-literate users should be tested because in the end most companies want to make software that is easy to use for as many people as possible. Feedback should be meticulously compiled for these beta-testers to that any issues that come to light are resolved before the software is more widely distributed.
For non-tech-based products or services, people market test their products. This is similar to beta testing in that, in market testing, you have a varied group of people try your product and give feedback. So for the coffee example, you would distribute your coffee to people and have them rate it based on a number of factors such as taste, likelihood of purchase based on price, or even colour and smell.
Validating your ideas is important to help investors measure the viability of your idea. They aren’t going to go out and talk to people themselves to see if they’d be interested in using your product or service. But they want to see if you have. They want hard facts to prove that their investment will give them the return you have promised them. They’re not going to invest in a business that throws out crazy numbers that they can’t back up. They value their money and don’t want to waste it on a company whose CEO isn’t realistic about the prospects of his or her business. You should never provide estimates for something you can’t support with research.
But, more than anything else, validation is crucial for the viability of your company!
There’s no point in pursuing a project that has limited chances of success. It’s in your best interest to be realistic about your business and catch errors before they do you and your business irreparable harm. While an idea might seem wonderful in theory, you need to assure yourself that there is a market for that idea. There’s no point in wasting time on an idea that people aren’t interested in buying. And many times, small adjustments need to be made to make your product a viable investment. But it’s better to find out earlier rather than later.
Conclusion? In entrepreneurship, never assume. Test. Learn. Adapt.