How to Validate Your Business Ideas Effectively – Without Spending a Fortune
“I have not failed. I’ve just found 10,000 ways that won’t work.” – Thomas Edison
One of the most prolific and successful inventors in history was not averse to coming up with a few ideas that just didn’t work. Modern entrepreneurs face a similar dilemma, coming up with thousands of business ideas that just aren’t viable. While there is no denying that small businesses are considered the backbone of the U.S. economy, the statistics relating to startup failure are still troublesome. According to Intuit, there is a 49% chance of failure within the first two years of running a new business. The old adage “build it and they will come” may well have worked for Kevin Costner, but that was Hollywood and this is real life. Far too many would-be business owners are still spending thousands of dollars in capital with very little realistic prospect of seeing any returns. Even business ideas that seem intuitively destined for success can fail. Spending time to test the validity and profitability o
f an idea before fully committing to it is always a good idea.
How to Validate a Business Idea
#1. Craft Your Elevator Pitch
The first step is to create a concise 60-second pitch that conveys exactly what your business idea is about. Not only will this help you develop your idea in your own mind, it will also mean you are well prepared to pitch for investment or clients should the opportunity arise.
#2. Set up a Website
The next stage is to set up a website to undertake some preliminary stage advertising of your proposed product or service. There is no need for this to be terribly complex. Indeed many web hosting companies offer free site builder tools to make the process of getting a site up and running relatively pain free. Hopefully it goes without saying that you shouldn’t be using a free website to do this as visitors won’t take a free site seriously. Since the cost of a domain name and web hosting is fairly cheap, this only represents a small outlay to effectively test the validity of your business idea. There are several options to choose from, but if you are looking for a low monthly payment as opposed to an upfront fee, you should check out the likes of Hostgator. You’ll have to do a little research when choosing a domain name to try to include some relevant keywords. Seomoz offers an excellent guide to keywords and keyword research.
At the very least your website should contain an effective landing page that offers the details of your product or service and what the visitor should do to stay informed in the pre-launch period. Trada has published an overview of how to create effective landing pages. While the article focuses on PPC campaigns, the information pertaining to what a landing page should include is sound and will give you a good understanding on what you should be looking at including on your own landing page. Besides, we’ll be getting to PPC campaigns very shortly. You might also like to include some sort of infographic. These are the new content of the internet. Never before has the saying “a picture says a thousand words” been so true, so make sure you spend some time getting it right. It’s well worth you taking the time to read Mashable’s Samantha Murphy’s take on how to create an awesome infographic.
#3. Analyze, Then Analyze Some More
Installing website analytics and conversion tracking tools on your landing page is going to give you a way to measure the potential success of your business idea. There are a few options out there but Google Analytics is the product of choice for many. Completely free to install and use, it gives you detailed information about how your visitors found you, where they came from, how long they hung around and what they did while they were there.
#4. Get Some Traffic To Your Site
This sounds like the easy part, but make no mistake, traffic is the holy grail of the Internet and every webmaster wants a slice of the pie. Social networking is an increasingly popular way to generate traffic and falls neatly into the undeniable trend toward inbound marketing. The only problem is that however noble a quest for organic traffic generation might be, it takes time and more often than not, it takes a lot of time, not to mention commitment. When you want answers quick, which is it likely that you do, you should be doing a PPC campaign with Google AdWords. Undoubtedly this is going to cost, but it will cost less than a poorly tested business idea failing in its first year. Tim Ferriss famously used Google AdWords to come up with the title for his New York Times Bestseller “The 4 Hour Work Week.” You can do yourself a massive favor by reading the really quick case study explaining how he did it over at Boing Boing. Ferriss completed his experiment in a week for about a $200 outlay. If that is more than you want to spend, consider setting a weekly budget. Your results will be slower, but you won’t feel the financial pinch too much.
#5. Speak to Subscribers
Give your PPC campaign the necessary time to work and then start looking at your results. If you are seeing good amounts of traffic and a decent amount of subscribers, then you could just be on to a winning business idea. Now is the time to get up close and personal with the visitors who have entered their email into your PPC landing page. Reach out to your potential customers with a personal email asking them a few questions about your product or service and what would most encourage them to purchase in the future. This allows you to fine tune your business idea to discover what specific features customers really want. Engaging with customers in this manner is a viable method used by many leading brands.
If you have gone through all of the business validation steps and find that you have promising results, then congratulations, you may well have come up with a viable business idea. Notwithstanding the fact that numbers will decrease as you get further into the funnel, if you are seeing numbers in terms of hundreds of visitors and a decent conversion rate, it would probably be a good idea to pursue your business idea further. If not, don’t stress, you’ve spent maybe a few hundred dollars to save potentially thousands and that makes you a winner right there. Your next business idea? Rinse and repeat. You could just be onto a winner.
Author Bio: Frank Hayes is an entrepreneur and an educator. He lives in Fort Worth, Texas with his family. He writes for Degree Jungle, a resource for college students.