What is business idea validation?
Business idea validation is the process of evaluating the potential success of a proposed business idea through research, testing, and analysis. This may involve gathering feedback from potential customers, competitors, and industry experts, as well as assessing market demand, feasibility, and potential profitability. The goal of idea validation is to determine whether a proposed business idea is viable and worth pursuing further, helping entrepreneurs to make informed decisions about their businesses before investing significant time and resources.
You are confused and puzzled as your search on the internet takes you to all big talks and management articles like “There are a few key ways of business idea validation. The first is to research the market and see if there is a demand for the product or service you’re offering. This can be done through online surveys, interviews, and focus groups…bla bla bla.”
No worry, you will get what you are looking for, I assume you have a small business concept in your mind which can earn you a living but before starting the business you want to know whether you are thinking and planning in the right direction…..am I correct? I am sure I am, as the title of this article is specific.
Before I start, want to share a few pieces of related information to enable you to understand the core concept better.
How do we ideate a product or service for starting a business?
Scenario 1
You have identified a problem area and found a way out of this problem. You firmly believe the solution has a commercial value. [First mover | You mean business]
Scenario 2
You found a gap in existing products or services that are up for sale, the gaps can be quality, purpose, utility, size, price, efficiency, affordability, and availability. [First Mover | You mean business]
Scenario 3
You simply want to join the competition with identical products or services and gain market by strategy. [Competitor | You mean business]
Scenario 4
Just want to do business the way others are doing. [Self Employment | Business for a living]
Example
Scenario 1: OLA, UBER, OLX, OYO, PAYTM [Take maximum support of government schemes. 90% of these kinds of startups close within 5 years. The businesses I mentioned here are exceptions i.e. 10%]
Scenario 2: STARLINK, ZERODHA [Take maximum support of government schemes. 90% of these kinds of startups close within 5 years. The businesses I mentioned here are exceptions i.e. 10%]
Scenario 3: SUGAR COSMETICS, NAYKA, LENSKART, DMART [Take maximum support of government schemes. 90% of these kinds of startups close within 5 years. The businesses I mentioned here are exceptions i.e. 10%]
Scenario 4: 99% of the business entities around us. [ Strongest pillar of the economy, with a high success rate]
Scenario-wise business idea validation method
Scenario 1: As the management guru/consultant proposes or right from the management books.
Scenario 2: As the management guru/consultant proposes or right from the management books.
Scenario 3: As the management guru/consultant proposes or right from the management books.
Scenario 4: Not available, try mine.
If you fall on any of the first three scenarios, frankly speaking, you do not need my lecture.
My blog aims to support the people who fall into scenario 4 so that they can take the correct decision. This article will explain how a guy who wants to start a business to give employment to self can validate the business before starting.
The business idea validation process for a very small business.
I will explain the business validation in 4 broad contexts i.e. IDEA, REVENUE MODEL, PEOPLE, and PLACE. [Even though the success rate is very high, furthermore to zero down the possibility of failure you can evaluate my concept]
IDEA: This involves evaluating the originality and uniqueness of the business idea, as well as its potential for success in the market. This may include conducting market research to determine if the target audience is interested in the product or service, and if there are any existing competitors offering similar solutions. The founder may also consider the potential scalability of the idea and the potential for growth in the market.
REVENUE MODEL: This involves evaluating how the business will generate revenue and make a profit. This may include analyzing the pricing strategy, determining the cost of goods sold, and identifying potential revenue streams. The founder may also consider alternative revenue models and the potential risks and benefits of each.
PEOPLE: This involves evaluating the human resources required for the business and determining if the founder has the necessary skills, experience, and network to make the business a success. This may include considering the team structure, hiring needs, and potential sources of support, such as mentors, advisors, and investors.
PLACE: This involves evaluating the location and physical environment in which the business will operate. This may include considering the target market and customer demographics, as well as the availability and cost of physical space, technology infrastructure, and local regulations and laws. The founder may also consider the potential impact of the physical environment on the overall success of the business and make adjustments to the business plan accordingly.
Never forget the below points.
Challenge your thoughts: The first step to challenging your thoughts is to become aware of them. Pay attention to the running dialogue in your head throughout the day. What kinds of things are you saying to yourself? Are they positive or negative? Once you start paying attention, you may be surprised at how often you have negative thoughts.
The next step is to start questioning your thoughts. Why do you believe that thought? Is there any evidence to support it? Often, when we examine our beliefs more closely, we realize that they are based on assumptions or old stories that we tell ourselves over and over again. If a belief no longer feels true or helpful, let it go. If you have the answer go to the next step.
Share your thoughts with your rich friends and invite them to be the cruelest critique of your thought, and ask the same person for funding. Approach at least 10 of them, and even if 2 of them agree you keep the hope alive and go to the next step.
There’s no denying that human beings are selfish creatures. We’re constantly looking out for our interests, whether it’s at the expense of others or not. It’s just in our nature.
Doubt your readiness, just multiply the amount you are thinking to invest by 1.5. Can you carry it on? Yes!! Bingo, you fall to the next step.
You have concluded the business IDEA validation, you are happy that your business idea has merits and commercial values. Now, the question is whether the business can generate surplus money in the short run.
Revenue model.
As you want to remain simple in your business, and the objective is to give yourself an alternative to employment, you need to ensure the business becomes able to generate profit within 3 to 6 months.
The principal is to sell such products and services that give more than 50% margin. So, check what is your buying price/cost of goods or services and then visit competitors bargain hard and see what is the customer price coming.
[In case you forgot….you are belonging to “Scenario 4”, doing a business that is not unique, and the objective is to give yourself an alternative to employment.]
To know what business gives more than 50% margin read my article on “List of high-profit products”.
Fantastic, you have almost done the business idea validation, your products/services are saleable, and your business can earn quickly. Now let us see whether your business has the right set of people.
Team.
The validation is on whether the business has balanced talents in its people portfolio.
- All partners are looking for a means of self-employment, the odd man has no role, if any, detach. A clash in aspiration will harm the business (Solopreneur is good to go)
- Are you “all in all” in the business, an accountant, a cleaner, a salesperson, a purchase executive, a marketing executive, and a recruitment executive? Do not keep more than 2 portfolios, recruit staff.
Place.
Lastly, just do it next to one of your competitors if it is a shop/workshop/office, the deviation in size and volume should not be more than 10%.
Please do not do it blindfolded just because your competition is there, evaluate cost, customer walk-in, and access to the market never know if you may get a better location than the competition has.
Confused!! Write to me.
What management books say on business idea validation?
Let me share the business idea validation process from the context of management science, below are inputs right from the management book text.
Business idea validation is an important process for entrepreneurs to go through when they are considering starting a new business. Validation helps ensure that the business will be successful and profitable, by testing the viability of a concept before investing time and money into it. This essay will discuss three key aspects of validating a business idea: market research, customer feedback, and financial analysis.
The first step in the business idea validation process of any new venture is conducting thorough market research to assess the potential demand for the product or service being offered. Market research involves gathering data on consumer preferences as well as competitor offerings in order to identify both opportunities and risks associated with launching such an enterprise. It also gives entrepreneurs insight into pricing strategies that could help them maximize profits while staying competitive within their industry sector.
Customer feedback should also form part of any comprehensive business idea validation process for aspiring startups; this can be achieved through focus groups or surveys designed to gauge how customers feel about particular products or services being proposed by businesses-in-waiting. Understanding what consumers want from your offering can make all the difference between success (or failure) – so it’s essential that entrepreneurs take time out during their startup journey to listen carefully (and act accordingly!) upon receiving customer input at every stage along the way.
Finally, financial analysis is vital if one wants his/her business plan validated properly; this requires crunching numbers related not only startup costs but ongoing operating expenses too – including salaries & wages payable over time, etc. By taking these factors into account early in the planning stages, aspiring founders have better chance at succeeding long term due diligence done upfront! All these considerations combined together provide valuable insights which inform decisions taken throughout the entire life cycle of entrepreneurial endeavor. In conclusion, proper validation processes must include elements outlined above if one wishes to increase the chances of making dreams a reality!
Example of business idea validation:
An example of business idea testing would be a startup founder who wants to launch a new healthy meal delivery service. To validate their idea, they would conduct market research to assess the demand for healthy meal delivery services in their target area, gather feedback from potential customers about their preferences and pain points, and analyze the competition to understand the existing market landscape. They might also reach out to industry experts to get insights on challenges, potential roadblocks, and trends in the food delivery market.
Based on this research, the founder may determine that there is a high demand for healthy meal delivery services and that there is room for their startup to differentiate itself from existing competitors. They might also identify potential challenges and make adjustments to their business plan accordingly. This validation process helps the founder to make a more informed decision about whether to pursue their business idea and what changes to make to increase the chances of success.
On my blog website, there are more than 50 business ideas, some are absolutely unique by product and service and some are by execution, you will also find a few business ideas, especially home-based business ideas, and you can evaluate them….but I strongly propose doing your own.
Thanks for reading the article on business idea validation.
Best of luck!
