How to Validate Your Business Ideas in 3 Easy Steps

Would you bet everything you own on a roll of the dice?

Leaving chance to determine your faith.

Some do, but not you; you’re smarter than that. That’s why you want to learn how to validate your business idea.

You can’t afford to invest your time and energy in a business idea that might work, right? You want a safe bet—a business idea guaranteed to work before you invest your money.

Well, did you know that you can now 99.9% guarantee your business idea is a safe bet by using clever strategies that validate it from every angle?

And guess what? The strategies are right here. if you put the time in now, the results could last a lifetime.

Why You Should Validate Your Business Idea Before Getting Started

Of course, you want your business idea not to fail, because you don’t want to waste time and money creating a product or service that won’t fulfill a need and make a profit.

And, more than that; you need to know why it might fail. Validating your business idea tells you everything you need to know, by analyzing specific data that is crucially important to your product, marketplace, and target audience.

The 3 main reasons businesses fail

1. A lack of need for the product/service. (This is the main reason businesses fail.) Validation investigates your market to ensure the demand is there.

2. Cash flow. Validation tells you whether your business will make a profit.

3. Misdirected marketing initiatives. Validation tells you which marketing strategies will suit your business idea.

But validation does a whole lot more.

And we’ll tell you next with our 3 steps for validating your business idea. 

 Step 1. Validate Your Market

You validate your market to answer the following questions:

  1. Is there a market for your business idea? How great is the demand; is it growing or shrinking?
  2. If there’s a market, is it big enough to support your business?
  1. How much are people willing to pay for your business idea?

Fortunately, there are several strategies you can use to answer these questions, all based on fact, not assumptions.

These answers can also help you gain a clearer understanding of your marketplace and provide insights into how to create a business that addresses your target audience’s pain points and convert them into paying customers.

Your first strategy involves some innovative online research.

 See who’s interested in your business idea:

You find out how many people are interested in your idea by using business idea validation tools, like trends.Google.com, Google Keyword Planner, Spyfu, etc. Even Amazon and Facebook can help you find out if your idea is in demand.

Your goal is to research the keyword search volume, or the amount that people are searching for terms that are related to your business idea.

Specifically, you want to look at the volume of searches for a chosen keyword within a specific time frame. For example, you could check out the number of people who searched online for a silk sleeping mask in 2020. The keyword is “silk sleeping mask”; the number of people who searched for it is your market size using that keyword.

Another thing you need to know is whether your chosen market is growing or declining, because you don’t want to enter one that’s on a downward curve.

If you don’t have these numbers, you’re letting chance determine your faith.

Here’s how you find them:

Use Google Trends to assess your market’s growth or decline

You can avoid wasting your time and efforts choosing a business idea with little demand by using trends.Google.com to validate whether your target market is growing, flatlining, or declining.

Google Trends shows you how frequently your chosen search term (silk sleeping masks) was entered into Google’s search engine over a selected period and in various world regions and languages.

But Google Trends can help you in other ways, too.

Here’s what you can use it for:

  • Find niches within your chosen market category
  • Find product categories and keywords related to your original business idea
  • Find relevant products and topics that are trending right now
  • Identify seasonal trends, create content and promote it at the most profitable time
  • Find niche topics and see which region and subregion needs your business idea
  • Find and avoid unicorn keywords (popularity spikes)
  • Plan your content calendar
  • If you’re using YouTube, analyze what’s trending and refine your video SEO strategy.

Once you’ve proven that your market is growing, your next step is to find out exactly how many people are interested in your product.

You can do that using Google Keyword Planner:

 Use Google Keyword Planner and find the search volume

Another excellent way to gauge your chosen business idea’s market validity is Google Keyword Planner.

Once you’ve researched your business niche on Google trends, confirmed it’s trending in the right direction (growing in popularity), and found product categories and keywords related to your original idea, the free Google Keyword Planner tool can tell you the total search volume for each keyword. It will also help you discover new keywords related to your product, and if you’re going to advertise, the cost to target them (CPC).

 How to use it:

  • Insert your chosen keyword and check the impressions (i.e. how many people are searching for it)
  • Look at the CPC (cost-per-click), how much it will cost you to target those keywords if running ads
  • Use long-tail keywords and record the search volumes, enabling you to refine your keyword marketing strategy

Use SpyFu.com to crosscheck Google results

While Google is great, there’s a commonly held belief that the results you find are sometimes chosen by Google based on their own interests. One way of negating this (if it’s true) is to use the free

SpyFu public website.

SpyFu works in much the same way as Google Keyword Planner, enabling you to identify popular and profitable keywords that your competitors use in their organic search campaigns. In other words, you can check which keywords are driving the most traffic to their websites, and which keywords those websites are using on their Google Ads campaigns.

However, SpyFu only refreshes its data monthly, so it’s better as a large-term trend guide rather than a real-time tracking platform.

 How to use it: Do the same as you did on Google

Now, let’s get some buyer feedback by using Amazon:

Use Amazon to crunch the numbers

Amazon is now so big that it’s practically a retail search engine, meaning you can use it to research and validate your business idea based on product rankings and category popularity.

It’s because consumers use it to search for products they want to buy and leave unbiased consumer-based content (reviews) based on their experience.

 How to use it:

  • Go to the Amazon website serving your country and type in your target keyword or niche category related to your business idea/product into the search bar.
  • Research similar products in your category and check out the number of reviews left for each product. If there’s a high number, then you’ve found a popular niche.
  • Research the product description to find its ranking within the Amazon product catalog.
  • Also, search best-selling products on Amazon to see where your chosen product is ranking. The higher it is, the more people buying the product.

If you want to take your research to the next level, you can use several product-research tools for collecting data, trends, and other essential metrics.

The best amazon product research tools:

  • SellerApp
  • Jungle Scout
  • AMZ Tracker
  • KeywordInspector
  • CamelCamelCamel 
  • Unicorn Smasher

By now, you’ll have a pretty good idea whether your chosen market is a viable one, but there’s one way to be absolutely sure—and that’s Facebook:

Run a Facebook Ad to confirm all your findings

Once you’ve chosen your product, you can use Facebook ads to run an ad campaign and monitor the interest.

Learning how to use Facebook ads effectively takes a little research. But if you do, it’s an excellent way of validating your business idea and creating a highly profitable marketing campaign.

Here’s what to do:

  • Create a business page and log in
  • Create a campaign
  • Choose your campaign objective (sell more products, get more website visitors, etc.)
  • Select your country
  • Select your audience demographics (age, gender, etc.)
  • Insert your target keyword
  • Upload your images and description
  • Set your budget
  • Pick a format
  • Place your order

Facebook ads work best if you know who you’re advertising to, so before posting, it’s essential you know more about who you’re targeting with your campaign. Once you know who will buy your product, use Facebook Audience Insights to gather data on your target audience’s demographic, then you can optimize your Facebook ads.

Step one: Complete! Next, you need to figure out if the market you’ve chosen is a profitable one.

Here’s how:

Find out how large the total adjustable market is

The TAM (total adjustable market) is the size of the overall pie (market size) and the size of the slice (your share) you can realistically capture. By doing so, you can confidently estimate your business idea’s potential and justify investing your time, effort, and money.

You calculate your TAM using the following formula:

Total Addressable Market = The number of people available * the amount they’re willing to spend on your product = Size of the total market

You’re unlikely to corner your market, so if the TAM is low, the market might not be worth entering.

How to work out your total TAM:

Take your Google Keyword Planner research volume as an example. Let’s say 500,000 people are searching online per month for your product. Multiply that by 5% (a reasonable projection of your slice of the market pie), and multiply that by how much consumers are willing to pay—for example, $100 (their worth/average product price). You would get a $25,000 monthly turnover.

But how do you find your customers’ worth?

Good question! Let’s find out:

How to find out how much your customers are worth

Your customers’ worth is the price they’re willing to pay for your product or service.

(We’ll be talking about products for the sake of the example, but the same idea applies to service-based businesses as well.) Once you know that, and your market size, you can estimate your profit.

 How to find your products’ price point:

  • Run a competitor analysis and find the base price they’re charging. You can do this by looking at their websites and on secondary sales sites like Amazon.
  • Calculate your CPU (cost per unit): This includes the hard costs, such as labor and materials for producing your product, packaging, testing, and shipping.
  • Look at product alternatives that people are purchasing; are they cheaper or more expensive than the product you’re bringing to the market?
  • Can you use a perceived value to increase your sale price? I.e., is there anything you can change or add to your offer that would convince people to pay a little more?

Product pricing is an essential step in validating your market and determining the success of your business. Don’t leave it as an afterthought; settle for what you think is a fair price, or charge exactly what your competitors are. Do your research and find a product price that guarantees you’ll earn enough to stay in business.

Congratulations: You’ve completed your market evaluation!

Next up, validating your idea:

Step 2. Evaluate Your Idea

Only evaluate your idea if you’ve proven that there’s a market for your business idea, that consumers need your product, and that the TAM is worth your investment.

However, that’s only stage 1; you still don’t know for sure whether people will buy your idea or exactly how much they’re willing to pay for it. And, you need to know all of this before investing in designing and manufacturing your product, or spending time creating materials for your service.

Are you thinking, but how do I validate an idea, on a product/service I don’t have?

You’re about to find out.

4 ways to validate your idea and get customers for your business:

1. Test different marketplaces for free

The first strategy is so simple it’s genius.

All you do is design your product and make up some high-quality visuals. If that sounds like too much hard work, a simple alternative is to use a competitor’s or a product on a wholesale website like Alibaba. Obviously, this is only for testing, and be sure to remove any labeling to avoid breaking copyright laws.

Next, list your product on sales platforms such as Craigslist, Facebook Marketplace, eBay, or a popular local platform. Set your price, write your product description, upload your images, and publish. Now monitor the interest; if it’s high, you could be in business.

2. Use your friends and possibly make some sales.

This strategy might seem a little limited, but if you’re an avid social media user, you could have a lot of friends!

Approach it much as you would the “test different marketplaces” strategy. But include a list of questions relating to your product and multiple-choice answers for your friends to choose from, such as:

Would you buy this product?

  • No, I’d never buy the product
  • Maybe, if I needed it in the future
  • Yes, I’d absolutely buy the product today

Why would you buy this product?

  • Is it because it’s a great deal?
  • Is it because it’s practical?
  • Is it something you have to have?

How often would you buy this product?

  • Once?
  • More than once?
  • Multiple times?

You can take this strategy a step further and ask your friends if they’d pre-order your product, and if so, would they pay a deposit, and how much? If a high number of friends say yes (for example, 100) and agree to pay a $10 deposit, you could earn $1000; that might be enough to place your first small order!

3. Try in-person interviews (Give a little to gain a lot)

In case you’re worried your friends won’t provide an unbiased opinion, ask complete strangers and interview your customers (your target demographic).

This strategy requires a face-to-face interview, which can, of course, take place via Zoom or any other streaming platform. Again, use social media to find and attract your interviewees, or if you’re a local business, advertising by using flyers or in local print media.

Of course, people will need an incentive; entice them by offering a discount on your product/service if your product testing is successful.

What to look for:

This strategy is all about body language.

You can use similar questions to the ones you asked your friends; just remember to use pre-arranged multiple-choice answers (yes, no, maybe, etc.)

But as people are often uncomfortable providing honest negative answers, such as “I don’t want your product” or “I think it sucks,” focus on their non-verbal communication while asking your questions and explaining your product details and advantages.

Your goal with this test is to continuously tweak and improve your product until most interviewed customers say an honest “yes” to it.

Now, let’s step it up a notch with our next strategy:

4. Drive traffic to a basic sales page

The final strategy to validate your idea is a little more advanced, requiring a bit of tech know-how and some investment. But it’s a great way of getting immediate online product validation results.

You can use websites such as unbounce.com or Instapage.com, which enable you to create a landing/sales page for your product to gather relevant information, like what percentage of visitors would pre-order or buy your product.

What to include:

  1. Your offer and the clear customer benefits. Don’t write product descriptions, as consumers don’t care how great you think your product is; all they want to know is how it will fix their pain points.
  2. Put a CTA (call to action) where consumers can see it without scrolling. This could be an order form, subscription form, an email collection form, or a phone number they can contact you on.
  3. Run your page for under 48 hours.

Your goal is to confirm there’s enough interest in your product, and you measure that using conversion rates.

You calculate the conversion rates using the following formula:

The total number of visitors that take action divided by the total number of page visitors.

For example, if you had 2000 visitors and 100 took the necessary action, your conversion rate would be 100/2000 = 0.05%. If your conversion rate doesn’t meet or exceed what’s required to validate your business idea, you’ll need to improve your offer; if it does, you can move to the final stage.

Now, it’s time to validate your business idea:

Step 3. Validate Your Product

To ensure your business idea is a success, you have to test your product or service in the real world, so you’re sure you’re providing exactly what your customers need. And you do that by using alpha and beta testing.

  • Alpha testing: When employees test your product idea in a staged setting. Its purpose is to eliminate any issues or bugs the product might have before bringing it to market.
  • Beta testing: When a chosen group of real users test your product and are asked to identify specific problems and benefits.

Real user testing is invaluable when assessing your market validity.

For instance, if your product doesn’t perform as expected, is faulty, or just difficult to use, the feedback you get from real users can help you refine and improve your product before you go into production. This, in turn, enables you to create a better product that meets your customers’ needs, giving you a better chance of success!

Time to Get Validating

Now that you know how to validate your business idea, you no longer have to rely on assumptions.

You can now be sure your idea is a safe bet and guaranteed to work. Follow our advice and put the time in now. Your market is waiting!

About the author

Terry O' Toole
+ posts
Terry O'Toole is a freelance writer, scuba instructor, and serial entrepreneur who spends most of his life sailing from one country to another, starting businesses as he goes. He has no plans to stop and believes we're here to live our dreams and fulfill our potential and tries to inspire and help others to believe it too. When not doing that, you'll find him kicking back on his boat, perfecting the art of Wu Wei.
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