How to validate your business idea

Today, we’ll explore how to validate your next business idea. When we embark on a business venture, whether it’s launching a new product or service, a surge of ideas and energy flows.

This period is both exhilarating and perilous for your business. Why? Because if you fail to validate that the market genuinely desires and is willing to purchase your product, you’ll face significant consequences. You’ll have invested substantial resources, including time, energy, and money, in creating and developing your product.

The risk is substantial; if your product fails miserably, you’ll lose valuable time, money, or even six months’ worth of earnings. This can be disheartening and lead to the decision to abandon the project altogether.

As an entrepreneur, it’s crucial to prioritise idea validation. Before embarking on any new venture, take the time to validate your ideas.

I personally had to validate numerous ideas before launching Purple Yak, my successful business coaching firm. Even with Purple Yak, I continue to validate programmes and courses before proceeding with development and launch.

In this blog, I’ll guide you through the process of validating your next business idea, product, service, or any other concept. By following these steps, you can save yourself time, money, and effort in finding a viable and successful venture.

Now, I want to emphasise the importance of using the word “next” because if you’ve already started your first business or product, you’ve already gained valuable insights into the process. You’ve learned from your mistakes and made progress through your efforts.

The next time around, you’ll be more cautious and deliberate in your approach. This lesson is specifically designed to help you avoid the pitfalls of the past and make informed decisions for your future endeavours.

Now, when I say validate, I mean you’re absolutely certain that people will pay for your product, regardless of what it is. I understand you might be wondering, Mick, how can I sell something before actually creating it? And how will I deliver it to the customer?

The answer is simple: ask for their money upfront. This is called a presale, and it’s a common practice.

Back in 2019, I used this method to validate the need for Purple Yak programmes. I approached local, small business, and explained that I had something in that could help them grow their businesses. I asked them to join me and pay me to become a founding community member, which would give them first access to the programmes.

And here’s the catch: it was a special discounted rate. It was that simple. While you can certainly use a slideshow to showcase your product or service, you can also create mockups, designs, or even walk them through the process if its a service.

For coaching or training, you can show them the results. This is what people really want—they’re pre-buying results.

Remember, your product or service is going to produce a result, a transformation, or a job for your customers. At the end of the day, people buy the promise of a solution. So if you can sell that promise and people actually want it, then you know you have a valid idea.

Now, I’m going to guide you through the process of getting up to that point where you can pre-sell your product or service.

Let’s say you have an idea and want to ensure that people actually want it. The easiest way to know if someone wants something is to find out if they need it. If there’s a problem you’re solving with your product, does that problem even exist?

So, if you have a current email list or customer base, you can ask them, “Hi, what are some of the things you hate about [fill in the blank]?” This should be the area your product or solution solves. For instance, let me walk you through what we did with Purple Yak back in 2019.

We asked local business owners, “What do you hate about trying to grow your business? What do you find difficult about growing your business?” We also asked about their current methods.

We then asked, “How are you currently trying to grow your business? What’s the platforms or systems you’re using to do this?” We asked open-ended questions to learn about the friction points.

We identified areas that frustrated them. We learned that people struggled to grow their business consistently because it was challenging, time-consuming, and expensive. They also kept trying new things without sticking with any one solution.

You may not agree with the answers you hear from customers. Honestly, that’s just tough. Your customers are the source of your money therefore their perception is fact, as far as they care. You could try to change this but that’s time consuming and often doesn’t work. However, you need to turn these perceptions into your messaging and then use them to show how your product or solution can help them overcome those perceptions.

Now, once you’ve identified a problem that your product or solution can solve for someone, you need to pre-sell it. And it’s actually quite straightforward. Invite your most loyal customers to a webinar.

During the webinar, you’ll simply present and demonstrate what this product is. You can use slides, mockups, and examples. You can also share testimonials from past clients and results, such as before-and-after pictures or videos of clients reviews.

Although you don’t have a product yet, you need to validate that people are willing to pay for it. It’s easy for someone to express their love for an idea when presented to them, but they won’t actually have to put their money out if they don’t have to. You need to ensure that they’re willing to pay for it, even if it’s at a discounted rate.

Many companies offer founder’s discounts. For instance, the first 100 customers might receive a 50% discount during the first year.

This significant discount encourages people to invest and take a leap of faith that this product will turn out to be quite good. However, it also ensures that people have skin in the game. They’re actually putting up money so they can use the product when it’s released. Essentially, you’re making an offer.

Don’t worry about how you’ll charge them. This is something you should keep simple. Even if it’s just a PayPal link or a button you create on your website with Stripe or something, and charge their credit card separately, you can then figure out how to deliver to the people who paid via receipts.

When your product, service, or whatever is ready to be delivered, you can then determine how to deliver to the people who paid via receipts.

Look at the receipts and their email addresses; this person paid for a pre-order. Let’s give them access. Keep it simple.

If you’re on a webinar and someone expresses interest, and I like to say at least 5%, encourage them to buy. So, if you have 100 people on the webinar and 5 buyers, that means you have some traction. Any more than that is incredible.

If you have 10 or 15 buyers, it means you’ve struck a really good chord. Now you have buyers.

Now you can build and develop your product. What you do is keep those customers, your founding customers, informed as you build, progress, and get closer to the delivery date.

You should have an estimate of how long it should take and say something like, “It will be ready for you in four to six weeks.” Give yourself a range. You’ll need to discuss this with your team, if you have one, to find out how long it will actually take.

If you’re building it yourself, you need to allow for enough time to account for potential snags and issues that you may encounter. But the point here is that you’re having them join you on this journey. They’re coming along and learning, for example, that this is the stage we’re at.

This is what we’ve built so far. We’re getting closer. You can share screenshots here and there, and you can do this in a Facebook group or via email.

The point here is to keep these founder members excited. Another thing you can do is offer a money-back guarantee.

If, after 30 days, you’re not satisfied with the product when I hand it to you, you can get a refund. The purpose here is to encourage people to invest in the idea and validate its concept. If they do, we gain validation, allowing us to proceed with re-rolling and actually creating the product or service.

Validating the idea is crucial. In the real world, with real customers and real money, it’s essential to ensure that the product or service offers value that people are willing to pay for. Otherwise, it’s not a viable business or product. Ultimately, a successful product or business is when people are willing to part with their money in exchange for something they value.

If you don’t provide enough value, they won’t be willing to invest enough money. Therefore, it’s necessary to stop, go back to the drawing board, retool, pivot, and figure out what they’re willing to purchase.

This approach will save you a significant amount of time, effort, money, and headaches because you won’t have to build, launch, and then discover that the product or service isn’t well-received. Instead, you’ll gather feedback and use it to build and launch a more successful product or service.

Thats it for today, thank you so much for reading.

Got a burning question? Reach out on our social channels or email me at michael@purpleyak.co.uk

Take care.