Perhaps you’ve got a great idea for a new business? Or maybe you’re having trouble getting customers and can’t work out why? Here’s how to validate your idea.
Validating your idea is a crucial step to confirm there are real customers out there who will buy your product or service.
In this post I’ll walk through the key steps to validate your startup idea. It’s based upon Lean Startup Machine’s excellent tool – the Validation Board* with lots of extra resources to get you started.
Entrepreneurs are action-oriented people. We like to dive in, build something and learn by trial-and-error along the way. But time is precious. And there’s a few easy things you can do to save yourself a lot of wasted time and effort!
Step 1: Identify your customers and what problems you’re solving
It all starts with really understanding what problems you’re trying to solve and who you’re trying to solve them for. Changing people’s behaviour requires there to be something broken about what they do now, even if they don’t realise it yet, and a compelling reason to change.
The customer hypothesis: Who are your prospective customers?
Think about who your idea would appeal to in terms of the problems or challenges they face. Are they in a certain age group? What are their needs and interests? What behaviours do they exhibit? What’s their financial situation?
To help with this you can create a predictive persona. These simply describe the characteristics of someone who could become a real customer. This helps later when you’ve got to go out and test your idea with potential customers – you’ll already know who you’re looking for.
The problem hypothesis: What customer problem are you solving?
Think about the specific problem your customer group is facing. Be sure to put yourself in their shoes. How would they describe the problem? What is it they simply can’t do now or find too difficult? What is it they really care about but can’t act upon?
Step 2: Define your assumptions – what you think you know but need to be sure about
The next step is then to define your assumptions. These are the things you’ve assumed about the customer or problem that need to be tested and validated. In other words, what tests do you need to run to prove you’re on to something? Typically, assumptions relate to things like whether you’ve focused on the right customer group and whether customers actually agree there’s a problem that needs to be solved.
Which one of these assumptions is your riskiest? This one is the most fundamental to whether your business could succeed or fail. You’ll test it first, because the results will give you the most valuable feedback about whether your idea has promise.
Step 3: Determine your test method and success criteria
Testing methods typically start simple and then increase in cost and level of effort as you get more successful validation.
While these approaches aren’t scalable, they’re not supposed to be. You’re validating that the idea has merit before you invest significant effort in building a solution. This is the essence of the Minimum Viable Product.
“The minimum viable product or MVP is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort”
– Eric Ries, The Lean Startup
Here are a couple of examples in more detail.
Exploration: The customer interview
The goal of an interview is typically to confirm that potential customers rank the problem as a significant pain point. Interviews often work better than online surveys because you can adapt your questions in real time.
- Conduct 20-25 customer interviews to ensure you really understand whether they face the problem and to what degree. If your idea involves a two-sided market (e.g. eBay, AirBnB) then you need to do this for both sides.
- Use the 5 whys technique to peel away the layers and get to the heart of how customers feel about the problem.
- Be sure to come away with an understanding of how big a problem this is for them, how frequently they experience it and what their current solutions or workarounds are.
You may want to supplement face-to-face interviews with surveys for further validation. Check out tools such as SurveyMonkey or Typeform which let you build and publish a survey. There are also services like IdeaCheck which even locate people to complete the survey as well.
The success criteria for an interview is often the percentage of people who rank the problem as significant. Remember that a low percentage may just mean that you’re talking to the wrong customer group. The percentage is set based on what you think is the minimum amount of validation you need to justify investing more time and effort in pursuing the idea.
Pre-sell: The landing page
The goal of the pre-sell is to have your potential customers give up something of value as a sign of their interest. They might provide their email address because they want to know when the product is launched, or even better, place a pre-order and offer payment. Crowdfunding sites such as Kickstarter or Indiegogo are a good example of the pre-order.
A landing page is simply a web page you direct customers to, describing your (future) product or service and including a call to action such as ‘Register your Interest’ or ‘Order Now’. These are a quick and low-cost way to perform validation.
- Build a landing page – there are many different services available which allow you to do this in minutes. Some examples include launchrock, QuickMVP and Unbounce. Often they allow split testing, so you can route visitors between two different versions of your page to see which one produces the best result and then optimise your message.
- If you need some feedback on the page design, you can use services like UsabilityHub’s Five Second Test.
- Promote the landing page. Some examples:
- Send the URL to customers you’ve already spoken to.
- Post the URL on community and social media sites. For example Facebook or LinkedIn groups where your customers might hang out.
- Run a small advertising campaign using Facebook or Google ads.
The success criteria for a landing page tends to involve a couple of dimensions. It’s useful to know how many people clicked through to the page as a percentage of how many viewed it. And then of course you want to measure how many of them ‘signed up’. Again the percentage is set based on what you think is the minimum amount of validation you need to justify further time and effort.
Step 4: Test your riskiest assumption
So now you’ve: (1) identified your customer and problem; (2) defined your riskiest assumption; and (3) determined how you’re going to test it and what the success measures will be. Now it’s time to run the test!
One of the most common questions at this stage is ‘ok… so how do I find potential customers?’ The answer is: be resourceful. If you created a predictive persona, you should have some insights about where to find people that fit it. Some examples:
- Is your idea in the consumer goods space? You could contact local sellers on classified ad sites and ask them about why they bought a competing product in the first place.
- Clothing? Visit a fashion market and talk to the shoppers.
- Games? Visit a gaming café and talk to the gamers.
- Enterprise software? Get into the diary of some CxOs. Use your network to get a warm introduction.
- The list goes on…
Let’s face it, this step will require you to step out of your comfort zone, but it’s a small price to pay to validate your idea.
Step 5: Continue, pivot… or quit
Ok you’ve done your customer exploration and the results are in. At this point you have three options:
- Continue – if you’ve had a great outcome and validated your thoughts about customers and their problems, move forward with further validation. See Step 6.
- Pivot – if you were a long way short of your success criteria, it’s time to go back to Step 1. This time you’ll test the next most promising customer and problem hypothesis.
If you only just fell short of your success criteria it makes sense to try a larger sample size, or consider whether there were issues with how you executed your test, before you move on to a different customer and problem hypothesis.
- Quit – people often ask ‘how do I know when to quit?’ This is never straightforward, but it’s fair to say that if you’ve unsuccessfully tested all your potential customer and problem hypotheses that’s a natural point to seriously consider whether the idea is worth pursuing further.
Step 6: Test your remaining assumptions
Test your remaining assumptions about the customer and their problems
Once you’ve successfully validated your riskiest assumption about customers and the problem, it’s time to go back to Step 3 and work out how you’ll test the next riskiest assumption. All going well, you’ll have validated enough big assumptions to know that your idea has promise.
Then start testing assumptions about your solution
Once you’ve validated there is indeed a group of customers who have a meaningful problem you can solve, you can form a view about how you’ll solve it. This is your solution hypothesis.
You’ll follow the process again, this time testing your assumptions about the solution. You can introduce higher effort testing methods, such as the pre-sell and the concierge to gain rich feedback about whether your solution hits the mark.
The 6 steps are mapped out below. All going well, by the end of the process you’ll have a keen group of customers wanting your product and enough validation to start investing resources to build it.
What other tools and techniques have you used to validate your ideas?