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5 Steps to Validate Your Business Idea

• 18 Aug 2020

You’ve come up with an innovative business idea, raised initial funding , and believe you have what it takes to be an entrepreneur . What’s next?

It’s time to validate your offering’s market potential.

What Is Market Validation?

Market validation is the process of determining if there’s a need for your product in your target market. Validating your business idea can enable you to reasonably predict whether people will buy your product or service, and whether your business will be profitable.

It’s important to validate your idea early in the entrepreneurial process to ensure you don’t waste time and resources creating a product that isn’t a good fit. Securing market validation can also instill confidence among investors, crowdfunders, and banks that are considering funding your startup.

By going through the process of validating your business idea, you can gain a deeper understanding of how your product does or doesn’t meet your target customers’ pain points. The insights you gain can help you create an offering that not only addresses your market segment’s needs, but earns you your first paying customers.

Here are five steps to determine the market validity of your venture.

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5 Steps to Determine Market Validation

1. write down goals, assumptions, and hypotheses.

Writing down the goals of your business is the first step in market validation. The process of articulating your vision can illuminate any assumptions you have and provide an end goal.

Ask yourself:

• What’s the value of my product ?
• Who’s the target audience, and what assumptions have I made about them?
• What differentiates my product from existing ones?
• What hypotheses do I have about my product, pricing, and business model?

Answering these questions can help you communicate the value and differentiating factors of your product, and illuminate assumptions and hypotheses you’ve made that are yet to be tested and verified.

Related: How to Come Up With an Innovative Business Idea

2. Assess Market Size and Share

Before moving forward with your venture, estimate the size of your target market and the share of it you could potentially capture. By doing so, you can gauge your business’s potential and justify its launch.

In the online course Entrepreneurship Essentials , Harvard Business School Professor William Sahlman uses mattress retailer Casper to illustrate this idea. In 2014, Casper’s founders assessed the market size for their product by comparing its differentiating factors against the larger market. For Casper, these differentiating factors included its online business model, 100-day return window, and the viscoelastic foam material used in its mattresses.

Based on statistics for the mattress market at the time—including units sold per year, the percentage of the market owned by foam mattresses, and the number of mattress retailers that were e-commerce brands—Casper’s founders narrowed down which segments they should target, and determined they could own a few percentage points of the total mattress market share.

Do this exercise for your target market. For products similar to yours, research sales data, the number and share of current manufacturers, and what percentage of the total market your segment holds. Determine where your product fits into the market and assess how much of it your business could own.

3. Research Search Volume of Related Terms

Another way to gauge the market validity of your business idea is to research the monthly search volume of terms related to your product or mission. When consumers need a product or service, they often use a search engine to see what the market has to offer.

You can use a host of resources to look up monthly search volumes, such as Moz . In the case of Casper, a related search term might be “foam mattress.” According to Moz, the term garners more than 11,500 monthly searches, indicating a demand for the product.

If there’s not a lot of search volume surrounding your product, use terms that express customer intent. For instance, if you design a mattress made from a new, extra supportive material, you could look up how many people search for “best mattress for lower back pain sufferers.” Moz data indicates that the query yields 240 monthly searches.

This type of search volume for a longer, specific query isn’t negligible. In fact, it can be used to bolster your hypothesis that there’s a need for your product.

4. Conduct Customer Validation Interviews

Conducting interviews with your target market segment can be an effective way to learn about your product’s potential. This initiative might include hiring a market research company to conduct focus groups, sending out an online survey, or simply requesting a conversation with someone.

Ask potential customers about their motivations, preferences, needs, and the products they currently use. Circle back to the list you created in the first step of the market validation process, and frame any assumptions or hypotheses you made as questions to your interviewees. Be open to the feedback you receive and record it for future use.

The feedback may reflect that your product doesn’t have strong market validity, in which case, you can use it to improve your offering and repeat the market validation process.

Related: 7 Questions to Ask for an Insightful User Interview

5. Test Your Product or Service

Once you’ve determined there’s space for your product in the market, ensure you’re putting the most useful, intuitive version of it into the world. You can achieve this through alpha and beta testing.

• Alpha testing is when internal employees test a product in a staged setting. The purpose of alpha testing is to eliminate any bugs, issues, or idiosyncrasies in the product before it’s available to outside users.
• Beta testing is when a product is tested by a limited group of real, external users who are specifically told to identify problems. In the case of a software or app, beta testing might be open to the public with a notice letting users know the version they’re testing is unfinished.

Testing your product with real users can prove invaluable when assessing market validity. If there’s a need in the market, but your product is faulty, complex, or difficult to use, customers may opt for a competitor’s offering. The feedback you get from beta testers can help you better leverage and meet customer needs .

Turning Feedback Into Action

In Entrepreneurship Essentials , entrepreneurship is described as a “process of discovery.” To determine whether your product is a market fit, you must seek feedback to validate the beliefs you hold about your product offering.

Entrepreneurship requires flexibility and hard work. If you put in the time to outline your goals and assumptions, assess the market, interview potential customers, and conduct tests, you can gather the information you need to build the best version of your product.

Are you looking to turn your idea into a viable venture? Explore our four-week online course Entrepreneurship Essentials and our other entrepreneurship and innovation courses to learn to speak the language of the startup world. If you aren't sure which course is the right fit, download our free course flowchart to determine which best aligns with your goals.

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Home > Start a Business > How to Validate a Business Idea in 12 Easy Steps

How to Validate a Business Idea in 12 Easy Steps

By Bernardo Barbosa

Published on 23 April 2024

14 mins read

The idea validation process can be hard to navigate, and even a great idea for a business needs to be validated before making a mark in the real world. In this article, we will start by taking a look at what idea validation is all about before sharing 12 valuable insights to help you turn your startup idea into a full-blown business.

What is Idea Validation?

Idea validation refers to the process of assessing and confirming the viability and potential success of a business concept before fully committing resources, time, and effort to its execution. It involves gathering evidence and feedback to determine if there is a demand for your product or service, if it fulfills a need in the market, and if there's a viable customer base willing to pay for it.

The goal of validating a business idea is to reduce the risk of failure by ensuring that it has a solid foundation and market acceptance. It involves researching the market, understanding the target audience, testing assumptions, and iterating on the concept to refine and improve it based on feedback.

Validating a business idea helps entrepreneurs make informed decisions about pursuing, pivoting, or shelving the concept before investing significant resources into its development. So, let's jump right into how to validate a business idea in 12 simple steps:

1. Understand the Pain Points and Needs of Your Potential Customers

For customers, pain points can be:

• **Functional:** Issues related to the product or service not performing as expected.
• **Financial:** High costs, hidden fees, or budget constraints.
• **Convenience:** Difficulties in accessing or using a product/service.
• **Support:** Lack of customer service, poor after-sales support, or slow response times.
• **Emotional:** Stress, anxiety, or dissatisfaction related to a product/service experience.

For businesses, pain points can be:

• **Operational:** Inefficient processes, high overhead costs, or resource inefficiencies.
• **Market:** Challenges in reaching the target audience or facing stiff competition.
• **Employee:** Issues related to team morale, productivity, or retention.
• **Financial:** Cash flow problems, difficulty securing funding, or financial risks.

Identifying and addressing these pain points is crucial for businesses to validate a business idea because it allows them to tailor their products, services, or operations to directly alleviate or solve these problems.

2. Analyze Your Target Market

In other words, business ideas mean nothing if there are no paying customers to back them. If you have an exciting business idea for the overall pet market, for example, your target market segment is comprised of millions of potential customers (i.e., pet owners). However, if your business idea is merely destined for people who have lizards as pets, your target market segment may be potentially too small to be worth it (i.e., lizard pet owners).

Some important tips for analyzing your target market segment include:

• Using demographics and psychographics to create a concise profile of your potential customers.
• Analyzing your current customer base to identify target-market patterns.
• Evaluating your niche's market size.
• Identifying the growth potential of your product idea.
• Going online to research search volume associated with your niche (such as important keywords, overall traffic, and other search engine metrics).

Lean market validation is equally important, and it's all about investing time to know how to create your product or service in the most resource-efficient manner possible.

3. Define a Unique Value Proposition (UVP)

A strong UVP typically includes the following elements:

• **Clarity:** It clearly articulates what your business offers and how it solves a particular problem or fulfills a need for the customers.
• **Uniqueness:** It highlights the competitive advantage of your business. This could be a distinctive feature, superior quality, a unique approach, or a specific benefit that others don't offer.
• **Value:** It emphasizes the specific benefits or outcomes customers can expect from using the product or service, showing why it's so valuable and relevant to your target audience.
• **Relevance:** It's tailored to address the specific pain points or desires of the target market, resonating with your audience's needs, preferences, and aspirations.

The more succinct your value proposition, the closer you are to turning your business idea into a successful business. Uber's UVP, for example, is generally regarded as a great example of a value proposition because it effectively conveys the company's unique advantage in one single sentence: "Uber - The smartest way to get around." Feeling inspired already?

4. Create a Minimum Viable Product (MVP)

A Minimum Viable Product (MVP) is a version of a product with enough features to satisfy early customers and gather feedback for future development. It's a strategy used primarily in product development and startups to quickly and cost-effectively test a concept or hypothesis with minimal resources. However, it's as essential for developing a business idea.

The key characteristics of an MVP are:

1. Directness: An MVP includes nothing but the essential features that address the primary problem or need of your target audience, so forget about all of the noise and be straight to the point.

2. Feedback-oriented: The goal is to develop the product quickly to get it into the hands of early users and potential customers for feedback, learning, and validation.

3. Iterative approach: Based on the feedback received, iterations and improvements are made to the product, gradually adding more features and functionalities.

4. Cost efficiency: MVPs are developed with minimal resources, reducing the risk of investing heavily in a product that may not meet the market's needs.

5. Learning tool: It serves as a learning tool to validate assumptions, test hypotheses, and refine the product based on real user experiences.

Your minimum viable product can truly be your company's MVP (as in Most Valuable Player) because it's the closest you'll ever get to testing your product idea without actually making a product! But how exactly does one test an MVP?

5. Test Your Minimum Viable Product (MVP)

Testing a Minimum Viable Product (MVP) involves gathering feedback from users to understand how they interact with the product, what they find valuable, and what needs improvement. Here's a structured approach to test your MVP:

1. Define testing goals: Clearly outline what you want to learn or validate through the testing phase. Identify specific metrics, behaviors, or user feedback you're seeking.

2. Select early testers: Identify a group of potential customers who align with your target audience. These individuals should be willing to engage with your MVP and provide constructive feedback.

3. Deploy the MVP: Make your MVP accessible to the testers. This could involve providing access to a prototype, a limited version of your product, or a beta release.

4. Analyze user behavior: Use analytics tools to track user interactions within the MVP. Analyze how users navigate the product, which features they engage with the most, and where they encounter issues.

5. Continue testing: Implement changes and updates to the MVP and continue testing with both existing and new testers. Validate if the changes have positively impacted user experience and addressed the identified issues.

Testing an MVP is an iterative process that involves continuous learning and refinement based on user insights. The goal is to validate assumptions, improve the product, and move closer to a market-ready solution.

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6. Collect Feedback

We have talked about the importance of feedback already, but how can entrepreneurs collect feedback to validate their business idea?

First, start by following the five business-idea validation steps listed above. Then, experiment with some of the following feedback collection tactics:

• **Leverage online tools:** Utilize online survey platforms like SurveyMonkey , Google Forms , or Typeform to distribute your survey to a wider audience. Share the survey through social media, email lists, or relevant forums.
• **Conduct customer validation interviews:** Arrange one-on-one interviews or organize focus group sessions with potential customers.
• **Talk with other pros:** Engage with industry experts at events such as conferences or networking sessions to discuss your business idea and seek their feedback and advice.
• **Be aware of the buzz:** Keep an eye on online discussions, forums, or review platforms related to your industry or niche to make sure your specific sector is open to your new business idea.

When it comes to collecting feedback, it's vital to take the opinions of your first paying customers into account. Sadly, the business idea validation process is only truly complete once potential customers become paying customers and have something to say about whether they're happy or not about how they have chosen to spend money.

7. Adapt Based on the Collected Feedback

Once the collect-feedback phase of the validation process is complete, it's time to use all of the collected data to make some important decisions. To put it very simply, it's about keeping the things people like about your product idea while changing the things they don't like about it.

Adapting your business idea (and even your entire business model) to collected feedback depends greatly on your intuition as an entrepreneur, but here are some essential tips that should help you stay on track:

• Focus on identifying patterns! Consistent trends allow you to gain valuable insights that can help you validate your business idea.
• Prioritize feedback based on importance, as not all customer validation interviews and online comments are equally important.
• Revisit the initial assumptions of your business idea to see if these still stand up to the test. In case they don't, be brave enough to assume that you were wrong and do your best to adapt to the actual characteristics of your potential market.

By the end of step seven, you should already have a pretty clear idea of your product market fit and verify whether you have strong market validity.

8. Evaluate Scalability

Now that you know whether your business idea will make the cut or not, it's time to assess its potential for scalability. This is essential not only for entrepreneurs but also for investors, as they will be more willing to spend money on a company with verified growth potential.

There are three fundamental aspects to consider when discussing scalability in the business idea validation process:

1. Operational scalability: Evaluate whether your business can efficiently handle an increase in production, customer demand, or service without a proportional rise in resources or costs.

2. Financial scalability: Assess your business model's ability to handle increased revenue and growth without an equivalent rise in expenses.

3. Technical scalability: Focus on your business's technology infrastructure to handle increased workload, users, transactions, and other important requirements.

9. Craft a Feasible Business Model

Creating a comprehensive business model helps you understand how all the elements of your business fit together, allowing you to identify potential challenges, mitigate risks, and capitalize on opportunities for growth and success. In the end, it's impossible to validate a business idea or product concept without a feasible business model.

10. Test Different Pricing Strategies

The next step of the business validation process requires you to get hands-on specific and outline a pricing strategy that meets at least three key requirements:

1. Target-market alignment (meaning that your product isn't drastically cheaper or more expensive than the products of your direct competitors).

2. Customer alignment (meaning that potential customers do have an incentive to pay for your product in the real world).

3. Cost-efficiency (meaning that your product is potentially profitable).

To see if your business idea's pricing strategy meets these three very basic requirements, here are some of the things you can do:

• Use A/B testing and strategies such as focus groups to see whether a given pricing strategy leads to more successful sales than the other.
• Test different pricing strategies on different segments of clients.
• Consider psychologic pricing tactics such as bundle pricing and charm pricing.
• Experiment with dynamic pricing, limited-time discounts, special offers, and so forth.

If the price's right, market validation will come more naturally to your business idea. The wrong price can utterly ruin your chances of validating your business idea and gaining that much-needed competitive advantage.

11. Create a Prototype or Landing Page

In other words, just put your products or services out there once you have completed all ten steps listed above! You can do so by developing a working prototype or (most commonly) by building an attractive landing page.

Your basic landing page should include the following elements:

1. A compelling headline.

2. Engaging visuals.

3. Concise Copy.

4. At least one Call-to-Action (CTA).

5. An opt-in-form to collect data from potential customers (such as their e-mail addresses).

6. Testimonials from satisfied customers.

7. A responsive design.

8. Your business's contact information.

The goal of a landing page is to engage visitors and encourage them to take the desired action. Keep the design clean, focused, and aligned with your brand messaging to effectively communicate your business idea.

12. Monitor Key Points and Metrics

Last but not least, it's important to keep in mind that the business idea validation process is ongoing. In the same manner that traditional cabs have been hurt by modern transportation network companies (for example), so does your once-valid business idea can become fruitless at one point or another.

To make sure that your business idea isn't stumped by progress, monitor your results as thoroughly as possible while focusing on important key metrics such as:

• **Customer Acquisition Cost (CAC):** Calculates the average cost of acquiring a new client.
• **Customer Lifetime Value (CLV):** Measures the total revenue a business can expect from one customer.
• **Conversion rate:** Indicates the percentage of users that make a desired action (such as the percentage of website visitors that make a purchase).
• **Gross margin:** Calculates the revenue left after deducting all associated costs.
• **Burn rate:** Measures how quickly a company is spending its resources (this one is particularly important for your startup idea).
• **Return on Investment (ROI):** Analyzes the return on marketing campaigns, investments in technology, or other initiatives to assess their effectiveness and profitability.
• **Net Promoter Score (NPS):** Measures customer satisfaction and loyalty by asking customers how likely they are to recommend your business to others.

The key lesson of step 12, however, isn't to get acquainted with all these fancy business terms, but to interiorize that no business idea is ever done: it requires constant monitoring, reshaping, and restructuration.

Validating a business idea isn't easy, and there's simply no way of guaranteeing it will make a mark even if you follow the 12 steps listed in the article. However, idea validation has got to start somewhere, and our 12 crucial tips make for the perfect starting point.

In sum, this is what we have learned today:

1. Construct your business idea around your potential customers by understanding their pain points.

2. Know your target market inside-out to know how to position your business idea, especially in relation to your direct competitors. Don't forget about lean market validation too!

3. Define a unique value proposition highlighting your business idea's unique advantage.

4. Set a minimum viable product.

5. Put your minimum viable product concept up to the test.

6. Collect feedback everywhere you can, from customer interviews to your first paying customers.

7. Use the collected feedback to make data-driven decisions regarding your business idea.

8. Evaluate the scalability of your business idea.

9. Create a superstar business model.

10. Test different pricing strategies to align with your target market and target customers more effectively.

11. Create a landing page for your product or services.

12. Ensure long-time product validation by monitoring results and adapting your strategy accordingly.

Finally, outline some validation goals to ensure that you're getting where you want to be. Your prospective customers will appreciate it, and your business idea will have a better chance of going from a rough idea to a real company.

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Written by bernardo barbosa.

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10 Steps to Validate Your Business Idea

Learn how to validate your business idea effectively with our expert tips and strategies. Start your entrepreneurial journey today with PitchBob!

Are you eager to transform your innovative concept into a thriving and sustainable business? Before you embark on this entrepreneurial journey, it is vital to undertake a comprehensive validation process for your business idea. So, how to validate your business idea? Validation serves as the litmus test that determines whether your idea holds the potential to address genuine problems and meet the actual needs of your target market.

This comprehensive guide will walk you through the intricacies of business idea validation. It will provide a step-by-step approach to ensure you start your entrepreneurial journey on the right foot. So you can enhance your chances of success.

What is Business Idea Validation?

Business idea validation is a systematic and structured process that involves assessing your entrepreneurial concept’s feasibility, viability, and potential success. It entails posing critical questions, gathering pertinent data, and conducting rigorous analyses to ascertain whether your idea is worth pursuing. The advantages of  business idea validation are multifaceted, ranging from avoiding costly mistakes to maximizing the probability of establishing a thriving enterprise.

What Problems or Pain Points Does Your Startup Solve?

Before diving into the detailed validation steps, it is imperative to contemplate and understand the precise problems or pain points that your startup endeavors to alleviate. Consider the following commonplace examples:

Enhancing Efficiency: Does your concept streamline a process, rendering it more efficient?

Cost Reduction: Can your offering help customers economize and save money?

Time-Efficiency: Will it facilitate significant time savings for your target demographic?

Health and Well-being: Does your innovation improve people’s health or overall well-being?

Sustainability: Is your product or service environmentally sustainable?

Accessibility: Does it provide accessibility to something hitherto inaccessible or prohibitively expensive?

Identifying the issues your business idea aims to tackle is the preliminary step towards effective validation.

Who is your target customer?

The knowledge of your target customer is pivotal. It enables you to tailor your product or service to meet their needs and form the foundation for your marketing and sales strategies. Here are some invaluable tips for identifying your target audience:

Demographics: Delve into the demographics of your potential customers, including factors such as age, gender, income level, and geographical location.

Psychographics: Gain insights into their values, interests, and lifestyle choices.

Behavioral Patterns: Analyze their online and offline behaviors to discern where they allocate their time and financial resources.

Feedback Collection: Seek feedback from prospective customers through surveys, interviews, or focus groups to gain deeper insights into their preferences and pain points.

Are You a First Mover in a Certain Market?

While being the pioneer in a specific market can confer a distinct advantage, it is also essential to recognize that even if you are not the first entrant, you may possess other competitive strengths. Nevertheless, ensuring that your business idea is not already trademarked or patented is crucial, which could potentially lead to legal complications. Additionally, thorough market analysis is highly recommended unless your idea is unique. This will enable you to identify key players and competitors, thus allowing you to pinpoint and leverage competitive advantages.

Steps to Validate Your Business Idea

When you validate a business idea, thoroughness and attention to detail are your best allies. This detailed guide will dive deep into the 10 crucial steps for validating your business idea in greater depth and detail. Each step is a vital building block, ensuring you thoroughly assess your concept’s feasibility and market demand.

Step 1: Conduct Extensive Market Research

Market research forms the bedrock of your validation process. Dive deep into your target market, leaving no stone unturned. This step involves understanding the market and gaining profound insights into your competitors. Identify gaps in the market that your innovative idea can effectively fill. The more comprehensive your research, the stronger your foundation for validation.

Step 2: Create a Minimum Viable Product (MVP)

Creating a Minimum Viable Product (MVP) is a pivotal step in your validation journey. It’s not merely about building a simplified version of your product or service. It’s about crafting a prototype encapsulating your concept’s core features and essence. This MVP will serve as a tangible representation of your idea. Distribute it to early adopters and actively seek their feedback. This iterative refinement process is essential for shaping your concept into a viable and market-ready offering.

Step 3: Collect In-Depth Customer Feedback

Engage profoundly with potential customers to gather feedback on your MVP. This engagement should gauge their enthusiasm for your product or service and assess whether your idea effectively addresses their pain points. Dive into detailed conversations, conduct surveys, and hold focus group discussions. The rich insights gained here will be instrumental in shaping your business strategy and fine-tuning your offering.

Step 4: Conduct A Comprehensive Financial Analysis

A comprehensive financial analysis is paramount to validating your business idea’s sustainability. Dive deep into the numbers, estimating your potential costs and revenue projections and calculating the anticipated return on investment (ROI). A well-structured financial plan attracts potential investors and equips you with the financial foresight to make informed business decisions.

Step 5: Rigorously Test Your Prototype

Creating a prototype is essential if your business idea involves a physical product. However, the testing process should go beyond functionality. Subject the prototype to rigorous usability testing to ensure it functions effectively and aligns seamlessly with user expectations regarding functionality and design. Solicit feedback from user testing sessions and refine your prototype accordingly.

Step 6: Iterate and Refine

Leverage the wealth of feedback and data from previous steps to iterate and continually refine your MVP or prototype. It’s not just about improving it^; it’s about making it exceptional. This iterative process should be at the core of your development strategy, ensuring your concept evolves in line with market demands and user preferences.

Step 7: Make the Go or No-Go Decision

After meticulously validating your business idea, you make a pivotal decision. Based on the wealth of insights and data collected, you must make a well-informed decision: should you proceed with your idea, pivot, or perhaps even consider abandoning it? This decision will significantly influence the trajectory of your entrepreneurial journey, so take the time to weigh all factors carefully.

Step 8: Intellectual Property Assessment

As you progress, conducting a thorough intellectual property assessment is vital. Ensure your business idea does not infringe upon trademarks, patents, or copyrights. If necessary, protect your intellectual property, safeguarding your concept from legal complications. This step ensures your idea’s integrity and adds an extra layer of assurance for potential investors.

Step 9: Conduct Rigorous Market Testing

With a refined concept, it’s time to perform real-world market testing. This involves introducing your product or service to a limited audience, collecting data, and assessing demand and customer interest meticulously. Dive into market segmentation, analyze consumer behavior, and scrutinize purchasing patterns. This step provides crucial insights into the market’s response to your idea and helps you fine-tune your approach.

Step 10: Evaluate Scalability and Long-Term Viability

Consider the scalability of your business idea and its long-term viability. Assess whether it can grow sustainably to meet increasing demand. Dive into operational capacity, infrastructure requirements, and scalability potential to ensure immediate success and long-term sustainability. A well-thought-out scalability plan positions your concept for enduring success in a dynamic business landscape.

By meticulously following these detailed and comprehensive steps, you not only validate business ideas but also equip yourself with the knowledge and insights needed to navigate the complexities of the entrepreneurial journey. Each step contributes to a robust validation process, ensuring your concept is well-prepared for the challenges and opportunities.

How PitchBob Can Help?

At  PitchBob , our unwavering commitment lies in supporting and empowering entrepreneurs throughout their journey. We recognize that startups and innovators face many challenges, and we have meticulously crafted a comprehensive suite of products and services to address these challenges at every stage of development. Let’s take an in-depth look at how PitchBob can be your trusted partner on your entrepreneurial path:

1. AI Pitch Deck Creator:

Pitch decks are the cornerstone of your startup’s success. With our AI Pitch Deck Creator , you can seamlessly craft compelling and persuasive presentations that capture the essence of your business idea. Whether you’re a seasoned presenter or a novice, our intuitive platform streamlines the entire process.

2. Improve Your Current Pitch Deck:

Already have a pitch deck in hand? PitchBob goes beyond creation; we offer expert guidance to  enhance your pitch deck . Our specialists will work closely with you to refine your presentation, ensuring it’s polished, persuasive, and tailored to resonate with your target audience.

3. Pitch Deck Evaluation & Feedback Tool:

Constructing a compelling pitch deck involves more than just design and content. Our Pitch Deck Evaluation & Feedback Tool offers valuable insights from experts in the field. This invaluable feedback ensures that your pitch deck looks good and resonates with your audience, increasing your chances of securing funding.

4. AI VC Coach:

Pitching to venture capitalists can be a nerve-wracking experience. Our AI-driven coach analyzes your pitch, offers insights, and guides you in refining your delivery. With our VC Coach, you’ll be well-prepared to navigate investor meetings with poise and professionalism.

5. AI Business Plan Generator:

A well-structured business plan is essential for attracting investors and charting your business’s course. Our AI Business Plan Generator simplifies the process, allowing you to create comprehensive and well-structured business plans efficiently.

6. Investor Outreach:

Securing vital funding is a pivotal milestone in your entrepreneurial journey. PitchBob facilitates investor outreach by connecting you with potential investors who align with your business goals. Our network of investors spans a broad spectrum, from angel investors to venture capitalists.

7. Sales Outreach:

Scaling your startup involves effective sales strategies. PitchBob leverages AI-driven strategies to enhance your sales outreach . From lead generation to personalized messaging, our tools help you connect with potential customers more efficiently.

We are dedicated to providing the tools and resources to succeed on your entrepreneurial journey. Our commitment continues; we continuously strive to innovate and develop new solutions that cater to the evolving needs of aspiring entrepreneurs. At PitchBob, we’re not just a platform but your trusted partner in building a successful and sustainable startup.

In conclusion, the journey on  how to validate a business idea is not just a safeguard against potential pitfalls. It is the very crucible in which successful entrepreneurial ventures are forged. By meticulously addressing real-world problems, honing in on your target audience, and diligently following the validation steps outlined in this guide, you significantly enhance your chances of establishing a thriving and sustainable enterprise.

Remember, validation isn’t merely a hurdle to overcome. It’s a vital catalyst propelling your dreams into a tangible and prosperous reality. As you embark on this exciting path of business idea validation, it’s reassuring that PitchBob stands by your side, ready to offer guidance and support at every turn. We are committed to equipping you with the tools and resources needed to navigate the complexities of entrepreneurship and thrive in a dynamic and competitive landscape.

Embrace the validation process with determination, and watch as your entrepreneurial aspirations materialize into a thriving and impactful reality. Your journey begins today, and the possibilities are boundless.

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How to Validate Your Startup Business Idea: A Five-Step Plan

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What's needed for validating your startup business idea?   

If you're an entrepreneur with an idea for a startup, you're probably eager to get your business off the ground. The 5-step plan for startup success involves identifying your target market, researching it, creating a minimum viable product, gathering feedback, and refining your product. These steps are designed to assist entrepreneurs in validating their business idea and enhancing their likelihood of surviving in the market.

Let's take a look at the steps together! 🙌

• Step 1: Identify Your Target Market
• Step 2: Conduct Market Research  
• Step 3: Create a Minimum Viable Product (MVP)
• Step 4: Gather Feedback

Step 5: Iterate and Refine

‍ step 1: identify your target market.

The first step in validating your startup is to identify your target market. Your target market is the group of people who are most likely to be interested in your product or service. To identify your target market, you need to determine who your ideal customers are and what their needs and pain points are. One way to identify your target market is to create a customer persona . A customer persona is a fictional representation of your ideal customer. It includes information such as demographics, interests, and behaviors. By creating a customer persona, you can gain a better understanding of who your target market is and what their needs and pain points are. Once you have identified your target market, you can begin to develop your marketing strategy. Your marketing strategy should focus on reaching your target market and addressing their needs and pain points.

Step 2: Conduct Market Research 

The second step your startup business idea validation is to conduct market research.

Market research involves gathering information on the market demand for your product or service, identifying competitors, and gathering information on pricing and distribution channels.

To conduct market research, you can use a variety of methods, including surveys, focus groups, and online research. You can also use tools such as Google Trends and social media listening tools to gather information on market demand and consumer behavior. By conducting market research, you can gain a better understanding of the market demand for your product or service, identify competitors, and gather information on pricing and distribution channels. This information can help you to make informed decisions about your business strategy and increase your chances of success in the marketplace. 

👉  What Are The Main KPIs That Early Startups Should Track?

Step 3: Create a Minimum Viable Product (MVP) 

The third step in validating your startup idea is to create a minimum viable product (MVP). An MVP is a prototype or basic version of your product or service that you can test in the market.

Creating an MVP allows you to test your business idea in the market without investing significant time and resources.

By testing your MVP in the market, you can gather feedback from potential customers and identify any areas for improvement. When creating your MVP, it's essential to focus on the core features of your product or service. Your MVP should be simple and easy to use, and it should address the needs and pain points of your target market.

Step 4: Gather Feedback 

The fourth step in validating your startup business idea is to gather feedback.

Gathering feedback involves collecting feedback from potential customers, industry experts, and other stakeholders to evaluate your product or service's viability and potential for success.

To gather feedback, you can use a variety of methods, including customer surveys, user testing, and focus groups. You can also gather feedback through social media and online reviews.

By gathering feedback, you can gain a better understanding of how your target market perceives your product or service.

Lastly, you can identify any areas for improvement and make adjustments to your business strategy.

The final step in validating your startup business idea is to iterate and refine it.

Iterating and refining involve using the feedback you have received to make adjustments and improvements to your product or service.

By iterating and refining your business idea, you can increase the chances of success in the marketplace. You can use the feedback you have received to make adjustments to your product or service, adjust your marketing strategy, and pivot if necessary. It's important to continue to test and gather feedback until you have validated your business idea. By doing so, you can ensure that your product or service meets the needs of your target market and has the potential for success in the marketplace.

Startup Validation

To sum it up , validating your startup business idea is essential to ensure that it has the potential for success in the marketplace. Following our five-step plan for startup business validation that includes identifying your target market, conducting market research, creating an MVP, gathering feedback, and iterating and refining, you can develop a business idea that meets the needs of your customers and has the potential for success in the marketplace. Remember, the key to success is to focus on creating value for your customers. As a result, you can increase the chances of developing a successful startup business that has a positive impact on your customers and the world around you.

👉  Understanding Valuation And Validation

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Ownr Blog  > Ownrship 101  > Business Stages  > Before You Start  > Before You Start a Business  > How to Validate a Business Idea

How to Validate a Business Idea

While coming up with an amazing business idea is a great start to entrepreneurship, it takes much more than a good idea to build a successful company. If you’re an aspiring business owner, taking your time with the idea validation process is the best way to find out if you have a viable product or service idea worth investing your time and money into. When you validate your business concept, you’re taking your startup idea and testing how it behaves in reality. The last thing you want to do is sink a ton of resources into a product concept that doesn’t have a large market of potential customers. In this article, we walk you through how to validate your business idea, so you can feel confident that there’s sufficient market demand for your product offering.

• What does it mean to validate a business idea?

The goal of idea validation is to determine whether there is enough demand for your business idea to make it worth pursuing. This means looking at the existing market to see if there’s a need not yet being met by your competitors, and finding out whether people will actually spend money on your business idea. By performing market validation research up front, business owners can reduce potential risk and minimize business costs down the line.

The information you gain during the validation process is crucial for determining whether your business idea has potential. That’s why it’s in your best interest to do the work of validating your business idea before you get too far along in your entrepreneurial journey.

If that weren’t enough to convince you, another huge benefit to doing market research and idea validation is that you’ll have access to honest feedback from customer interviews you can use as proof of the validity of your business idea for investors, crowdfunders, and banks when you seek business funding . Business idea validation can also give you insight into whether your product idea will be effective at meeting customer needs, and how you can market your product so that it appeals to your ideal customers.

• What problems or pain points are you trying to solve?

A successful business idea needs to solve a problem and fulfill a purpose. That’s why many entrepreneurs find it helpful to start the process of idea validation by identifying the problem your idea is designed to solve, confirming the problem exists, then determining whether your product or service is actually able to solve the problem.

Customer problems are also sometimes referred to as pain points, which are areas your potential customer struggles with. The pain points that your business idea seeks to solve will determine who your target customer is, and vice versa.

One of the challenges you may face in defining your customer pain points is that your potential customers may not even be aware of the problem they’re experiencing. This means that part of your job will be making them aware of an existing problem and marketing your business as the perfect solution.

Pain points will differ depending on who your target market is, but here are some common pain points you may encounter.

• Financial: for example, your ideal customer wants to save money on a certain product or service.
• Productivity: your customer may value efficiency and make choices based on convenience.
• Process: they may need help automating their business or simplifying their processes.
• Support: they want more support from their product or service providers.

Once you identify your potential customer’s pain points, consider what it would take for them to feel satisfied in relation to those problems. Does your business idea effectively solve their issue? How can you show potential customers that this is the case?

Think about the features and benefits of your product or service, and how they measure up to those of your competitors. For example, perhaps you offer a less expensive option which is better suited to customers with financial pain points, or your product is more efficient, for customers who value productivity. You need to convince prospective customers that your business can offer them a competitive advantage and that it is worth choosing you over a more established competitor with a similar offering. 

• Who is your target customer?

Even if you have an amazing business idea and a perfect product, your business won’t go anywhere if you don’t understand who your target audience is. A person can be considered a target customer if they need or want your product offering and are willing and likely to pay for it. The more specific you can get about who will benefit from your business idea, the easier it will be for you to market it to them in a way that allows them to see the value in spending their hard-earned money on your business.

A good place to start is thinking about what type of person will be interested in what you sell. Try to understand who they are, what they need, and what their motivations are, so that you can deliver your product and messaging in a way that speaks to them and converts them into real paying customers.

When it comes to defining your target customer, it may help to divide them into distinct customer segments. For example, many different types of people could benefit from your product offering, but marketing to them in the same way may not be the most effective way to present your business. Instead, you may want to come up with different marketing lists based on what defines the various types of customers you serve, so that your marketing copy will make each individual type feel understood.

• Who is your target market?

Sometimes referred to as a   niche market , a business’ target market is defined by a specific demographic or common interest. If you’ve already done the work of determining your company’s  target customers, you have a head start in defining your target market. However, if you’re still unsure where to find the potential market for your business idea, start by looking at who your direct competitors serve.

Often, you may find your target market consists of people in certain demographics, like age, gender, location, educational background, income level, values, lifestyle, and more. This is all very important information to have when it comes to fine tuning your offering. For example, if your target market belongs to a lower income level, you may want to reconsider your pricing structure to ensure they’re able to afford what you sell.

When thinking about your target market, you should also identify your business objectives and goals. Do you want your business to grow and expand into an international conglomerate, or do you prefer to serve individuals with a more personalized experience? The answer to questions like this will help you define what market you serve.

While it’s important to get specific about who your business idea is designed for, make sure that the market you will serve is still big enough that your potential business can be profitable. After all, marketing to women who knit sweaters is one thing, but specifying that your target market is women who knit sweaters for cats under 10 pounds may be a little bit too specific, meaning that not enough people will be able to relate to what it is you’re offering.

• Does your business idea already exist in the market?

No business idea is completely original, so it’s definitely not the end of the world if there are other business owners that sell a similar product or service to yours. Depending on your market size, there might be room for multiple companies who sell the same thing. However, it’s important that you make sure your business idea is not already trademarked or patented, and that you won’t be infringing on anyone’s rights if you go ahead with your idea.

Your best bet is to perform a   market analysis to identify the key players in your niche while compiling information about market statistics and forecasting. Start by performing a simple online search using keywords related to your business idea. You can also search the Canadian Patents Database and other trademark registries.

If your research determines that your business idea doesn’t infringe on any intellectual property rights, you can proceed with starting your business.

• Who are your direct competitors?

If your business idea is not completely original and unique, you’ll need to focus on distinguishing your business idea from current solutions on the market. Researching your direct competitors can give you a ton of insight into the pros and cons of their offering, who they serve, and how they market their business. 

Direct competitors are businesses in your niche who provide the same product, solve the same problem, and have the same potential customers as you do. If you’re not yet aware of who your competitors will be, this process will help you find out more about them. That way, you can use the information you collect to help conduct your own market research and better position your business idea as the preferable choice for your shared target market.

You can learn a lot about what works in business and what doesn’t by looking at what your competitors do. Not only does this allow you to stay ahead of the game, you’ll also be able to learn from their successes and failures and determine what advantages your business idea has over theirs. For example, they could be missing out on targeting a key demographic in their target market, and that gives you an opening to get your foot in the door.

One way to learn about direct competitors is to perform an online search using relevant keywords, then visit your competitors’ websites. This will show you how they visually present themselves and what kind of language and calls to action they use, and it may also provide you with information on their pricing structure.

You can find out even more about your direct competitors by looking at comments on their social media pages and reading reviews on third party platforms. This will give you more honest feedback than if you rely solely on reviews left on their official pages or website.

It’s possible to do market research and analysis for yourself, but you can also choose to hire a professional market researcher who can provide a detailed market report that you can use to help you understand the market and stay competitive.

• Steps to take when validating a business idea

Now that you have a thorough understanding of the factors that can help determine the business idea’s potential success, we’ll take you through the idea validation process step by step. 

• 1. Write down your business hypotheses and validation goals

Business validation is all about testing the assumptions you have about your business idea. For example, who do you think your target market will be? How do you anticipate that your product will solve your customers’ pain points? What results do you think your market research will uncover?

Think about what you want to achieve from the process of validating your business idea. What information do you hope to obtain, and what parts of your business do you feel need validating? Assumptions about your business can also include things like the value you believe your product offers, your ideas about product pricing, and your business model.

It’s a good idea to write down any ideas you have about your business, then use the validation process to test those ideas. You may have great business instincts, but you still need to stay open to the possibility that your market research will contradict your initial assumptions.

You should also determine what kind of data you will collect and how you will use it to determine the potential success of your business, also known as your minimum success criteria. This means deciding the minimum amount of positive responses to your business idea for you to be convinced your idea is viable.

• 2. Perform market research

Finding out the size of your target market is key to determining your business idea’s potential for profitability. Keep in mind your market size will vary greatly depending on where your business will operate and what locations you plan to serve.

Market research can fall into two categories: qualitative and quantitative. Qualitative research focuses on open ended questions and unique individual responses, whereas quantitative research is more about finding where the majority lies on a given topic. A combination of both types of research may be effective for validating your business idea.

In addition to looking at the market size, you should also pay attention to competitors’ sales data, the number of businesses operating in your niche, market trends, the amount of the market share your business could own, and where your business will fit in with your competition.

• 3. Research search volume and keywords

A great way to get a sense of the potential market for your business idea is to look at consumer activity regarding keywords related to your idea. When you use a search engine to look up a keyword or term, pay attention to the number of results your search returns. If a search term brings up a high amount of monthly searches, that tells you that there may be an interest in your product or service.

On the other hand, lower search volume could mean that your idea isn’t in demand, but it could also simply indicate that you’re using the wrong keywords or your target customers aren’t yet aware of their need for your business idea. If that’s the case, try using search terms that are related to your target customer’s pain points rather than those describing your specific business idea. This will help you to determine whether there is sufficient need in the market for a solution to their problem.

Another benefit to researching search terms is that it can give you insight into what words your prospective customers are using. This can help you decide what terms to use in your product descriptions, website copy, and social media communications to increase the chances that your business will end up on the first page of search engine results.

• 4. Conduct customer validation interviews

Once you determine there is a need for your idea in the market, it’s time to try direct communication with consumers. This can include interviews, online surveys, or focus groups with members of your target market segment.

Ask them questions about their motivations as a consumer, what needs and preferences guide their purchasing decisions, and any other feedback they may be able to provide. You can also ask about the current solutions they use to solve their problem, and what they feel could be improved upon. Use this opportunity to test your business hypotheses and assumptions by asking open-ended questions.

• 5. Test your product or service

Now it’s time to allow consumers to test your offering to see if it works. There are two different types of testing that you can use: alpha and beta.

• Alpha testing: internal employees of your business test the product or service to find any remaining issues that need fixing before it can be made available to the public.
• Beta testing: a limited group of external users test the product and report back on their user experience.

Alpha or beta testing is an important step in validating your business idea because it gives you the opportunity to receive real feedback from potential users.

• 6. Start small

If your research sufficiently validates your business idea, you may be tempted to dive right in and start ordering inventory like there’s no tomorrow. However, it’s probably wiser to start small with a basic landing page and email list sign up form to gauge how many people are interested in your new business. You could even create a pre-order page or a crowdfunding campaign.

• How to Use Blueprint to Validate a Business Idea

If you’re looking for a way to complete these steps, you can always use Blueprint. Blueprint is Ownr’s completely free business plan generator which, across 10 different sections, can help you accomplish many of the steps in this guide. Each of the easy-to-use modules will ask you some simple questions about your business, and compile your answers into a polished, professional business plan that you can print, download, and share with your network. 

Putting together a comprehensive business plan can be a great way to validate your business idea, and Blueprint is the easiest, and most cost effective way to do it. You’ll fill in information about your competitors, complete financial projections, and even start to think through your marketing strategy. You can get started today.

While every entrepreneur hopes the idea validation process will confirm their belief in their business idea, it’s important to remember the information your market research turns up isn’t personal, it’s just business. After all, wouldn’t you rather know now if your idea doesn’t have market potential, rather than finding out the hard way when you’ve sunk all of your savings into your business?

If your research shows that your idea doesn’t have strong market validity, use what you’ve learned through this process to decide whether your idea can be improved, or whether you’re better off going in a completely different direction. No matter what information you come up with, you’re better off knowing!

This article offers general information only, is current as of the date of publication, and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by RBC Ventures Inc. or its affiliates.

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Effective Business Model Validation: A Step-By-Step Guide

by Mike Vestil  

Business Model Validation is the process of testing, analyzing, and refining a business idea to ensure that it is feasible, sustainable and profitable . The concept requires entrepreneurs to validate their value proposition, target market, revenue streams, cost structure and key resources to maximize their business potential.

Business model validation is an essential phase in entrepreneurial success, as it helps entrepreneurs to evaluate their business model’s potential and increases their likelihood of securing financing and attracting investors.

In this article, we will discuss the importance of business model validation and how to apply it to your business.

Introduction To Business Model Validation

Definition of business model validation.

Business model validation is the process of testing and verifying a company’s business model to ensure that it is viable, sustainable, and profitable. This involves reviewing and analyzing all aspects of the business model, including its value proposition, target market, revenue streams, cost structure, and customer acquisition strategy.

The goal of business model validation is to identify potential weaknesses or areas of improvement in the model and make adjustments to increase its chances of success. It is an essential step in the business planning process as it enables entrepreneurs and executives to validate their assumptions and test their ideas before investing significant time and resources.

Importance Of Business Model Validation

Business model validation is an essential process for any startup or established organization that wishes to achieve sustainable growth and profitability. Validating your business model entails examining your assumptions about your customer segments, value propositions, revenue streams, cost structures, and other key aspects of your business to ensure that they are accurate, feasible, and sustainable.

The process involves testing hypotheses through various methods, such as customer interviews, surveys, experimentation, market research, and financial modeling. Business model validation is crucial because it enables you to reduce the risks and uncertainties associated with launching a new venture, entering a new market, or scaling an existing business.

By validating your business model, you can gain valuable insights into your customers’ needs, preferences, and behaviors, as well as the market dynamics and competitive landscape that affect your business.

The importance of business model validation cannot be overstated. Startups and established companies that fail to validate their business models risk significant losses of time, money, and resources. A lack of validation can lead to incorrect assumptions about your target customers and their needs, resulting in products or services that do not resonate with the market.

It can also lead to flawed revenue models that are not sustainable or profitable, as well as cost structures that are not aligned with your value propositions. Without proper validation, your business may encounter significant obstacles in acquiring customers, generating revenue, and achieving profitability.

Moreover, business model validation allows you to identify and address potential weaknesses or gaps in your business model. By testing your hypotheses and assumptions, you can uncover unforeseen challenges, such as regulatory barriers, technological limitations, or competitor threats, that may affect the viability of your business.

This enables you to pivot or adjust your business model to better address these challenges and improve your chances of success. Validating your business model also enables you to gain credibility with investors, partners, and stakeholders who may be hesitant to invest or collaborate with unproven or unvalidated business models.

In conclusion, business model validation is a critical process that enables startups and established organizations to validate their assumptions, reduce risks and uncertainties, and improve their chances of success.

By validating your business model, you can gain valuable insights into your customers, markets, revenue models, and cost structures, and adjust your business accordingly to increase your chances of achieving sustainability, growth, and profitability.

Purpose Of Business Model Validation

A business model is the framework for generating revenues and profits from a company’s products or services. It lays out how a company intends to create and deliver value, as well as its goals and objectives for success.

Business model validation is the process of testing and refining a business model to ensure that it is viable and sustainable. Purpose is an essential aspect of business model validation because it clarifies the objectives and goals of the process.

Purpose sets the stage for what a company wants to achieve through the validation process and helps it stay on track throughout the process. Without purpose, business model validation can become unfocused and disorganized, leading to wasted time and resources.

The purpose of business model validation is to test assumptions made during the development stage of a business. This testing helps businesses refine their models, identify flaws and adjust course so that they can be successful. There are different ways to approach business model validation depending on the nature of the business, but the principles are generally the same.

Purpose helps businesses determine what questions to ask, where to focus their attention, and how to prioritize their efforts. It also helps to establish benchmarks for success and provides a framework for measuring progress throughout the validation process.

The importance of purpose in business model validation cannot be overstated. Purpose converts vague notions into concrete goals and objectives, and it provides a clear sense of direction for the process.

Purpose also helps to align stakeholders, including investors, customers, and employees, with the business’s goals and objectives. Without purpose, there is a risk of losing focus and wasting resources, leading to business failure. Purpose provides a solid foundation for success.

Overall, purpose plays an essential role in business model validation by providing direction, focus, and a framework for success. It is the foundation upon which the validation process is built, and without it, the process can become disorganized and unfocused.

Purpose sets the stage for what a company wants to achieve through the validation process, helps it stay on track, and provides a sense of direction and alignment for all stakeholders.

Types Of Business Models

Traditional business model.

The traditional business model is a time-tested approach to creating a business. In this model, a company creates a product or service, establishes a customer base, and generates revenue through sales. The company maintains control over the product or service and takes ownership of the distribution channels.

This model has been used by businesses for centuries, and it is still relevant today. The traditional business model often requires a significant investment of time and money upfront, but it can lead to long-term success if executed effectively.

Companies adopting this model may face challenges in the modern business landscape, but by building a strong brand, establishing customer loyalty, and adapting to changes in the market, companies can continue to thrive using the traditional business model.

Subscription-Based Business Model

The Subscription-Based Business Model is a type of business model where customers pay a regular fee to access a company’s products or services. This model has gained popularity in recent years as it provides a predictable source of revenue for companies.

The subscription fee may be charged on a monthly or yearly basis, and customers may have the option to cancel at any time. This business model is commonly used by companies that offer digital products such as streaming services, online education, and software services.

The advantages of this model include increased customer loyalty, long-term revenue predictability, and the ability to offer personalized experiences based on customer data.

However, companies must constantly provide value to their customers to retain their subscription and must carefully manage churn rates. In addition, companies must continuously innovate and update their products or services to maintain a competitive edge in the market.

Freemium Business Model

The Freemium Business Model is gaining popularity among startups and established businesses alike, making it a noteworthy subsection of Business Model Validation. This model offers a basic version of a product or service for free while charging for premium features.

The aim is to attract a large number of users and then convert them into paying customers by providing additional and valuable features. This approach allows the company to get a foothold in the market, build brand recognition, and establish a customer base without requiring a significant upfront investment from its consumers.

This model can be a good fit for companies with products or services that can be easily scaled up and have low marginal costs, as they can offer a basic version of their product at no cost to the consumer.

The most successful companies using this model often implement a combination of psychologically appealing tactics such as gamification, personalized product recommendations, and limited-time offers to entice users to upgrade to a paid version of the product or service.

A well-executed Freemium Business Model not only generates revenue through premium features but also serves as a marketing strategy by allowing customers to try a product before committing to it.

Therefore, it is crucial for businesses adopting this model to accurately measure the customer acquisition cost (CAC) and customer lifetime value (CLV) to determine if the growth and revenue generated through the basic, free version of the product justifies the cost of offering it.

Overall, the Freemium Business Model can be a successful and rewarding approach for businesses to validate and scale their models, provided they appropriately tailor the model for their intended customer base.

Marketplace Business Model

The Marketplace Business Model is a type of business model that allows multiple third-party vendors to sell their products or services on a single platform. The platform provides the infrastructure for vendors to list and promote their products, while customers can easily compare offerings and make purchases.

The marketplace operator usually charges a commission for each sale made through the platform. This business model has gained popularity in recent years due to the increasing popularity of online marketplaces. Many successful companies have adopted this model, including Amazon, eBay, and Airbnb.

The Marketplace Business Model has many advantages for both vendors and customers. For vendors, it provides access to a large and diversified customer base, which can increase sales and visibility. Vendors may also benefit from the platform’s marketing and promotional activities.

Customers, on the other hand, benefit from a wide selection of products and competitive prices due to the platform’s price transparency. The platform also streamlines the purchasing process and provides a sense of security, as transactions are conducted through a trusted and secure platform.

However, the Marketplace Business Model also has some challenges that need to be addressed. One key challenge is managing the quality and consistency of the products and services sold on the platform. Customers expect a certain level of quality and consistency from the products and services sold on the platform.

Thus, the operator must establish clear guidelines and enforce them strictly to maintain the platform’s reputation. Another challenge is managing the relationships with the third-party vendors. The operator must provide adequate support and communicate effectively to foster a successful relationship with the vendors.

Overall, the Marketplace Business Model is a versatile and effective business model, but its success depends on properly addressing the challenges and ensuring customer satisfaction. The Marketplace Business Model offers many benefits for both vendors and customers, and many successful companies have adopted this model.

Therefore, careful consideration and validation of this business model can lead to profitable and sustainable business growth.

On-Demand Business Model

The On-Demand Business Model is a promising approach to achieve a competitive edge in the competitive business landscape. It involves offering services or products that can be accessed and delivered promptly to customers whenever they require them, usually through a mobile app or a website.

The On-Demand Business Model is usually associated with high convenience, fast delivery, and low wait times. The technology behind this business model is based on real-time data processing that allows businesses to collect customer’s preferences, location, and availability to match them with available resources.

This business model has become increasingly popular for companies that offer various services, including transportation, food delivery, laundry service, and house cleaning.

One of the advantages of the On-Demand Business Model is its flexibility. Businesses that use this method can quickly adapt to changing customer demands, quickly optimize their operations, and significantly lower overhead expenses.

Another benefit is that the real-time data collected by the system can be analyzed for insights into customer behavior and the business itself. This data can help fine-tune marketing strategies, improve service quality, reduce operational costs, and increase overall customer satisfaction.

Despite its many benefits, the On-Demand Business Model also presents some challenges. For instance, success in this model requires a robust IT infrastructure and consistent network connectivity. Companies that fail to implement these necessary technologies might encounter difficulties in fulfilling customers’ demands promptly.

Additionally, competition in the segment is fierce, and new entrants continue to emerge, saturating the market and causing price wars.

Overall, the On-Demand Business Model represents a viable approach to create value for customers and optimize operations for businesses. With a high level of convenience and flexibility, this business model caters to the needs of an ever-changing market. However, businesses must be aware of its limitations and invest in the necessary technologies to fuel long-term growth and success.

Sharing Economy Business Model

The sharing economy business model is a relatively new concept that relies on peer-to-peer sharing of goods and services. It is a subset of the larger collaborative consumption movement that seeks to challenge traditional business models by promoting the sharing of underutilized physical assets.

This business model has gained significant traction in recent years, spurred on by technological advancements that have made sharing and collaboration more convenient and efficient.

The sharing economy business model is built on the idea that individuals can share their resources with others who need them, thereby generating new sources of value for both the provider and the consumer.

The rise of platforms that facilitate this sharing, such as Airbnb and Uber, has made it easier than ever for individuals to monetize their underutilized assets or offer their services on a freelance basis.

Platform Business Model

Platform Business Model is a unique business strategy that requires little capital investment yet can generate significant returns. Typically, this model involves building a platform that connects two or more parties that need each other to create value. In a platform business, the platform owner usually takes a percentage of the transactional value created through the platform.

Platforms can be highly scalable and profitable businesses that help match supply and demand. However, it is important to note that building a successful platform business model requires a solid understanding of the ecosystem and customer behavior.

The key to success in the platform business model is to establish a match among customers, providers, and promote complimentary services. The platform should offer a value proposition that meets the needs of all users. Customer feedback is a vital component of a platform business because it improves the quality of the offering and helps to meet customer needs.

For instance, if a platform serves B2B industries, then it is of utmost importance to tailor the platform features to better serve and promote the interests of both parties involved. A successful platform will stimulate partnership between customers while balancing the interests of the platform and its users.

Platforms can come in different forms, such as marketplaces, on-demand, sharing economies, among others. Overall, the platform business model has proven successful in enabling companies to create extreme value with little capital investment.

E-commerce Business Model

The E-commerce business model is a type of business model that primarily deals with buying and selling goods and services through online platforms. E-commerce businesses can take the form of B2B, B2C, or C2C businesses. B2B e-commerce businesses focus on selling products and services to other businesses, while B2C e-commerce businesses sell directly to consumers.

C2C e-commerce businesses, on the other hand, facilitate transactions between consumers. The e-commerce business model has been gaining significant traction in recent years due to the increased adoption of the internet and mobile technologies. Some examples of successful e-commerce businesses include Amazon, eBay, and Alibaba Group.

To validate an e-commerce business model, several key factors need to be considered, including market research, customer acquisition costs, customer lifetime value, revenue streams, and profit margins. E-commerce businesses must also ensure that their platforms are user-friendly, secure, and reliable to gain and maintain customer trust.

To remain competitive, e-commerce businesses must continuously evolve by improving their product offerings, leveraging new technologies, and adapting to evolving customer needs and preferences.

Brick and Mortar Business Model

The Brick and Mortar Business Model is a traditional business model that has been around for centuries. This model involves establishing a physical location where customers can come and purchase goods or services.

In this model, entrepreneurs invest in a physical storefront or office, complete with inventory, fixtures, and employees. The Brick and Mortar Business Model is often used for retail stores, restaurants, and service-based businesses. This model allows businesses to provide more personalized services to customers and is ideal for businesses that rely on walk-in customers.

The advantages of this business model include greater control over customer interactions and the ability to provide face-to-face customer service. However, the Brick and Mortar Business Model also has some disadvantages. One of the biggest challenges is that it requires a significant upfront investment.

Rent, utilities, and inventory costs can be high, and there is no guarantee that the business will be successful. Additionally, the physical location may not be convenient for all customers.

Business Model Validation Process

Step 1: identify key assumptions.

The first step in business model validation is to identify key assumptions. This involves listing all of the assumptions that underlie the business model and determining their accuracy. Assumptions can be related to customers, the market, the competition, costs, revenue streams, and more.

Once key assumptions have been identified, they can be prioritized based on their potential impact on the success of the business. It is important to note that assumptions are not facts, but rather educated guesses about how something will work.

Therefore, it is crucial to validate these assumptions early on in the process to ensure that the business model is built on a solid foundation. One effective way to validate assumptions is to conduct market research and gather feedback from potential customers.

This can include surveys, focus groups, or interviews. Another approach is to test out the assumptions through a Minimum Viable Product (MVP) or prototype. By identifying and validating key assumptions, a business can increase its chances of success and avoid costly mistakes down the road.

Step 2: Develop Hypotheses

Developing hypotheses is a critical step in the business model validation process. Before testing any assumption, it is essential to develop hypotheses that can be analyzed and tested. This step involves brainstorming ideas and developing initial assumptions that can be tested later.

It is critical to involve stakeholders in this step to ensure that all possible scenarios are considered. Developing hypotheses involves asking questions such as “What do we think will happen?” and “Why do we think it will happen?”. Once hypotheses are developed, it is important to prioritize them based on their potential impact on the business model.

Step 3: Test Hypotheses

The third step in business model validation is to test your hypotheses. This step is critical for determining the viability of your business model. To test a hypothesis, you need to design and conduct experiments that will yield data to support or refute the hypothesis.

Experimentation is essential because it enables you to collect evidence on which to base critical business decisions.

One way to test a hypothesis is to conduct customer interviews. In these interviews, you will ask your customers to provide feedback on your product or service.

This feedback can help you understand whether your customers would buy your product and whether they find it valuable. Additionally, you can use surveys to collect data from a larger cross-section of your customer base.

Another way to test your hypothesis is to conduct A/B testing. In A/B testing, you create two versions of a product, website, or advertisement and test each version to see which performs better. This method allows you to identify which version of your product or service is more effective in achieving your business goals.

You can also use prototyping to test your hypothesis. Prototyping involves creating a working model of your product or service. This model can help you understand whether your idea is feasible, whether it meets your customer’s needs, and whether it is easily understood.

Finally, you can analyze data to test your hypothesis. Collecting data on consumer behavior, market trends, and competitors can help you determine whether your business model is viable.

Additionally, you can use analytics tools to track metrics such as conversion rates, customer retention rates, and revenue growth. These metrics can help you see how your hypothesis is performing in the market.

In conclusion, testing your hypothesis is crucial for validating your business model. It allows you to collect data that can help you make informed decisions, and ensure that your idea is viable.

By conducting customer interviews, using A/B testing, prototyping, and data analysis, you can identify areas of strength and weakness in your business model, and refine it to achieve your business goals.

Step 4: Analyze Results

The fourth step in Business Model Validation is to analyze the results obtained from testing prototypes and validate assumptions. This step is crucial in determining the validity of the developed hypotheses and key assumptions.

Data analysis is used to evaluate quantitative results such as revenue and customer acquisition costs as well as qualitative feedback such as customer satisfaction and usability. The analysis helps to identify trends, patterns, and outliers that can drive decision-making processes.

The insights generated from data analysis are used to refine the business model and make necessary adjustments to improve its effectiveness and efficiency. Companies should ensure that the results obtained align with their objectives and goals, and help them make better-informed decisions.

Data analysis involves identifying meaningful relationships between variables, understanding the significance of different factors, and using insights to drive decision-making. It is crucial to select the right metrics and key performance indicators (KPIs) to measure the success of the business model.

Data visualization tools such as graphs and dashboards can help to interpret large datasets more effectively. Apart from quantitative analysis, qualitative feedback from customers and stakeholders can provide valuable insights into their needs, preferences, and pain points. This feedback can be gathered through surveys, interviews, and focus groups.

Companies should use a combination of both qualitative and quantitative data analysis to get a holistic understanding of the outcomes of testing and validation.

The outcomes of data analysis can be used to refine the business model and make necessary adjustments in the hypotheses and assumptions. Companies should carefully evaluate the results obtained and consider the implications of the insights generated.

They should also test whether the refined hypothesis or assumption continues to hold, as newer insights into customer behavior might reveal new issues.

This iterative process of validating hypotheses, testing, and refining the business model helps companies to reduce risks and minimize costs. It also allows them to adopt an evidence-based approach to decision-making and ensures that the business model is aligned with customer needs, expectations, and preferences.

Ultimately, business model validation helps companies to build a sustainable and scalable business model that can withstand the test of time.

Step 5: Iterate And Refine

After analyzing the results, the next step in business model validation is to iterate and refine the assumptions and hypotheses. Iteration allows for feedback from customers, investors, and other stakeholders to refine the business model hypothesis.

Refinement involves gathering data through customer feedback, market research, and experiments to make informed changes to the business model. The process of repeating the validation cycle ensures that the business model remains relevant and dynamic to the market.

Iterating and refining the business model is a critical step in business model validation. This step involves revisiting the initial hypotheses and assumptions and refining them based on feedback from various stakeholders.

The feedback collected is used to refine the business model, and its various components, including the value proposition, customer segments, revenue streams, and channels.

Incorporating feedback during the iteration phase allows for evidence-based decision-making while refining the business model hypothesis. Such feedback can come from various sources, such as customer insights, market research studies, and competitor analysis.

This stage also involves refining metrics and key performance indicators based on the most relevant and recent data. With the refined metrics, the team can make more informed decisions when designing experiments to test the business model hypothesis.

During refining, the team can conduct various experiments on critical components of the business model. For instance, the team can alter the value proposition to appeal to different customer segments or test different sales channels to reach a more extensive range of customers.

Through agile experimentation, the team can then track and measure the impact of these changes and make further refinements. This iterative process helps develop and validate potential solutions to ensure they meet the requirements of the business model.

Refining the business model also involves consistently updating it with relevant market trends and changes. The team must keep track of changing customer preferences and new competitors entering the market. This information ensures that the business model remains relevant and adaptable to any changes that might affect the business’s success.

Overall, the iterate and refine step is a critical phase in the business model validation process. The team must carefully consider feedback from stakeholders, evaluate and refine assumptions made, and test the business model hypothesis to ensure it remains relevant to the market.

Tools And Techniques For Business Model Validation

Customer interviews.

One of the most crucial steps in validating a business model is conducting customer interviews. This subsection entails gathering feedback from potential customers to determine their needs and preferences. Companies can use different methods, such as personalized interviewing or focus groups, to obtain qualitative data.

Customer interviews aim to identify the target audience’s pain points, desires, and behaviors. Therefore, it is essential to have a well-prepared interview guide to ensure that all relevant questions are asked. Questions should be open-ended and allow interviewees to express their opinions and provide further insight.

Open-ended questions allow for a more in-depth understanding of the customer’s perception of the company and its products or services. Businesses should also consider performing interviews with diverse groups to obtain insights and perspectives from different demographics.

Overall, customer interviews are a powerful tool for validating a business model, as they allow startups to identify product-to-market fit, understand customer demand, and obtain insights for future product improvements.

In the process of business model validation, surveys serve as a valuable tool to collect data and feedback from a large number of potential customers. Surveys are an efficient and cost-effective method of obtaining quantitative data from a target customer segment.

They provide insights into customer preferences, needs, and pain points that businesses can use to fine-tune their business models. Surveys can be administered online, via email, or through social media platforms.

The questions in surveys should be carefully crafted to elicit meaningful responses from customers that will inform business decisions. Key metrics such as customer satisfaction, Net Promoter Score (NPS), and willingness to pay can be gleaned from surveys. Surveys can also help businesses identify potential market segments, understand customer behavior, and assess market size.

The data collected from surveys can be used to validate or invalidate a business model, and to iterate on a minimum viable product. Survey results can help businesses make data-driven decisions and prioritize resources for product development, marketing, and customer acquisition.

It is important to note that surveys have limitations, as they do not allow for in-depth qualitative responses, and respondents may not always provide accurate or truthful answers. Nevertheless, surveys remain a vital tool in the business model validation toolkit and should be used in conjunction with other validation methods to obtain a well-rounded understanding of the market and customers.

A/B Testing

One of the most effective methods for business model validation is A/B testing. This involves testing two versions of a product or service with a sample group to determine which is more effective. A/B testing can be used to test variables such as pricing, product features, and marketing strategies.

Proper A/B testing requires defining specific metrics for success and analyzing the results to make informed decisions about the business model. It is important to approach A/B testing with care as the results may not always be straightforward.

It is also essential to conduct A/B testing in a controlled environment to ensure the accuracy of the results. A/B testing can provide valuable insights for businesses seeking to validate their business model and make data-driven decisions.

Minimum Viable Product (MVP)

The Minimum Viable Product (MVP) is a crucial aspect of business model validation. It is the initial version of a product with only the core features necessary to meet the needs of early customers. One of the primary goals of a Minimum Viable Product is to validate the core idea and hypothesis of the business model, which are identified during customer interviews and surveys.

The MVP offers an opportunity to receive feedback from target customers on the product’s usability, value proposition, and other key features. This feedback can then be used to refine the MVP and incorporate additional features that are validated by customers.

The Minimum Viable Product helps entrepreneurs to reduce the risk of failure by testing their assumptions in the leanest way possible. Instead of building a fully-featured product without any validation, entrepreneurs can use an MVP to test their assumptions and iterate accordingly.

The MVP approach can be an effective way to significantly reduce the time, money, and resources that would have been invested in developing a product that doesn’t meet the market’s needs.

Moreover, by building an MVP, entrepreneurs can gain valuable insights into the customer’s pain points, which would be difficult to identify without a product that customers can interact with.

Building an MVP requires a significant amount of effort to ensure that the product is not only functional but also easy to use for its intended audience. During the MVP’s development stage, it is essential to keep the team’s focus on building the core features of the product that align with the business model hypothesis.

The MVP must adequately represent the business idea, offer value to its customers, and provide a competitive advantage. If these criteria are not met, the MVP could fail in validating the business model as desired.

Overall, the MVP is a significant step towards business model validation, which if carefully crafted, emphasizes the quality and value proposition of the product. The insights gained will help the entrepreneur to better understand their customers’ needs and want, and if they are willing to pay for the solution.

In conclusion, building an MVP is critical to the success of a business, particularly for the entrepreneur who seeks validation for their business concept.

Financial Modeling

The Financial Modeling subsection is an integral component of business model validation. It is the quantitative aspect of the process that involves creating a financial representation of the business idea, product or service.

Financial modeling is used to test the viability of a business idea and is typically used to project revenue, expenses, and cash flow.

One of the most significant advantages of financial modeling is that it helps business owners to identify potential pitfalls and areas where resources can be allocated efficiently. In addition, it enables the entrepreneur to estimate the necessary amount of capital to start and operate the business.

The financial model also allows the entrepreneur to predict the break-even point, returns on investments, payback period, and other financial metrics that are important for investors and stakeholders.

Competitive Analysis

The Competitive Analysis subsection of business model validation involves evaluating the strengths and weaknesses of competitors in the market. It is essential to understand the competition’s products, strategies, market share, pricing, and target audience.

This type of analysis helps businesses identify opportunities and challenges in the market, and develop strategies to gain a competitive advantage. Additionally, a competitive analysis allows businesses to preemptively address potential threats, such as new entrants or changes in customer preferences.

To conduct a thorough competitive analysis, businesses must rely on both primary and secondary research data. Primary data includes interviews with customers, suppliers, and industry experts, while secondary data includes publicly available information such as industry reports and competitor websites.

Ultimately, the goal of a competitive analysis is to identify gaps in the market that a business can exploit and areas of strength that must be developed to stay competitive.

SWOT Analysis is an essential tool for assessing the internal and external factors that can influence the success of a business. This analysis helps establish the strengths, weaknesses, opportunities, and threats (SWOT) of a company.

This subsection’s primary purpose is to help business owners and managers identify the key areas in which the company excels, areas that need development, opportunities that can be capitalized upon, and threats that require mitigation.

When conducting a SWOT analysis, companies should analyze their internal strengths and weaknesses, such as brand reputation, company culture, distribution channels, financial resources, and human resources.

They should also analyze external factors, such as changes in the market or political environment, new competitors, economic downturns, and legal and regulatory factors. Companies must also consider their competition and how they can differentiate themselves to gain a competitive advantage.

Business Model Canvas

The Business Model Canvas is a visual representation tool that helps entrepreneurs to identify and analyze the key components of their business model. It consists of nine building blocks, which include Customer Segments, Value Proposition, Channels, Customer Relationships, Revenue Streams, Key Activities, Key Resources, Key Partnerships, and Cost Structure.

By using the Business Model Canvas, entrepreneurs can gain a comprehensive understanding of their business model, identify potential weaknesses, and explore opportunities to improve their model. The canvas helps entrepreneurs to identify their target customer, what value they are offering to their customer, how they will deliver their value, and how they will generate revenue.

The canvas also helps entrepreneurs to identify their key activities, resources, and partnerships needed to deliver their offering to their customer. By using the Business Model Canvas, entrepreneurs can create a clear, concise, and coherent strategy that aligns with their vision and goals.

Challenges in Business Model Validation

Lack of resources.

Business model validation is a key process for entrepreneurs to ensure that their business idea has a high probability of success. However, entrepreneurs often face significant challenges during the business model validation process, such as lack of resources, which can hinder their ability to validate their business model.

Lack of resources is a significant challenge, as it can prevent entrepreneurs from carrying out critical activities such as market research, product development, and testing, which are essential for business model validation. Lack of resources can also make it difficult to secure funding, hire talented staff, and acquire the necessary equipment and technology for the business model validation process.

One major resource that entrepreneurs often lack is funding, which is critical for carrying out activities such as market research, product development, and testing. Without adequate funding, entrepreneurs may struggle to collect the necessary data to validate their business model or even to build a prototype of their product.

Additionally, lack of funding can make it difficult to secure the talent needed to conduct market research or to develop and test a product, which can further hinder the validation process. Another common resource that entrepreneurs lack is time.

Entrepreneurs who have full-time jobs or other commitments may find it challenging to dedicate sufficient time to the business model validation process, which can delay the launch of their business.

Moreover, entrepreneurs may lack access to technology or equipment critical for the business model validation process. For example, entrepreneurs who are developing a technology-based product may need access to specialized equipment to test and refine their product.

Without access to such equipment, the entrepreneur may not be able to validate the feasibility of their business model, leading to potential failure in the long run. Additionally, lack of access to specialized technology or software can make it challenging to collect market research data or to conduct product testing, which can further delay the validation process.

In conclusion, lack of resources can make the business model validation process challenging for entrepreneurs. The lack of funding, time, and access to technology or equipment can prevent entrepreneurs from carrying out essential activities such as market research, product development, and testing, which are crucial for business model validation.

To overcome such challenges, entrepreneurs must identify alternative sources of funding or seek out partnerships to gain access to the necessary resources. Additionally, entrepreneurs must focus on time management and prioritize activities that are critical for business model validation to ensure that they can devote the necessary time to these activities.

Limited Market Access

One of the significant challenges that startups face in business model validation is limited market access. Limited market access occurs when startups have a restricted ability to enter a market due to various reasons such as regulations, competition, or high costs of entry.

For a startup to conduct thorough business model validation, it needs to have ready access to potential customers and markets to test the assumptions in their models. A lack of market access makes it difficult for startups to determine the viability of their business models, as they cannot gather feedback from their target audience.

Limited market access can even adversely affect the quality of the feedback obtained because the feedback is limited to a small set of potential customers, thus reinforcing the beliefs that the startup already possesses. Moreover, limited market access slows down the speed of business model validation, which can hinder the success of a startup.

Resistance To Change

A common hurdle that businesses face in validating their business models is Resistance to Change. Resistance to change is the natural human tendency to resist any change that challenges the status quo or disrupts established processes.

This resistance can manifest in various ways, such as employees being resistant to new technologies or processes, partners and investors being skeptical about the new business model, or customers not being receptive to changes in pricing or product offerings.

The resistance to change can be a significant obstacle for businesses trying to validate their business models. However, it is crucial to identify and address this resistance to ensure that the business model is thoroughly validated. One way to overcome resistance to change is by involving all stakeholders in the process of validating the new business model.

This involvement can take various forms such as giving employees a voice in shaping new processes, involving investors in data-driven analysis of the new business model, and testing new product ideas with small groups of customers before making significant changes.

By involving all stakeholders in the process, businesses can ensure that everyone is invested in the success of the new business model and is more likely to accept the changes.

Another way to overcome resistance to change is by providing clear communication about the changes and their potential impact. By proactively addressing any concerns or questions that stakeholders may have about the new business model, businesses can help to reduce skepticism and increase acceptance.

Clear communication can take various forms such as regular meetings and updates, use of data and metrics to demonstrate the benefits of the new business model, and providing training and support for employees adjusting to new processes.

Lastly, it is essential to have a plan in place to manage any resistance that may arise during the validation process.

This plan should include identifying potential sources of resistance, developing strategies to address them, and regularly monitoring the progress of the validation process. By having a plan in place, businesses can proactively manage resistance to change and ensure that the validation process stays on track.

In conclusion, resistance to change can be a significant obstacle for businesses trying to validate their business models. However, by involving all stakeholders in the process, providing clear communication, and having a plan to manage resistance, businesses can effectively overcome this obstacle and ensure that their business model is thoroughly validated.

Inadequate Data

One of the major causes of failure in business model validation is the lack of adequate data. When launching a new product or service or making changes to an existing one, it is essential to gather relevant data to make informed decisions.

Insufficient data can lead to incorrect assumptions about customers, markets, or even the viability of the business. Effective validation of a business model requires robust and reliable data about customer needs, market potential, competition, and financial expectations.

Inadequate data can also lead to inaccurate testing and experimentation of a business model. Without sufficient data, businesses may not be able to identify potential setbacks and challenges that could emerge during the implementation of the model. It increases the likelihood of unforeseen circumstances and hinders a business’s ability to adapt to new situations confidently.

Therefore, it is crucial for businesses to equip themselves with a robust and reliable data collection and analysis process.

Businesses need to deploy a range of research techniques, such as customer interviews, surveys, focus groups, and secondary research, to gain a comprehensive understanding of their target market, audience, and competition.

Moreover, businesses should continually track and test their assumptions based on solid data and make necessary adjustments to their business model.

These measures can help to prevent data deficiencies that can limit the effectiveness of your model’s validation and future business operations.

It is evident that the quest for adequate data is an essential component of validating a business model. With accurate and relevant data, businesses can make sound decisions and contribute to the success of their business. Thus we can conclude that gathering extensive, accurate data and continually adjusting the model is fundamental to achieving the validation of a business model.

Unforeseen Circumstances

Unforeseen circumstances are events that occur unexpectedly during the business model validation process, which can significantly impact the outcomes. These events can arise from various sources, such as natural disasters, political instability, and changes in regulatory frameworks, among others.

Due to the unpredictability of such events, it is difficult to prepare adequately for them. Thus, it is vital to have contingency plans in place in case of such scenarios.

For businesses conducting market research, unforeseen circumstances could result in the delay or cancellation of research projects, leading to a loss of resources and time. Moreover, if a company has insufficient resources to deal with such situations, it may lead to operational inefficiencies, delays in the completion of projects, and even bankruptcy.

Inadequate data can also be considered an unforeseen circumstance. This occurs typically when the data available for analysis is incomplete, inaccurate, or biased. Such data can lead to inaccurate predictions and decisions, which can ultimately affect the success of the business.

To mitigate this scenario, it is crucial to ensure that the data used is reliable and that the analysis is conducted by experts in the field.

Another unforeseen circumstance that can arise is limited market access. This can occur due to reasons such as geopolitical issues, trade barriers, and transportation issues, among others. For startups, this scenario can result in a failure to enter new markets, leading to stunted growth and potentially reduced profits. It is, therefore, essential to have a robust market entry plan that takes into account potential barriers and outlines strategies to overcome them.

Resistance to change is another potential unforeseen circumstance that businesses should be prepared for. This can arise from various sources, including employees, customers, and even competitors.

The resistance can lead to a slowdown in the implementation of new business models, leading to delays and missed opportunities. To mitigate this circumstance, it is crucial to communicate the reasons for the changes effectively and provide training and support to employees and clients.

To conclude, unforeseen circumstances are a part of the business world, and it is essential to prepare adequately for them.

Having contingency plans in place, ensuring adequate resources are available, and conducting thorough market research can minimize the negative effects of unforeseen circumstances.

Ultimately, the success of a business depends not only on its ability to overcome challenges but also how well it can adapt to changes.

Summary Of Business Model Validation

The summary section of this article provides an overview of the critical elements of business model validation. In this section, we have discussed the importance of validating a business model before implementing it to ensure its viability and sustainability.

We have explored the process and techniques of validating the business model, such as identifying customer segments and their needs, assessing the market and competition, testing the value proposition and revenue streams, and creating a minimum viable product (MVP) to validate the hypothesis.

We have also discussed the benefits and challenges of validating a business model, such as reducing the risk of failure and improving the chances of success, attracting investment and partners, and increasing customer satisfaction and retention.

However, the validation process requires time, effort, and resources, and may encounter various obstacles and uncertainties, such as inaccurate assumptions, invalid feedback, limited resources, and complex regulations.

Moreover, the future outlook for business model validation is promising, as new trends and technologies emerge, such as data analytics, artificial intelligence, and blockchain, that can enhance the validation process and improve its accuracy and efficiency.

Additionally, the COVID-19 pandemic has highlighted the need for flexible, adaptable, and innovative business models that can withstand disruption and uncertainty. Therefore, businesses that invest in validating their models and continuously improving them are more likely to succeed and thrive in the dynamic and competitive market.

Future Outlook Of Business Model Validation

The future outlook for business model validation is promising, as this process continues to gain importance in today’s rapidly changing business environment. With so many new technologies emerging and customers’ preferences constantly evolving, it has become more critical than ever for companies to ensure they have a viable business model that meets the needs of their target market.

In the coming years, we can expect to see more emphasis on data-driven validation methodologies that rely on advanced analytics tools to gather and analyze customer feedback, market insights, and other relevant metrics.

One significant trend we can expect to see in the future is an increased focus on lean startup methodologies, which advocates for creating a business model that can adapt quickly to changing market conditions.

This approach requires iterative experimentation and continuous customer validation, which can help identify and address flaws in the business model before they become critical issues.

Another area where we can expect to see more innovation in the future is in the use of blockchain technology for business model validation. Blockchain technology offers several benefits, including increased transparency, security, and reduced operational costs.

By leveraging blockchain technology, companies can create a decentralized, trustless system that can help validate their business model and ensure that all stakeholders are aligned and incentivized to work towards a common goal.

We can also expect to see more emphasis on customer-centricity in the future, as companies realize that their customers are the ultimate judges of their business model’s effectiveness.

By prioritizing customer feedback and incorporating it into the business model validation process, companies can ensure that their products and services are meeting the evolving needs and expectations of their target market.

Overall, the future outlook for business model validation is bright, as companies continue to recognize its strategic importance in today’s fast-changing business landscape.

By embracing data-driven validation methodologies, lean startup principles, blockchain technology, and customer-centricity, companies can create business models that are agile, resilient, and well-positioned to succeed in the long term.

Business Model Validation: FAQs

What is business model validation.

Business Model Validation is the process of testing and confirming a proposed business model to determine if it is feasible, sustainable, and profitable. It involves analyzing the key components of the business model, such as customer segments, value proposition, revenue streams, cost structure, and key partners.

Why Is Business Model Validation Important?

Business Model Validation is important because it helps entrepreneurs and startups avoid costly mistakes by identifying potential flaws in their business model before launching their product or service to the market. It also helps them gain insights into their customers, competitors, and market demand, which can inform their business strategy and decision-making.

What Are Some Common Methods Of Business Model Validation?

Some common methods of Business Model Validation include conducting customer interviews, building prototypes, conducting surveys, running experiments or pilots, analyzing market data, and seeking feedback from industry experts and mentors.

What Are The Benefits Of Business Model Validation?

The benefits of Business Model Validation include reducing the risks and uncertainties of launching a new business, increasing the chances of success, improving the efficiency and effectiveness of business operations, optimizing the allocation of resources, and enhancing the value proposition for customers.

What Are Some Challenges That Entrepreneurs Face When Validating Their Business Model?

Some challenges that entrepreneurs face when validating their business model include limited resources, lack of industry expertise, limited access to customer feedback and market data, and biases or assumptions that can skew their perceptions and decisions.

How Can Entrepreneurs Overcome The Challenges Of Business Model Validation?

Entrepreneurs can overcome the challenges of Business Model Validation by leveraging networks and resources such as mentorship programs, incubators, accelerators, and industry associations, using data-driven methodologies and tools, seeking feedback from diverse sources, and maintaining a mindset of curiosity, adaptability, and resilience.

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How to validate your business idea in 4 steps

If you've got an idea for a business, it's essential to ensure that there's a market for what you're selling before you invest too much time or money into it.

After all, no matter how great your product or service is, if there's no one out there who wants or needs it, your business will ultimately fail.

While the process of validating an idea can seem daunting, it doesn't have to be.

In this article, we'll show you how to validate your business idea in four simple steps to be sure you're on the right track. We'll also explore various tools you can use to help you gather the data you need to make an informed decision, as well as the factors you need to consider when evaluating your idea.

Let's get right into it.

How to validate your business idea

Now that you know what validation is and why it’s important, let’s look at how you can validate your business idea.

Step 1: Define your goal

The first step in validation is to define your goal. What are you trying to achieve? Are you trying to validate the need for your product or service? Are you trying to validate your business model? Are you trying to validate your marketing strategy?

Defining your goal will help you determine which experiments you need to run and what type of data you need to collect.

At every step of your validation, you'll also be able to compare your results against your goal to see if you're on track.

Step 2: Develop a hypothesis

The next step is to develop a hypothesis. A hypothesis is an educated guess about how things work. In the context of validation, your hypothesis is your guess about what will happen when you run your experiment.

Once you have a hypothesis, you can start developing your experiment.

Creating hypotheses can be done in various ways. But at its core, a reasonable hypothesis should be:

• Testable : You should be able to design an experiment that will allow you to test your hypothesis.
• Specific : Your hypothesis should be specific enough that you can measure whether or not it’s true.
• Measurable : You should be able to collect data that will help you determine whether or not your hypothesis is true.
• Time-bound : Your experiment should have a start and end date to know if your hypothesis is valid within a specific timeframe.

Step 3: Experiment and revise

The next step is to experiment and revise. This is where you put your hypotheses to the test. You’ll need to design an experiment and collect data to do this.

Sometimes, you might have to revise your hypothesis based on the results of your experiment. That’s why it’s important to have a flexible mindset when conducting experiments. The goal is to learn, not to be right.

Step 4: Validate and develop

The final step is to validate and develop. This is where you take what you’ve learned from your experiments and use it to build your business idea further.

This might involve changing your product or service, adjusting your business model, or revising your marketing strategy. Whatever it is, the goal is to use validation to make your business better.

What is idea validation?

The goal of validation is to reduce the risk of building something no one wants. Validating your business idea means you can avoid the costly mistake of making something people don’t want or need.

In addition, validation can help you do the following.

One of the most time-intensive things you can do is build a product or service, only to find out later that no one wants it. Idea validation can help you avoid this scenario.

Focus on the right things

When starting a business, a million things need to get done. It’s essential to focus on the tasks that will have the most significant impact. Idea validation can help you identify which activities are worth your time and which ones aren’t.

Reduce stress

Starting a business is stressful enough without worrying about whether or not people want what you’re building. Idea validation can give you peace of mind knowing that you’re on the right track.

Build confidence

One of the hardest things about starting a business is having the confidence to move forward. Idea validation can help you build that confidence by providing feedback from potential customers.

Raise money

If you’re planning on raising money from investors, they’ll want to see that you’ve validated your idea. Falling in love with your own idea is one of the deadly fundraising sins you can make when launching a startup, and if you are raising money from other people, you'll want to be able to show that your idea has been validated by someone other than yourself.

Tools for idea collection and validation

When it comes to data collection and validation, the good news is that there are several different tools and techniques you can use to validate your business idea. Here are a few of the most popular ones.

Google Trends

The first tool we'll discuss is Google Trends . Google Trends is a tool that allows you to see how popular a specific keyword or topic is. You can use it to see if there's demand for what you're offering.

Go to the website and enter a keyword or topic to use Google Trends. Google will then show you how popular that keyword or topic is over time.

You can also use Google Trends to compare multiple keywords or topics. This can be helpful if you're trying to decide between two different business ideas. The more specific you can be with your keywords, the better.

A company that provides a 24/7 answering service through its live agents can validate its business model by seeing what trends small businesses are looking into to see if they would be interested in using such a service. The trends might revolve around their current call answering solution, what they like and don't like about it, and how much they would be willing to pay for a live answering service.

Based on these findings, the company could then iterate on its original idea and pricing model and offer a solution that is tailored to the needs of its target market.

Online quizzes

Another tool you can use for validation is online quizzes. Online quizzes are a great way to engage potential customers and get them talking about your product or service.

Plus, they can be a lot of fun.

There are a couple of different ways to use online quizzes for validation. First, you can use them to gauge interest in your product or service. Second, you can use them to get feedback about what people want.

You can then use the quiz results to make decisions about your business.

One example in the healthcare industry could be that of a company that provides hearing aids solutions in Canada. In this case, the company could validate its idea by conducting a quiz targeting people with hearing loss in their country.

The quiz could ask questions about their current experience regarding hearing aids, what they think about the current solutions in the market, and what kind of features they would like to see in a new hearing aid.

Based on the results of the quiz, the company could then validate its business idea and proceed with developing a new solution.

Google Keyword Planner

Another tool you can use is the Google Keyword Planner. The Google Keyword Planner is a tool that allows you to research keywords for your website or blog.

You can use it to see how many people search for a particular keyword. This information can be helpful in a couple of different ways.

First, it can help you gauge interest in your product or service. If people are searching for what you're offering, that's a good sign. Second, it can help you develop ideas for marketing your business.

Seeing what results come up can give you an idea of how people search for your product. It can also give you ideas for how to market your business.

Use Amazon product research and reviews

One way to validate your business idea is to use Amazon product research and reviews. Amazon is a great place to research products because it has a lot of data on what people are searching for and buying.

To do this, go to Amazon and search for products similar to what you're selling. Looking at the products, descriptions, and images can give you an idea of what people are looking for.

Additionally, reading the reviews can give you insights into what people like and don't like about specific products. Reviews can also help you identify people's pain points with the current market.

This information can be helpful in a couple of different ways; first, it can help you refine your product. If you see that people are unhappy with a particular aspect of a product, you can try to address that in your product. Second, it can help you come up with new marketing ideas.

An example in the fitness industry could be a company that is looking to create a new program to help people get in shape. Say this program is an at-home workout program that requires no equipment while also being very affordable for the customer. They could really go through what customers buying similar programs on Amazon are saying, what they like about them and what their main frustrations are.

This could help them create a solution that includes how to stay motivated, healthy recipes that could easily be prepared, and much more. By doing Amazon product research and reviewing the reviews of customers in the industry, companies can create a product that really addresses the missing elements.

Focus groups

Another way to validate your business idea is to run formal focus groups. Focus groups are small groups of people who are brought together to discuss a particular topic.

To do this, find a group of people who would be interested in your product or service and ask them questions about it. This can give you valuable insights into what people think about your product or service.

Create a landing page

A landing page is a website designed to get people to take a specific action. For example, if you're selling a product, you might want people to buy it from your website. Or, if you're offering a service, you might want people to sign up for it.

Creating a landing page is a great way to validate your business idea because it lets you see how many people are interested in what you're offering. Additionally, it can help you with lead generation ideas for your business.

In the case of a company that offers dressers for the bedroom, they could validate their idea by creating a specific landing page for each style of dresser they offer and tailor their marketing message to the target buyer. They could then use analytics tools to see how many people are visiting each landing page and whether or not they are submitting their contact information or taking any other desired actions.

Run a small ad campaign

Running a small ad campaign is another excellent way to validate your business idea. You can test how well your product or service resonates with potential customers with an ad campaign.

Simply create a few ads and run them on platforms like Google Ads or Facebook Ads . Then, track how many people click on your ad and take the desired action. This will give you an idea of whether or not people are interested in what you're selling.

Facebook Ads Library is a valuable tool that allows anyone to view and analyze active and inactive ads that have been run by a Facebook Page or an advertiser on the platform. Facebook Ads Library is an online database that provides transparency into the advertising practices of Facebook Pages and advertisers on the platform. It allows users to view active and inactive ads, including the ad's content, the dates it was active, the target audience, and the amount spent on the ad.

A/B testing

A/B testing is a method of experimentation that compares two versions of something to see which one performs better. For example, if you're selling a product, you might create two different ads and then see which one gets more people to click on it.

Just like you can perform A/B testing on cold emails to see which subject lines get more people to open your email, you can use it to test different aspects of your business idea, allowing you to incrementally adjust parts of such an idea.

Questions to ask that contribute to validation

Here are some questions to consider that will help you validate your business idea:

• Does my product or service solve a problem?
• Is there a demand for my product or service?
• Do I have a competitive advantage?
• Can I reach my target market?
• Is my pricing strategy feasible?
• Do I have the resources to execute my business plan?
• What are the risks and potential challenges of my business idea?
• What are the chances of success? (realistically)

By answering these questions, you'll get a better sense of whether or not your business idea is worth pursuing. Additionally, it can help you identify any potential problems with your business idea to address them before moving forward.

The bottom line: should you move forward?

Validating your business idea is an essential step in starting a business. By validating your idea, you can ensure a market for what you're selling and that you have a competitive advantage in the journey you’re about to embark on. Additionally, validation can help you identify any potential problems with your business idea and allow you to address them before moving forward.

There are several ways to validate your business idea, including conducting market research, running focus groups, creating a landing page, and running ads.

Ultimately, the best way to validate your business idea is to test it out with potential customers. This will give you the most accurate insights into whether or not people are interested in what you're selling.

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4 Ways to Test Your Small Business Idea in 2024

Table of Contents

Testing business ideas is a great way to validate them before you put time, money, and effort into building something that might not work. It doesn’t take much to test a business idea, either. It’s about sitting down and looking at your potential venture from all angles and considering the challenges and opportunities in front of you. 

If you’re saying to yourself, “I have a business idea, now what,” the next step is to test and validate that idea. Let’s take a look at how to test your business idea and what market validation means before you move forward in starting a business . 

Why is it important to test your small business idea?

Testing an idea is something every single successful business does. Huge conglomerates test products and services before they roll them out, and even startups need to get into the habit of testing before doing. The concept is the same for testing a small business idea: you want to make sure there’s actually market demand for what you’re offering—and that people will pay for it.  

Here’s a look at some of the benefits of testing a small business idea , and why it always makes sense to test before you move forward:

• Get actionable data about what works and what doesn’t
• Learn clear information about your target audience and market
• Testing ideas helps them become leaner and better formed
• Save time, energy, and effort by avoiding bad or poorly formed ideas
• Identify your Strengths, Weaknesses, Opportunities, and Threats (SWOT)

What happens if you don’t test your business idea? If you’re lucky, things will turn out fine and you’ll have a valid business concept that gets traction. However, you always run the risk of bringing a business to market that just isn’t as successful as it could be—or worse, one that’s overlooked in favor of a competitor or a different solution. 

How do you know if your business idea is viable?

Until you draft a business plan and get your test balloon up and running, there’s no way of telling if your idea will be successful. Testing opens the door to a trial run, which gives you experience and data you can use to continue shaping and refining your idea—or abandoning it if there’s a better concept to pursue. It’s only after testing that you can truly know if you have a viable idea . 

Testing is the path from idea to business. That is to say, testing lets you know if you’re on to something. It can tell you if people are willing to pay for a product and how much. It can tell you what people love and hate about your service offering. It can help identify who your target market really is vs. who you think it is. 

In a nutshell, testing gives you the confidence to say “yes, my idea is one that will work” or “my idea needs more work before it can become a successful small business.”

Ways to test your small business idea

So how, exactly, do you go about testing business ideas? You might be surprised to learn that much of the legwork is conceptual, meaning you can run experiments and use data to learn a lot before you ever launch a test balloon. It is important to actually test your idea in the market. That said, there’s actually a great process for how to test a business idea.

Here’s a look at how to test your business idea and identify market validation in just four easy steps:

1.  Draft  a business plan

Testing business ideas starts by looking at your business plan—or drafting a business plan if you haven’t already . A business plan will force you to consider every aspect of your business, inside and out. You’ll need to determine the who, what, where, and why of your idea:

• Who is your target market? Who needs your solution?
• What is the solution you’re offering, specifically?
• Where and how are you going to provide value?
• Why is your business idea, product, or service better than the competition?

Drafting a business plan means researching industry trends, understanding the market, getting to know the ideal customer, and identifying key challenges and opportunities. This is the single best way to test your business idea before actually launching anything. If you’re struggling to produce a business plan that’s exciting, it’s a sign you need to continue developing your ideas. 

2. Analyze the competition

There’s no need to reinvent the wheel. If you want to test the validity of your small business idea, take the time to see what your competitors are already doing. What are they doing that’s effective? What do you think you can do better? What’s their approach? What value propositions and market positioning are they using to gain market share? 

What most small businesses don’t realize is that competitors are useful! They’re doing experiments and testing their own ideas, and you can learn from them. If you look at the market and see competitors that are struggling to distinguish themselves, you’ll need to make sure you’re bringing a strong brand identity to the market .

3. Launch a test balloon

A test balloon is a test run of a product or service among a small group of potential consumers. For example, food and beverage companies like Pepsi or General Mills might launch a new product in a few key test markets across the country . They’ll use the sales data from a few cities to determine if they want to roll out the product to even more cities on the way to a nationwide launch. 

You can do the same thing with your small business’ products or services. Launch your product to a select few customers through a pre-order sale or a members-only sale. Or, offer your services in a trial capacity for a heavily-discounted rate to see how customers feel about them. This is one of the best ways to get real, actionable data about your offering, your customers, your markets, and anything else that will help validate your idea. 

4. Create a marketing plan

A marketing plan is a great step forward toward validating and launching your idea. Like a business plan, the marketing plan will help you identify the strategies you’ll use to appeal to customers: when, where, who, and how. This forces you to establish your key value propositions and understand different marketing channels. Essentially, it encourages you to determine who you’re talking to and how you’re talking to them. 

Your ability to attract leads and create customers will define the success or failure of your small business. Creating a marketing plan is a low-cost way to determine if you have an idea that will accomplish this. Are your marketing messages appealing enough to attract customers? Can you target customers through the right channel using the right materials? Once you create a marketing plan, it opens the door to even more testing as you begin to execute it. 

Test drive your small business idea before you launch

Testing business ideas is one of the most productive strategies for launching and running a successful business. The more you can experiment, the more confident you’ll be in your market validation. From there, all you need to do is follow through in launching your business! Never underestimate the importance of experimentation in the path from idea to business. 

Eytan Bensoussan

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Validate Your Business Idea -- Quickly -- With These 5 Steps New product and service concepts are stifled by the process of taking them to market. If you can prove a demand, however, the next steps become much less intimidating.

By Peter Gasca Edited by Dan Bova Sep 18, 2014

Opinions expressed by Entrepreneur contributors are their own.

Do you have a business idea? Of course you do. Why else would you be reading this article?

If you are like most aspiring entrepreneurs, however, the problem comes in the immediate stage following your "ah-ha" moment , when the idea lingers as a passing thought or a series of sticky notes in a journal until the enthusiasm passes. Then, a few months later, you see your idea on the shelf at a local retail store or in the iTunes App Store .

We have all been there.

Related: Eureka -- a New Product Idea! Now Ask These 5 Questions.

Ideas stall because the process of getting them to market can seem overwhelming. In reality, if you validate your idea -- prove it has worth beyond the bar napkin on which it is scribbled -- the process thereafter actually gets much easier.

Here are few things to consider the next time you have your next big business idea.

1. Look for it. When I hear that someone has the next big business idea, I pull out my iPhone and within minutes can often find an existing product or service with a search on Google or YouTube. Before you even get wrapped up in an idea, save yourself the time and do a thorough search to find out if it already exists.

If you find it does, do not give up on your inspiration too hastily. Perhaps there are ways to improve on the existing product? Can you offer value to the business already producing it? Could the market be satisfied better? If you answered "yes," move to the next step.

2. Seek feedback. Talk to others about your idea, especially people you trust. At this stage, what you want is brutally honest feedback. Entrepreneurs have a tendency to get stuck in "idea lock," when they are hellbent that their idea is a winner, regardless of what others say. If you are the only person who truly thinks the idea is good, then it is time to reassess.

3. Build an MVP. If your idea has support, then consider developing an MVP, or minimum viable product , to determine if it is a product you and others would really use. Channel your inner " MacGyver " and build a working prototype, or look to a resource that has the ability to leverage newer technologies, such as 3D printing , to help.

If you have a technology idea, such as a smartphone app, look to crowdsourcing or a StartupWeekend event to find the assistance you need. Once you have the MVP, use and test it and have others test it as well. If it turns out to be a product that you and your friends would never really use, scrap the idea.

4. Start building your identity. If your testing goes well and you feel that you might have a winning idea, start building a brand around it now. In today's fast-moving and innovating business environment, an idea that is validated today may be knocked off or even obsolete tomorrow, so do not linger.

More importantly, unless your idea is founded in a groundbreaking and proprietary new technology, more than likely it is already being conceived by someone else already. It is off to the races.

At this point, some fear that "exposing" their idea may lead to someone stealing it. This is a completely valid concern, but these days, you should go on the assumption that someone will steal it or develop a newer and better iteration eventually, so the key to success will be to be first to market.

Also, while patenting is a great way to protect your idea, it is also a very expensive process that is not guaranteed to protect you. If you have the resources, engage a patent attorney and pursue the protection, but if you do not, then turn your focus on building your brand .

Start by choosing a great name and securing the website domain to create, at a minimum, a sharp business landing page . Next, secure your business name with every social-media site you can. Even if you do not use them, it protects you from others securing and using them, and it will ultimately improve your search-engine optimization . Then start leveraging these resources to build a fan base .

5. Hash a customer acquisition plan. Before you dive into a lengthy business plan, which more than likely will be obsolete before you even launch, focus on two questions:

"How do I get my first customer?" "How do I get my n-th customer?"

You may have the best business plan in the world, but without customers, your business is nothing. Create a thoughtful customer-acquisition plan and marketing strategy and be prepared to explain it to investors, partners and stakeholders, as this will undoubtedly be the first questions they ask.

I was fortunate to recently be selected as part of the inaugural cohort in Startup.SC , a business incubator that focuses on scalable business ideas in South Carolina. All of the ideas are all in varying stages of development, but the primary criteria for the incubator was idea validation. Once validated through the steps above, it is much easier to proceed to the next steps.

Just remember, it is much easier to build a business around a demand than to build a demand around a business.

Related: 9 Entrepreneurs Reveal How They Validated Their Business Idea

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How to Validate a Business Idea (Insights from 10 Industry Leaders)

If overestimated or not fully thought through, your business idea might not deliver as expected. This is something even the most successful brands like Facebook with their Facebook Home know well.

Built to offer users the convenience of responding to messages without opening the main Facebook app, the company thought Facebook Home was a mega-idea. Big enough to elicit a $99 subscription for two years. Less than a month after launching the price was down to a mere $0.99.

For your business to have a better chance of success, you should test it out and have the right tools to help. Dive in below for advice from successful business owners that will give you insights on how to validate a business idea.

#1. The Client Calls the Shots

Reviewing all of your input and determining what works best for your clients is vital when validating a business concept. Interviews allow you to get to the core of what resonates with your customers. Every business owner fears getting ignored. As you make decisions based on your findings, remember it is about the client and not what you think is best for your company.

– Thilo Huellmann, CTO Levity.ai .

#2. Test the Idea in the Actual Marketplace

A clear, concrete vision of a profitable business can be highly elusive for an entrepreneur. You may have a lot of trial and error before getting a business model that works, though, along the way, some things you envision may not materialize. The only authentic way to validate a business idea is to test it under actual market conditions and tweak the model along the way.

– David Reischer, Attorney & CEO LegalAdvice.com .

#3. Obtain Adequate Feedback

Interview at least 50 individuals to see what they think of your idea. Find out whether they believe your idea solves a problem and how much they can part with to get your products or services. Ask them open-ended questions to see what solutions they can come up with. Heavily invest in your customer service when dealing with your first few clients.

– Reece Griffin, Founder & CEO MirrorTrip .

#4. Market the Idea Before Creating an MVP

Create a landing page or ads. Does your idea attract customers? How many can you convert from these advertising efforts, and what are their reviews on the products or services? Once you have a good idea of what customers are expecting, you can then develop an MVP.

– Michaeł Suski, Co-Founder Surfer .

#5. Do Extensive Groundwork

Often, entrepreneurs only do light research blindly, hoping that their competition is small and not that hard to outsmart. You are about to commit yourself to a seven to ten-year journey. So, you should go into it knowing as much as you can about your marketplace and still be enthusiastic about your idea.

– Matt Warren, CEO Veeqo .

#6. Experiment and Adjust Accordingly

Often, your first concept functions as a springboard for a more advanced version since you’ll likely need to alter it. There are multiple ways of experimentation as you go through the validation process, including landing page and MVP creation, email interview, A/B comparison, and a crowdfunding website. As you analyze your findings, pay attention to your target market, pricing, and demand.

– Mike Chappell, Founder FormsPal LLC .

#7. Make it Exist, Then Make it Better

A mistake investors make is trying to begin from perfection. You wouldn’t want your many hours and funds to go to waste because you started your idea from the finishing point when only a handful liked it. Launch the product with only the basic requirements. You can slowly upgrade to suit the needs of your target customer base.

– Michael Alexis, CEO TeamBuilding.com .

#8. Launch the Idea in the Shortest Period Possible

You can do vigorous research on your idea. But until you start earning from it, you don’t know whether your idea is the next big thing or not. Launch your MVP the soonest you can and upgrade it as time goes on. For non-product-based ideas, get first-hand experience from the industry to determine whether it works.

– Johannes Larsson, Founder Financer.com .

#9. Use a Niche Product to Solve a Relatable Problem

Excellent idea creation begins by looking at your challenges or those of loved ones. If you are able to prove that your product works effectively within your network, you can start attracting paying customers. Many entrepreneurs tend to think they have to solve major issues for their business to attract a large clientele. However, creating a niche product delivers what most of your competition is not, and is an excellent way to establish your position in a flooded market. Finding ways to infuse new ideas into already existing products is a superb way to validate your business idea.

– Ryan Fyfe, COO Workpuls .

#10. Embrace Uniqueness

Consider the validation process as experimentation before getting absorbed too much into your idea. It is pretty easy to develop a brand new category than trying to be successful in an already packed category with the established competition. When you concentrate on simplifying your idea and making it easily distinguishable from related ones, it is less challenging for you to gain traction.

– Blake Miner, Founder Flaneur Life .

Guest author: Ivan Petrovic is CEO at Workpuls , a workforce productivity and analytics platform that helps organizations drive productivity, benchmark performance and improve efficiency.

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Business Idea Validator: Test Your Idea (Free)

Embarking on the journey to become an entrepreneur can be exciting, but validating the feasibility of your business idea is critical before you dive in. Bizway's new feature, the Business Validator tool, is here to help. This AI-powered tool evaluates your business plan based on various key factors and provides a comprehensive analysis to determine the viability of your business idea. You can try it out for free on our website.

Why Validating Business Ideas Is Important

Validating your business idea is a vital first step in your entrepreneurial journey. It helps you understand if there is a market for your product or service, if it solves a real problem, and whether it stands up to competitive and financial scrutiny. By testing your idea early, you can identify potential challenges and opportunities, making necessary adjustments to increase your chances of success.

Key Factors of a Coherent Business Idea

Our Business Validator tool evaluates your business plan based on seven key factors: Problem Identification, Solution Fit, Market Assessment, Unique Value Proposition, Financial Viability, Scalability, and Regulatory and Legal Considerations. Each factor is scored on a scale of 1 to 10, contributing to a cumulative score out of 100 that represents the overall viability of your business idea.

How to Use the Business Ideas Validator

To begin with, you will need to provide some basic information about your business idea. This includes:

• 'Your Business Idea': What is the central concept of your business?
• 'Target Market Size': How many potential customers are there for your product or service?
• 'Market Trend': Is the market for your idea growing, stable, or shrinking?
• 'What Is Your Main Offering?': What product or service are you offering to your customers?
• 'How Will You Charge Your Customers?': What is your revenue model?
• 'How Will Customers Hear About You?': What are your distribution and marketing strategies?
• 'What Will You Charge (on average)?': What is your pricing strategy?

By answering these questions, you will provide the necessary input for the Business Ideas Validator to assess the viability of your idea.

The Pros and Cons of Using AI to Validate Business Ideas

As with any technology, using AI to validate business ideas comes with its own set of advantages and disadvantages.

1. Speed and Efficiency: AI can process and analyze large volumes of data in a fraction of the time it would take a human. This means that you can get insights into the viability of your business idea much quicker, allowing you to make decisions and adjustments more rapidly.

2. Objectivity: AI can provide an unbiased analysis based on the data provided. This can help you overcome personal biases that might affect your judgement about the viability of your business idea.

3. Scalability: AI systems can easily handle increasing amounts of data as your business grows and evolves. They can continue to provide valuable insights, no matter the scale of your operations.

4. Access to Data Analysis: AI can provide entrepreneurs access to sophisticated data analysis techniques that were previously only available to large corporations. This can level the playing field and increase competition.

1. Dependence on Quality of Data: AI is only as good as the data it is given. If the data provided is inaccurate or incomplete, the insights generated might be misleading.

2. Lack of Human Insight: While AI can process data and generate insights, it may not fully grasp the nuances of human behavior and market dynamics in the same way a human analyst might.

3. Potential for Overreliance: While AI can provide valuable insights, it is not infallible. There is a risk of becoming over-reliant on AI and neglecting to use human judgement and intuition.

4. Cost: While prices for AI tools have decreased over time, implementing and maintaining AI systems can still be a significant investment, especially for smaller businesses.

Despite these potential drawbacks, the use of AI to validate business ideas can be a game-changer, particularly for entrepreneurs who know how to leverage it effectively. The key is to use AI as one tool in your toolbox, in conjunction with your own industry knowledge, business acumen, and customer understanding.

How to Use the Full Validate Feature Inside Bizway

To make full use of the Validate feature, sign up for an account on Bizway . The platform will automatically take all information saved about your business and use it for the Validator test. This seamless integration makes it easy to constantly assess and re-assess your business idea as it evolves, ensuring you stay on track with a viable and competitive business proposition.

In summary, we believe that the best business ideas are those that have been carefully tested and validated. With the Business Validator tool, we hope to make this process easier and more accessible for everyone, helping budding entrepreneurs turn their ideas into successful ventures. Try the free Business Validator tool today and start validating your business ideas with the power of AI.

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How to Validate a Business Idea in 30 Days or Less 9 Steps to Validating Your Idea with Less Than $500 (My Validation Challenge)

In this guide, we’re walking through my step-by-step process for learning  how to validate a business idea , based largely around my experiment of publicly validating a new idea here on my blog (in less than 30 days with a budget of $500) to prove it’s possible to launch a brand new business—quickly and on a tight budget.

During the month of December 2016, I embarked on a 30-day challenge to validate a business idea , limiting myself to spending less than $500 to make that happen. I asked you to tell me what idea I should validate, too. The consensus: A hiking guide for California.

The challenge was a major success .

In just a few short weeks, I pre-sold 12 copies of a hiking guide (that didn’t even exist yet), generated $108 in revenue without a website and built an email list of 565 email subscribers who wanted to learn more about my upcoming hiking guide.

This was all done without using my existing audience, business, website, traffic or any other resources aside from my skills and the system I teach students who want to validate a business idea. I even had time to take a week-long vacation and visit my family for the holidays while validating this idea.

I’m telling you this because you can do it too .

In fact, you can take my system for validating a business idea and be far more successful than this little challenge was. I’ve used this system to generate more than $5,700 in pre-sales of a physical product for a previous business of mine. I’ve used it to pre-launch an online course and drive over $10,000 in revenue in  one week without a large audience. I even used this strategy to land a $120,000 consulting contract and validate my content marketing business before quitting my day job.

If you want to start from the very beginning, read more about the rules of the challenge and dive deep into my weekly updates with an insane amount of detail around the execution of each tactic, click right here to jump down and begin reading from the day my validation challenge started.

For now, I want cover all of the major lessons I learned during my challenge to validate a business idea in 1 month. After analyzing all of the steps I went through during this challenge, looking back at how I built my previous businesses,  interviewing dozens of entrepreneurs  on this subject and applying my system from The Launch Formula, I’ve boiled it down to just 9 simple steps to validating a business idea.

But first, let’s quickly cover what validation actually is, what it isn’t and why it’s important.

What is Idea Validation?

• Validation is  designed to give you you reasonable certainty your business will have a sustainable, growing, paying audience in a matter of days or weeks, rather than wasting months or years building a final product nobody will pay for. It’s as much a way of thinking, as it is a step-by-step process. The end result validation attempts to achieve is most often meeting a desired number of pre-orders or waiting list subscribers who’d purchase a basic proof of concept of your idea—a minimum viable product that solves the most simple form of the problem you’re attempting to address.
• Validation isn’t  a guarantee of success and it most certainly isn’t easy. It’s not as simple as putting up a waiting list and hoping people miraculously discover your offering & fork over their hard-earned money for something that doesn’t exist yet. It takes work to build confidence, inspire trust and convince a community that you’ll be able to deliver enough value in exchange for the price you’re asking. Validation is designed to give you your first paying customers and foundation for future growth.

Know that my definition of validation has been formed over years of experimentation myself, from all of the best business books I’ve read and the online business courses I’ve both taught and taken. I’d recommend reading this post all the way through from top to bottom, but if you prefer to jump around, here’s a hyperlinked table of contents that’ll take you straight to each stage of validating a business idea.

9 Steps to Validate a Business Idea in 30 Days (With Less Than $500)

• Find a Profitable Niche (That You Care About)
• Leverage Your Strengths and Outsource Your Weaknesses
• Create an Early Feedback Group
• Have One-on-One Conversations With Your Target Market
• Develop a Competitive Advantage
• Grow Your Email List
• Build a Proof of Concept
• Launch and Get Pre-Orders From Your Email List
• Continue Building and Tweaking With Feedback

Disclosure:  Please note that some of the links below are affiliate links and at no additional cost to you, I’ll earn a commission. Know that I only recommend products and services I’ve personally used and stand behind. When you use one of my affiliate links, the company compensates me, which helps me run this blog and keep all of my in-depth content free of charge for readers (like you).

Now, let’s dive into this.

1. Find a Profitable Niche (That You Care About).

Business ideas don’t just fall down out of the sky. They’re not delivered by a magic genie. And while you can find a lot of inspiration on the  types  of businesses you should consider starting , you shouldn’t pursue a random idea just because someone told you it’s a good idea.

In a study by CB Insights  covered on Forbes, a whopping 22% of failed startup founders cite their primary reason for failure as either never having a true interest in what they were building or losing focus on the goal they set out to achieve.

Put simply, they were never really interested in their business concept.

The best business ideas come from your strongest areas of interest.

I’m so adamant about only building a business around a real interest of mine because I’ve chased pure market opportunities in the past, without really caring about what I was building… it doesn’t end well .

When the going gets rough (it will), you need to be motivated beyond just the lure of dollar signs (and more than just a stable of motivational quotes  to get you through 😉.) If you’re only in it for the money, you’ll either give up or be quickly pushed out of the market by people who genuinely care about what they’re doing and the people they’re helping—they’ll be more motivated than you.

If you’re not sure what your interests are, or which of them may potentially lead to a profitable business opportunity, start by answering these questions:

• What are your hobbies?
• What is the most meaningful part of your day?
• What are some topics you could enjoy writing a 1,000 word article about?
• What do you love doing?
• What is an achievement that’d make you feel particularly proud of yourself?
• Are there any specific aspects or functions that you love about your job?
• How about any childhood dreams you still find intriguing?
• If you had to choose just 1 thing to be remembered by, what would it be?

For my challenge to validate a business idea, I went through these questions and landed on 3 general topic areas I knew I could  potentially build a business around—I didn’t know how or what, but that’s not important at this stage.

What’s important is that I focus on the next incremental step that’d get me closer to my goal of validating my idea. For now, that meant picking a niche to blog about , not worrying about how I was going to make money with the idea today .

So, first things first. That brought me to my top 3 options of hiking in California, cooking hacks (which I’m now exploring with a side project, VeganTable ) or long distance running.

My favorite personal litmus test for choosing these was whether or not I could write a 1,000 word article about the topic and actually enjoy doing it. To me, that proved I was actually interested in the subject matter and have enough confidence in my knowledge to publicly share about it.

If you don’t personally identify as a writer, consider Joel Saltzman’s thesis in If You Can Talk, You Can Write , where he teaches people how to become writers by starting them off writing only about the interests they find themselves talking about most—which is also the clearest indication as to what you could potentially build a business around.

After choosing these topic areas, I asked my readers to vote in the comments (below) and hiking in California emerged as the winner.

If you want more questions and guidance around uncovering profitable niche ideas, there’s an entire lesson & worksheet dedicated to this topic in my upcoming course, 30 Days to Validate . You can sign up to get updates and early access right here.

Want to find a profitable niche business idea this week? Join my free online course  Find a Profitable Business Idea  today.

2. Leverage Your Skills and Outsource Your Weaknesses.

If you want to become successful as an entrepreneur, you need to be great at what you do—and you must focus on giving yourself as much time as possible to leverage those abilities (in addition to #1, being interested in what you’re solving). Here’s why.

It’s proven that focusing on your strengths makes you more confident in your work (via Psychology Today).

Choosing to work with your strengths also helps you unlock more creative solutions  to the problems you encounter, because you’re more comfortable and in your element.

Studies have also found that those who engage their strengths on a daily basis report higher levels of positivity , which helps create a buffer against the negative effects of stress, fatigue and trauma.

When you choose to leverage your strengths within your business, you’re maximizing your opportunity for success by setting yourself up to be more confident, creative, positive and less prone to becoming overly stressed. This has been essential in helping to grow two of my newest side projects—a business, finance and credit blog called MoneyTalk , as well as a WordPress tutorial and advice blog called SmartWP .

In business (and in this challenge to validate a business idea), you’ll constantly be racing against the clock to achieve meaningful results. And when you’re operating outside of your core strengths, you’ll encounter more unexpected challenges, thus having to account for more of a learning curve along the way.

When it comes to validating a business idea, fast and simple is the name of the game .

To move as quickly as possible without wasting time and money, you need to focus on the skill set you already have and make it work—which I promise you is possible. This is the foundation for how I manage opportunities within my business.

If you’re not sure what your most marketable skills are (like blogging skills ), I have a free skill assessment guide that’ll walk you through the process of discovering your skills . You can pick it up right here .

Focusing on leveraging my strongest skills translated directly into this challenge to validate a business idea, as a clear sign that I wouldn’t be investing time in any of these areas outside of my current expertise:

• Not going to build a website
• Not going to design any fancy visual content
• Not going to create an app
• Not going to make a physical product
• Not attempting anything else far outside of my current skill set

That left me with having to lean primarily upon my skill of writing to validate this business idea—which I view as one of my strongest. If I hoped to have any chance of success validating this idea, I didn’t have time to go out and learn new skills, take classes or meet with coaches for weeks or months.

It’s not that investing in new skills is a waste of time—I wholeheartedly believe education is always a good investment in your future. However, in order to validate this business idea,  I didn’t need to build new skills . And you don’t either.

Delaying this challenge in any way because I felt I didn’t have  the right skills would’ve been a major excuse. I’m not into making excuses.

“But Ryan, you already have clear, marketable skills…”

Stop wasting time complaining. Seriously. You need to become the master problem-solver in your business (and life).

Today, that means working with the skills you have and doing everything you possibly can to validate your business idea with real, paying customers before going out and investing time or money into building skills for your project.

If you decide to really make this happen despite any obstacle ahead, you can build a business that’s uniquely suited for you.

You can do it without having to go out and learn complex new skills, as long as you’re willing to be honest with yourself about what’s outside of your expertise. Then, you’ll have to actively outsource those tasks to sign a freelance contract on platforms like these remote job sites , by bringing in complementary business partners or hiring the right employees .

For this challenge to validate a business idea, I knew I’d have to focus on leveraging my writing skills. No complex tech tools or fancy integrations. All I used was a series of (free)  Google Docs and Google Sheets  that’d allow me to side-step wasting time on anything outside of my wheelhouse.

On top of just the hard skills I planned on leveraging for validating this business idea while keeping my core business running at full speed, I knew I’d have to get serious about managing my time in order to make this happen.

I’m a morning person (4:30am is a casual wake up time for me), so I turned to some great advice from my friend, Chris Winfield on how to construct a morning routine that’d help set me up for success with this project.

Each weekend, I scheduled blocks of time on my calendar for when I’d be dedicating time to working on this project during the week ahead—everything that makes it into my calendar gets done. If it’s not in the calendar, it probably won’t happen.

Now that I had these ground rules set in place, I could move on to the first critical (often neglected) stage of validating a business idea: Creating an early feedback group.

3. Create an Early Feedback Group.

One of the biggest takeaways from my challenge to validate a business idea last month was that sharing your work is hard , even for me still.

You’re exposing who you really are, making yourself vulnerable and creating opportunities to be judged on the quality of your work.

The more people I shared my broad hiking website idea with, the more great things started to happen for me.

The goal of creating an early feedback group of people who are within your target market, is to make sure that you’re building something they’ll actually need—and want bad enough to pay for. That’s why having customer feedback is so crucial.

But, before I could start telling people about my idea and asking them to join my feedback group, I had to at least have a rough idea of what I was pitching them—a guess about the main problem I was seeking to address.

Crafting a quick elevator pitch .

Here’s how I did this in-action with my challenge to validate a business idea related to hiking in California.

With a focus on value, I sat down and wrote out a list of what I thought was missing from current sites that tried to be hiking guides, adventure manuals and general resources for doing cool stuff outdoors in California.

Surprisingly, I found that most of the websites talking about hiking and outdoor adventures in CA had pretty mediocre content—images were often stock photos, the written content tended to be overly generalized and not very helpful for hikers seeking to capture great photos while they’re on a hike (a narrow niche I think I can address very well).

I thought there could be a serious opportunity for having hiking guides and outdoor adventure resources that have a significantly higher quality of images and other content.

So, my hypothesis was that by going into content mediums like drone footage and 360 cam images (that others aren’t trying in this space yet), I’ll be able to win some readers that appreciate new innovations and higher quality.

After 20 minutes of research, I came up with this short elevator pitch that I could customize for each person I’d be reaching out to:

Hey [First Name]! I’m building a new site I thought might be up your alley as a fellow adventure junkie.. it chronicles all of the best places to find adventures in California, go on awesome hikes and capture unique photos from each spot while you’re there. I’ll be grabbing photos, videos, drone footage and 360 cam images to make this really awesome. Would you be interested in getting updates on this?

Is it perfect? No.

But that doesn’t matter. I’ll refine as I go and tweak it over time as I learn more about what my audience wants.

Manual outreach to create your early feedback group .

Once you’re ready to start reaching out, begin closest to home. Keep in mind that you don’t necessarily  want your mother and father to be in your early feedback group unless they’re actually a good potential customer.

To highlight another example, if you’re going out and selling workout plans  as a means to validating a larger personal training business you’re considering launching—start by evaluating whether friends, family and co-workers could be a good fit for getting your fitness help.

Now, before I started my outreach for my challenge to validate this business idea, I did my best to quickly make sure these friends would be within my target so I wouldn’t waste time presenting an idea they wouldn’t be interested in.

With my specific idea, being within my target market meant that each friend I reached out to needed to (1) live or frequently spend time in California and (2) have a somewhat active lifestyle, which would indicate to me that they’ll probably be interested in adventuring and hiking. Protect the quality of your community.

Here’s a screenshot of my first round of text message-based outreach (by far my highest response rate medium) to start building my feedback group. Note that each of these messages is customized based on my relationship with the person:

Working this process for just 1 week netted me 47 email subscribers for my early feedback group. Eventually, you could scale up this kind of outreach by employing one of the best CRMs for small business , but at this stage, that’s overkill.

Now, it’s your turn.

Begin by working your way down this list:

• Friends & family
• Former co-workers
• Other professionals you’ve worked with
• Classmates or former classmates from school
• Teachers or professors you’ve had
• Fellow members in clubs, societies, groups or meetup networks you’re in

Scroll through your recent text messages.

Browse through your last couple hundred personal emails.

Head into your Facebook friend list, LinkedIn connection list and check out your Twitter followers.

Look for people you know, who you think may have an interest in what you’re building.

Then, out of the people who express interest in your idea, ask them if there’s anyone else they know who comes to mind—that might be excited about what you’re building. Double down and get more qualified referrals so that you can keep having conversations with your target audience .

I personally recommend tracking this process rigorously so that you can see the growth of your community and keep their contact information all in one (free) place. Enter: Google Sheets .

Each time I came across someone from my text messages, emails, and Facebook friend list who I thought could be right for checking out my site idea, I added them to a Google Sheet so that I could easily keep track of all my leads.

Here’s a snapshot of my tracking sheet (and here’s a template you can grab for free ):

I stopped after getting to 100 potential people I could ask to join my early feedback group.

Expanding your early feedback group beyond your personal network .

With my personal challenge to validate a business idea, I didn’t need to take it this far. I was able to track down enough people interested in hiking in California that I personally knew by combing through my text messages, personal emails and Facebook friend list.

However, if you don’t have the right personal network for your project or you don’t feel comfortable starting with those whom are closest to you, there are still TONS of ways to manually build an engaged early feedback community.

Enter: Online groups and communities.

Now, when it comes to actually starting a conversation in these groups without coming across as spammy or too self-interested, keep in mind exactly what your goal is at this stage:  to have conversations with your target audience . Nothing more—we’re not selling anything to anyone yet.

You’re going to best achieve this goal of having great conversations by posing a very open-ended, genuine question to the group without asking people to visit a website, fill out a form or complete any action other than replying with comments in the beginning. Keep it simple.

Here’s a copy/paste script inspired by one of my mentors, Ramit Sethi , that you can use to post in online communities and start meaningful conversations with members:

“Hey guys, I’m thinking of  [starting a website, creating an app, building a product] around  [topic area] . When you talk to your friends about it, what do you say? What do you think is the biggest problem around  [topic area] ?

Here’s this posting tactic live in action with one of my TLF students, DJ who was able to quickly generate 25+ subscribers for his early feedback group by posting a variation of this in 10 Facebook Groups:

Depending upon how active the group is, you can get anywhere from zero to dozens of comments with thoughtful replies to your question.

Once a few people start responding to your post, nurture those conversations, keep them going, stir up a debate, share your thoughts on the subject matter.

After the post begins to lose a little momentum, send a personalized (private) message to the people who seemed most engaged in the conversation—asking them if they’d like to get updates on your project. If they’re up for it (some will be, some won’t be), ask them for their best email address so you can keep them in the loop and ask a couple more questions.

Replicate this process until you’ve built up an early feedback group of ideally, at least 25 – 50 people so that you’ll begin getting some diversity of opinion within your community.

Finding the right online communities .

From my experience, here are some of the best places and methods for finding potential early feedback group members to give you feedback on what you’re building (even if you don’t know what exactly it’s going to be yet):

Standalone Online Communities .

• AMEX Open Forum for Small Business Owners  (broad)
• Angel.co  (focus on startup community)
• Inbound.org (focus on email marketing and deciding between tools like ConvertKit vs AWeber vs Mailchimp )
• GrowthHackers (focus on growth & marketing)
• HackerNews  (focus on startups and more technical projects/news)
• Quora (broad)
• ProductHunt (focus on startups and tech)
• Bonus: Amazon Reviews (if you’re building a physical product)

Facebook Groups (Topical) .

It’s best if you can find topically relevant groups to join—that’s where you’ll know without a doubt that your target audience already exists.

For example, if you’re working on validating a photography-related business idea, you should consider joining groups like Nikon Digital Camera & Photo Enthusiasts  (26,000+ members), Nikon D750 Users (27,000+ members) and Nikon UK Photography (13,000+ members). I found these groups by searching for “Nikon” and clicking the ‘Groups’ sort tab at the top of the menu.

If what you’re building is relevant to anyone with a DSLR camera, you’re sure to find enough people who’d be interested in giving you feedback on your concept from within those groups.

Facebook Groups (Entrepreneurial) .

If you aren’t able to find many Facebook Groups with a decent number of members (think 5,000+), it might be a sign that your niche market is too small. However, you can still take to building a feedback community by activating members of entrepreneurial Facebook Groups where members are already conditioned to helping each other with projects like this.

Start with these ones, which I chose specifically because they’re not riddled with spam:

• Freedom Hackers Mastermind (39,000+ members)
• The Smart Passive Income Community (28,000+ members)
• The Joyful Entrepreneur (37,000+ members)
• Heart-centered, soul driven entrepreneurs (16,000+ members)
• Coaches, Authors, Entrepreneurs (13,000+ members)
• Women’s Entrepreneur Network (32,000+ members, women only)
• Super Hero Entrepreneurs (10,000+ members)

LinkedIn Groups (Entrepreneurial) .

• On Startups (626,000+ members)
• Future Trends (474,000+ members)
• I ❤ Startups  (248,000+ members)
• Entrepreneur’s Network (33,000+ members)
• Band of Entrepreneurs (26,000+ members)

Reddit Sub-Channels .

• r/SideProject
• r/Entrepreneur
• r/BusinessHub
• r/MutualCollaboration

Keep in mind as you begin posting in communities and forums, that you need to provide value before asking for anything in return—that’s how you build relationships with people and eventually ask them to join your feedback group.

Don’t expect to get stellar results from simply cold emailing a bunch of people you don’t really know, asking them to support your idea.

If you want my dead simple, step-by-step game plan for creating an early feedback community of 25 – 50 subscribers in a matter of days, sign up right here to get updates on my new course, 30 Days to Validate.

4. Have One-on-One Conversations With Your Target Market.

Once you’ve started to build your small community of early feedback subscribers, you need to keep the conversation going with them. And you can continue building the size of your feedback group throughout this process.

At this stage however, your goal now shifts to focusing more on determining the right mix of highlights, features and value propositions that’ll be most appealing to your target audience.

It’s time to narrow in on what exactly your business is going to be and you’ll solidify this even more in the next stage: Developing a competitive advantage.

Again, since we don’t want to build a solution to a problem that doesn’t really exist, this requires as many one-on-one conversations as possible. Yes, it takes time, but it’ll save you countless hours later by getting your solution right on the first shot.

During my challenge to validate a business idea, a few conversations with my early feedback members naturally transitioned into brainstorming sessions in which my audience started telling me what they wanted .

Check out this text about my hiking site idea, from my friend Michael that lives in Los Angeles, a traditionally very tourist-heavy city.

He identified one of his major pain points when it comes to finding good local hikes and adventures to do that  aren’t touristy like hiking up to the Hollywood sign. He lives in LA, so he’s already done all that—now he wants “off the grid, local and culturally interesting experiences.”

Two other friends of mine, Bryan Lemos who worked with me at CreativeLive and loves photography, and Alan who’s an active outdoor enthusiast in his own rite over at Love to Camp, now work together and talked about my website idea at lunch after I had texted them both earlier in the day.

They came to me (in a Slack group we have together) with a great idea for a service that they wish existed in the hiking and outdoor market.

Providing a monthly subscription service where I line up a curated, local adventure and discounted deal for my subscribers to go on once a month. Dead simple and pretty easy for me to implement each month.

Do everything you can to foster this type of idea flow in your conversations. If you listen hard enough, for long enough to your audience, they’re going to tell you exactly what they want.

While you  can have these conversations over text, email, Slack or another digital media, nothing beats meeting up in-person for a quick coffee or picking up the phone for 15min to get more meaningful feedback from your target audience.

Here are a few of the top questions you should be asking your target market, with the goal of learning more about their motivations and needs as it pertains to your business idea:

• What are you most looking to achieve (as it pertains to your topic area)?
• What are some of the current solutions you’re using, or have used in the past?
• What frustrates you most about current solutions out there?
• What features would you most like to see (as it pertains to your topic area)?
• Do you have any fears (as it pertains to your topic area) holding you back?
• Would you be willing to pay for a solution that does XYZ for you?

I recommend adding a few additional columns to the  Google Sheet  you already made for keeping track of your feedback group, so that you can add notes with their answers to these key questions.

By this point in my challenge to validate a business idea, I was starting to get a more clear picture of what exactly my audience wanted from me in the California hiking space.

After thinking more about the two ideas I got from my feedback group—a monthly adventure planning service or a guide to the most under-rated, off-the-grid hikes and adventures in California—and running them by a couple others, I got more votes for the off-the-grid hiking guide.

Once you’ve been able to collect this depth of feedback from at least 10 – 15 people in your early feedback group, it’s time to really formulate your competitive advantage and solidify (at least for now) what you’re business is going to represent.

I pushed forward with the tentative plan of creating the off-the-grid hiking guide.

Now it was time to figure out how to make it significantly more unique, useful and better than existing hiking guides.

5. Develop a Competitive Advantage.

By this stage of validating your business idea, you’ve had a number of meaningful conversations with your target audience and you’ve built a small list of people who are interested in getting updates on your upcoming solution—based on the simple elevator pitch you’ve sent them so far.

Now it’s time to expand a bit on that elevator pitch and pull some more insights out of the feedback you’ve been gathering from your conversations with the people in your community.

All with the purpose of developing a competitive advantage that’ll make your upcoming solution uniquely valuable to your audience. The worst thing you can do is rush to market with an identical solution to what’s already out there.

A competitive advantage is defined as your unique advantage that allows you as a business to generate greater sales or margins, and/or acquire & retain more customers than competitors.

In short, it’s what makes your business, your business.

Your competitive advantage can come in many different forms, including:

• Your cost structure
• Product offering
• Distribution network
• Customer support
• Your own personal skill set (like being able to tell great stories)
• Your experience
• Industry knowledge
• Strategic relationships
• A powerful personal brand
• Large and engaged audience you’ve built

The strength of your competitive advantage will greatly affect your early results in validating your business idea.

With my challenge to validate a business idea in the California hiking space, my competitive advantage for my upcoming website (that didn’t yet exist, mind you), was that I’d be delivering content in a new medium (VR/360°), with a level of quality and depth that was unmatched in an industry full of web 1.0 style websites with stock photos and short descriptions.

To land on the competitive advantage(s) for your side hustle idea , start by carefully combing through all of the feedback emails, conversation notes and ideas you’ve recorded from your target audience conversations so far.

Look for commonalities, trends, surprising insights and particularly interesting ideas that catch your eye. Highlight them as potential value propositions to come back to for developing your competitive advantage.

6. Grow Your Email List.

Despite what many profess, growing your email list (further) is actually an optional step in the process of validating a business idea.

Here’s why: If you’ve already manually built an email list of 100 or more subscribers through the various audience building tactics we covered in #3 (which you could definitely do given enough time and effort), you likely already have enough  people to validate your idea with.

Sure, more of the right subscribers would help increase your chances of successfully validating your business idea, but anything more than ~100 or so, is bonus points for the sake of this validation test.

Revisiting our initial goal for setting out to validate a business idea in the first place, it’s to give us  reasonable confidence in the future success of our solution.

Put simply, you don’t need more than 100 subscribers to validate an idea and get at least 10 paying customers.

If you’re sitting below that magic number of 100 subscribers or you feel strongly about needing to acquire a larger audience before building a proof of concept, let’s get into growing your email list beyond where it’s at right now.

I’ve written about a lot of list building tactics that have worked well for me over the years, but here are a few of my favorites for quickly growing your email list beyond the limitations of manual outreach .

1. Guest Posting (to Grow Your List and Validate Your Business Idea) .

While guest blogging is significantly more effective in the long run once you have time to make a website or of your own already (could be a good reason to learn how to start a blog today and eventually learn how to make money blogging ), recent blogging statistics suggest it’s not as necessary in the context of validating an idea quickly.

All you need is a very basic “landing page” that gives you the opportunity to capture the name and email address of any readers who are interested in learning more about what you’re planning on building—based on a brief description written on your landing page. This landing page will be a foundation for the proof of concept you’ll be building in the next step anyway.

Within your guest post that’s topically relevant to what you’re planning on creating, you’ll tastefully link back to your landing page so that readers can click through to learn more and sign up for updates.

Here’s an example of a guest post I recently wrote for Lifehacker , one  for Forbes , one on Inc , and another on CreativeLive’s blog . You’ll notice that I always make sure to include at least 1 link back to a specific post, landing page or project I’m seeking to promote (or validate) within the first few paragraphs of the guest post to make sure I’m maximizing my chances of driving back readers who are interested in signing up to learn more. This is a smart blog SEO strategy to incorporate from the start.

Again, you do not have to go through the process of choosing the best website builder and getting a site online before guest posting. Your landing page can be as simple as you allow it to be. I’ve created basic landing pages from (free) Google Forms , (free) Google Docs , (free) Gumroad sales pages and through free trials with a more robust blogging tools like Unbounce or Instapage .

What’s most important about the basic landing page you build, is that you’re able to ( 1 ) write a brief description of your upcoming solution and ( 2 ) ask readers to sign up with their email address for updates. You can collect their email addresses by using a Google Form , which will store them neatly in a Google Sheet you’ll be able to refer back to later.

Here’s an example of a guest post I wrote for the Desprenuer blog ( right here ), a popular website that gives designers the tools they need to grow their businesses.

You’ll see that I included a link back to the post I wanted to promote on my own blog (about side businesses), within the first paragraph of this guest post. This guest post took me about 30-45 minutes to write and was a shortened derivative of the original post I linked to in that intro paragraph up top.

I know, I know … you don’t have a ton of blog content of your own, so you “can’t” do this, right?

Not quite. If you think you don’t have the content for writing a guest post, you’re mistaken. Take all the bits and pieces of conversations you’ve already been having with your target market, identify the value propositions they’ve been resonating with most and start expanding on each of those points.

Now, let’s talk about pitching a guest post & identifying the right destinations and people to pitch to.

All it took to land this guest post on the Despreneur blog, which drove back a couple hundred visitors to my site, was a quick email to the editor, Tomas Laurinavicius . I mentioned a recent podcast episode he recorded with another entrepreneur, which showed I took an interest in what he’s doing and established relevancy by noting that I’m also a Forbes contributor. Side note—if you’re considering starting a podcast yourself, check out my picks for the best podcast hosting to get your show online.

Then I pitched him on writing a guest post:

This worked particularly well for me because the content I referenced on my blog was already performing well and Tomas also had some mutual connections with me (via Forbes), so there were fewer barriers between us.

But you probably don’t have a strong personal brand or contributorships on major publications… sure, that’ll make this more difficult. However, my very first guest post  was landed on Buffer’s blog  (1 million+ monthly readers) back in 2015 long before I had any semblance of an audience or credibility. I cold emailed one of the writers on their team with a few strong topic ideas I knew she’d be interested in, then she asked to see a draft of one and the rest is history.

Success with pitching guest posts begins with choosing realistic targets, but never doubt the power of asking for what you want—tons of other people have also been able to land high value guest posts without any “street cred” of their own yet.

Now let’s dive deeper into my 5 step process for cold pitching guest posts.

Step 1:   Create a landing page (or blog post/proof of concept) .

Nearly every blog post idea I publish to my site is treated as a proof of concept for a potential course topic I can cover in the future. I choose to use blog posts for all of my proof of concepts because that’s what I’m good at and I can do it quickly. For your purposes, this landing page can be in the form of a simple blog post (just be sure to learn how to write a headline that’ll appeal to your audience), sales page, product description, video or otherwise—this is the destination that’ll serve as home base for when you’re ready to go out and pitch guest posts.

Step 2: Build a list of publications, brand and blogs .

Once I publish a post to my blog, I’ll create a shortlist of 10-20 different publications, blogs and brands that I think I can realistically land a guest post with—on a topic closely related to my landing page back on my own website. I’ll vet these websites and make sure it looks like they accept content on my topic and that they have engaged readers for the subject matter, otherwise it’s not the best utilization of my time. Once I have my list, I’ll rank everyone on it based on how much traffic I can drive to my website from a guest post (an estimate).

Step 3: Create outlines of derivative works from the original post .

Next, I’ll break down the sections of my original post and start outlining what a more detailed post could look like—expanding upon each of these sections from my original. For example, from my post on the 10 Steps to Starting a Business While Working Full-Time , I could choose #2 on the list (Inventory Your Strengths and Interests) and outline a more detailed post that expands upon actionable strategies for finding your strengths and interests. Now, I’ll start to pair up these new post outlines with the target websites I want to get a guest post published on.

Step 4: Find the right point of contact at my target websites .

This is key. You need to pitch a real person and make sure it’s the right person. That’s someone who (1) cares and (2) can do something about your guest post idea. For that reason, I always look to target a marketer, writer, editor or blog manager at the destination I’m looking to secure a guest post on—these people will all be on the same page when it comes to the constant need for solid content and they’ll either have or know the people with the decision-making power to grant a guest post.

Step 5: Reach out with a value-driven approach, then pitch .

Most of the time before pitching someone on a guest post, I’ll first go back to my original landing page or post on my blog and add in a relevant link to a piece of content on the blog of the target destination I’m trying to get a guest post on. That way, when I reach out to the marketer, writer or editor, I can keep the message related to just my mention of them in the post on my blog— providing value first .

I’ll ask them to give it a quick look to make sure I’m citing them properly and linking to the best possible destination for them; two things they’ll care about and it’s not a big ask. That gets them to my website where they can see what the post is about and a bit about me. Then once they respond, I’ll pitch them on the guest post topic that I believe to be most relevant to their readers.

It’s a lot of work and you definitely want to spend some time promoting the content and making sure your guest post does well. But by building relationships that are founded on delivering value before asking for anything in return, you’re going to plant the seeds for a relationship that has the potential to grow and evolve over time.

This strategy will also set you apart from the 50 other people that email in every day asking to guest post.

If you don’t have a website up yet, you obviously can’t use this exact approach verbatim. Instead, you’ll have to compensate by reaching out to more people. It’s a numbers game, but I promise you can make it happen. If you want help strategizing, shoot me an email at [email protected] and I’m happy to help.

2. Facebook Ads (to Grow Your List and Validate Your Business Idea) .

If you have a little budget ($50 – $200) for testing paid traffic, Facebook Ads (especially if you can produce high quality Facebook video Ads) are going to be your biggest bang for the buck, by far. With that budget range, you can generally drive a couple hundred extremely targeted visitors to your landing page and see how they react to your proof of concept.

For one of my past businesses, Case Escape , we were able to validate the concept of offering our Startup Kits—a business in a box style package that helped people start their own phone case business —by spending around $100 on Facebook Ads for a week to generate leads which led to phone conversations and making our first $5,700 sale.

Both AdEspresso and Hootsuite  have amazing guides to getting started with Facebook Ads that I highly recommend. Facebook has their own deep dive on ad targeting  as well.

3. Giveaways (to Grow Your List and Validate Your Business Idea) .

In my experience, giveaways are a very mixed bag. Sometimes they work very well and give you a ton of qualified leads, but other times you’re left with a worthless list of people who signed up solely to win something cool.

My advice: Keep your giveaway item as closely related to your upcoming solution as possible (and keep your costs as low as possible). Spending meaningful amounts of money before you have a clear path to making it back is dangerous.

I recommend hitting the pavement to visit local stores, picking up the phone and doing what you can to try and broker discounts on your giveaway items before purchasing—in exchange for some advertising exposure to your audience.

Giveaways only make this list because they’re a  potentially viral marketing tactic that’s worked well for me in the past. I used one during my challenge to validate a business idea and generated  565 email subscribers in just 6 days for a GoPro and Osprey pack giveaway thanks to the built-in viral sharing that the KingSumo Giveaways plugin has.

The idea behind a giveaway is simple: Run a sweepstakes and give away an awesome,  relevant product or service for free in exchange for asking entrants to sign up for your email list.

Incentivize them to share the giveaway on the backend after they sign up by offering a few “extra” entries into the giveaway for every friend they refer to my giveaway, which KingSumo Giveaways does very well.

Starting with just 47 people in my early feedback group, I was able to grow that number to 565 in just 6 days thanks to their sharing. That means they referred an average of 12 friends each.

For the specific copy/paste email templates I used to kick my giveaway off with a bang and help make sure it succeeded, jump down to my Update #2 of the validation challenge .

Now, once you’ve built your email list to a size you’re comfortable with (I recommend ~100 subscribers), it’s time to start building your proof of concept.

7. Build a Proof of Concept.

Now you have a small (but growing) audience. You know the specific offering you want to validate your business idea with. In my case with this validation challenge, that was an off-the-grid hiking guide to the most under-appreciated adventure destinations in California—documented in VR/360°, drone footage and video.

But I didn’t have the time to go out and shoot all that content, get it edited and HOPE people paid me for it. That’d take months and probably a good amount of money.

Instead of pausing here to invest weeks or months into building your course, writing your book, developing an app or creating a complex website to highlight your freelance skills in order to land the best work from home jobs  or otherwise remote gigs , we still want to make sure there’s a (paying) demand for what you plan on building—before you actually go out and build it.

That’s where building a simple proof of concept comes into play.

A proof of concept is a realization of your method or idea that demonstrates its feasibility .

Well constructed proof of concepts are designed to achieve these 3 things:

1. Verify that your solution solves the problem you’re attempting to address.

2. Confirm that your solution is valued by your future customers.

3. Determine whether or not people will pay for your solution.

Setting your proof of concept goal .

Once you have a more clear picture of what your specific product or service offering is going to be (based on your target market conversations and using a smart keyword research tool ) and you’ve developed a competitive advantage that’s going to make your offering unique in some way, it’s time to set a goal for what you want your proof of concept to achieve.

Only that which is properly tracked and measured, improves.

Your proof of concept goal will be unique to your business and it needs to give you relative confidence in the future of the solution you’re building.

There’s no definitive, across the board success metric for all proof of concepts, but I always recommend setting a proof of concept goal of generating a specific amount of revenue from a pre-defined number of paying customers.

Here are a few popular examples of proof of concept goals:

• 10 pre-orders for your upcoming product or service
• $100 in affiliate commissions generated
• 100 listeners on your first podcast episode
• Getting a book proposal accepted by a publisher
• 100 waiting list subscribers
• Fully funding a Kickstarter campaign

With my challenge to validate a business idea in the California hiking space, I set my proof of concept goal at  10 pre-orders of the hiking guide I wanted to create. If I could get 10 people to pay me for a book that doesn’t yet exist, that’d give me enough confidence to go out and actually shoot the content & create the book.

Now that I had the goal I wanted to achieve—10 book pre-sales, it was time to create a (simple) preview of what that would be, so I could start pitching it and asking my subscribers to buy.

Here are a few examples of the many different forms a proof of concepts can come in:

• Google Doc (like the one I created to validate my hiking guide )
• Blog post (like the one I wrote to validate my first course idea )
• Explainer video
• Portfolio of your existing work (like this free one on Contently )
• Hand-built prototype (like my $100 iStash prototypes )
• Simple product sales page or website
• A scaled down product or tool (like these no-code prototypes you can build in a weekend)
• Rough demonstration of your software solution
• Email or email newsletter (like how ProductHunt started )
• Self-published book
• Facebook or Slack group (like #Investing , a group created by a reader)

So, going back to leveraging my core skills (which we covered the importance of in #2 of this post), I took a couple of hours and wrote out a simple Google Doc Proof of Concept  that was just a few pages long, to serve as my proof of concept for this hiking guide idea.

You can check it out and grab the template for it  right here .

I kept it ridiculously simple (721 words). I whipped up a quick header image and just wrote what I wanted the guide to be—while focusing on  how it would benefit readers .

It wasn’t perfect, it didn’t highlight absolutely everything it  could have , but I ran it by one of my friends (a subscriber) and we came to the consensus that it was good enough to get the job done and help me secure pre-orders.

Note that at the end of the proof of concept page, I wanted to include a link to where people could immediately go and pre-order the guide. Giving readers the option to go and buy the guide without me first directly asking them to purchase would tell me a lot about how excited they are for this guide.

Now it was time to pre-launch it to my subscribers and see how it’d go.

8. Launch and Get Pre-Orders From Your Email List.

You’ll need a secure way to accept payments from your subscribers before asking them to buy.

That could be as simple as asking them to PayPal you the dollar amount, using a free card reader from Square to accept CC payment or setting up a simple product page on a platform like Gumroad (I chose this option for my validation challenge).

I chose Gumroad because they have the quickest setup time in my experience, and I knew they offered the option to pre-sell products without charging the customer’s credit card until the guide is actually finished—something I really wanted to highlight to my potential customers so they’d know they’re not getting scammed.

Even if you’re looking to sell handmade goods and eventually plan to  sell them on Etsy , choosing to first use a simple pre-ordering flow through Gumroad is going to be much quicker and less overwhelming in the short term.

Choosing a realistic price point .

Next, you’ll need to choose a realistic price point for your offering—a price point that  helps you achieve your proof of concept goal.

I wasn’t worried about the dollar amount I earned from pre-sales of the guide, since my goal at this stage is to validate my business idea —not make thousands from it this week. This is something that so many aspiring entrepreneurs neglect to see the importance of, which often leads to failure, loss of motivation and disinterest in an otherwise great idea.

You have to use the tools at your disposal, especially as you’re just getting started. One of those tools is choosing to offer an otherwise very low price point for your product or service when you go out to pre-sell it to early subscribers.

That discount is in exchange for them giving a vote of confidence and waiting while you actually produce the solution—in turn, you get to prove that there is a paying market for your product before investing in it.

As a starting point for pricing my digital guide, I decided to take a look around and see exactly what others were charging for similar hiking-related guides and see if I could price myself in the same ballpark.

I took a few minutes to do a little research and found that Lonely Planet, an outdoor reviews site amongst many other things sells their digital eBook destination guides for $8.99 on average.

Despite knowing that my guide would explore California’s destinations in new content mediums, with greater depth and more careful curation, I decided to (again) keep things simple and price the pre-sale of my guide right at $9 since that’s what many consumers are currently conditioned to for a guide of this type… if not free even.

I made it clear on the product page that the price point would be higher ($29) for the guide once it’s finished, to increase the urgency for those who are interested, to pick it up right now.

Now that I had my proof of concept Google Doc and a live product page ready to go, it was time to try and drive in some sales.

Getting your first sales .

Your first sales need to come from manual, individual conversations with your subscribers. You can’t mass email a link to your proof of concept or sales page and expect people to immediately buy (or even understand the value in buying).

Before emailing my list of 565 subscribers I had acquired from my giveaway, I wanted to go back to the 4 friends I had consulted about which product ideas sounded more interesting. I texted them a customized variation of this message—skipping the proof of concept Google Doc and linking them straight to the purchase page to see how they’d respond:

1 of them bought .

That gave me a quick vote of confidence.

Next, I revisited ~15 the individual email conversations I still had going with the friends & acquaintances who’d joined my early feedback group. I was still familiarizing myself with selling this guide & learning what was most attractive about it.

Since some of these people I’d reaching out to via email weren’t my closest friends, I didn’t want to immediately ask them to directly buy my guide. I wanted to ask for their opinion and gather their feedback on my proof of concept document first.

So, I turned to using my  Feedback to Pre-Order Sequence (you can download the copy/paste email scripts right here ) I use to pre-launch courses and other products. It’s another extremely useful strategy & toolset we’ll be covering in my new course, 30 Days to Validate.

Here’s how the Feedback to Pre-Order Sequence works:

Step 1:  Ask the person to check out your proof of concept and complete a short survey leaving feedback about it.

Step 2:  Genuinely answer their questions (from the feedback survey) and ask them if they’d be confident enough in your [product] to pre-order it at a discount today.

That’s it. So simple it’s ridiculous.

Important : In the survey, it’s incredibly important to ask the yes or no question of whether or not they’d buy this [product]. You can prioritize your time on the people who pre-qualify themselves as being interested in buying.

Meet their objections head on and be honest about whether or not you think your solution will be a good fit for them based on the feedback they’re giving you.

Now, here’s my Feedback to Pre-Order Sequence in action with a former co-worker and photographer, Matt who’s been giving me feedback on my California hiking guide project for the past couple of weeks.

(You can click right here to view the zoomed in email and read easily)

That now brought me up to 2 pre-orders.

So, I continued to replicate this approach manually with more of my most engaged early feedback subscribers.

The pre-sales continued to climb throughout the next couple of days.

Here’s another example conversation I had with a former co-worker, Brooks who’s relatively new to California but loves finding cool new hikes off the beaten path in the bay area.

(You can click right here to view the zoomed in email and read easily)

Did it take time having these 1-on-1 conversations with more than a dozen people? Definitely .

But with every conversation and feedback form that rolled in, I learned something new about both my audience and what my product represented to them. I was getting a step closer to validating this business idea each day.

A lot of people really resonated with the idea of getting curated adventure recommendations that aren’t mainstream, touristy and crowded—that fueled my motivation every time I got positive feedback.

This experience also gave me a more clear sense of how to sell this guide more effectively moving forward—I could see first-hand which selling points were getting the most thumbs up.

By the end of the last week of my challenge to validate a business idea, I was sitting at  12 pre-sales totaling $108 in revenue .

I achieved my validation goal (10 or more pre-sales).

I validated that business idea.

Could I have kept going and made several hundred more over the next few days by keeping the one-on-one conversations going or sending an email broadcast to all my subscribers once I had my pitch down?

Probably, but I already achieved my validation goal so I wanted to move forward.

What comes next after you complete your pre-launch sequence?

Keep going. Continue building with even more confidence. Engage more with your subscribers and customers to make sure you’re still providing them with something they want.

9. Continue Building and Tweaking With Feedback.

If you’ve successfully validated your business idea, the real work has just begun—and that’s exciting as hell.

As responses roll in from your pre-launch pitches, you’ll undoubtedly collect valuable feedback that’ll help you make your solution even more effective for your audience, if you listen carefully.

If your pre-launch didn’t go as planned and your validation test failed, don’t give up.

This is just the first of many setbacks that’ll be coming your way as an entrepreneur. Failure is a natural (necessary) part of the journey. It’s what you decide to do next that defines you. Trust me, I’ve been there  many times.

It’s time to digest all of the feedback you’ve gotten and determine some possible causes of why your validation test failed.

Some common reasons validation tests fail are:

• Pitching to the wrong audience
• Not getting in front of a large enough audience
• Not creating enough perceived value in your proof of concept
• Not incorporating or highlighting the right value propositions
• Pricing the pre-order of your solution above what your audience will pay
• Existing solutions on the market are already “good enough”

So, what comes next for you?

Do you want to validate a business idea of your own in the next 30 days?

I’m talking about finding a profitable business idea . Quickly building an email list of real potential customers. Generating revenue in a matter of days. Creating the foundation for what could quickly grow into a profitable business that solves problems you care about.

I did everything in my challenge to validate a business idea in less than 30 days with around 5 – 10 hours of work per week, maximum. And that was with a week-long vacation built in.

All of the money I spent validating my business idea (less than $500) was recouped within the same month and I was able to generate $108 in pre-sales of an eBook that doesn’t yet exist, to a handful of my email subscribers… thus validating my business idea.

Sound like something you’d like to do too?

If you’ve been wanting to start a business but don’t know exactly what it should be…

If you haven’t been able to get much traction with the idea you already have…

If you feel like you don’t have the time or money to start a business right now…

If you’re just not sure of how or where to get started and you’re looking for a step-by-step game plan to launch…

I’d like to personally help you .

Would you be into that?

I’m looking for beta testers to help me finish my next course, 30 Days to Validate (and validate a business idea of their own).

I want you to  get real results . And if you’re up for it, I’d love to personally help you do this right now .

If you want to beta test my new course, you’ll get the first look at all of the course material, membership in a private Facebook Group with me so I’ll be able to tailor the content specifically to your questions and you’ll get direct access to me for the coming months while you build your business.

Are you ready to do this? Now, here’s the original validation challenge post.

My Step-by-Step Challenge to Validate a Business Idea in 30 Days (With Less Than $500)

Here’s the deal. I want to show you how easy it can be to validate a business idea —any idea—very quickly without spending hardly any money at all.

In celebration of the launch of my flagship course, The Launch Formula  (shameless plug), I thought there’d be no better way to demonstrate just how easy it  can be to build the foundation for a profitable business if you have the right mindset, blog goals , a real blogging strategy and clear plan of action.

There’s no reason why you can’t start a business today and build a successful foundation in a matter of just a few short weeks…

In just 30 days, I’m going to choose a business idea (comment below what you want me to build), create a proof of concept for that idea, build a list of potential customers, launch a product to them and validate the business idea.

Kickoff Note: We’ve Chosen the Business Idea .

Dec 2nd :  As promised, I’ll be updating this post regularly throughout the month of December. Click right here to jump down and start reading from my Kickoff Note.

Update #1: Elevator Pitch, 47 Email Subscribers, Generating Product Ideas and a Giveaway Idea .

Dec 8th :  A lot has happened over the past week. Through manual reach out efforts to friends, old co-workers and acquaintances, I’ve built up a list of 47+ email subscribers (and growing) who are interested in learning more about my website. I’ve got my elevator pitch down, a few ideas for products I can sell from my future website and plans for a giveaway to scale up my list building efforts are in the works. Click right here to jump down and read more starting from Update #1.

Update #2: 305 Email Subscribers, Strategic Connections, Reddit, Launching the Giveaway and Influencer Outreach .

Dec 15th :  I still can’t believe everything that’s happened with this project in the last week. The number of email subscribers I’ve generated for this (as of today non-existent) website is now sitting at a whopping 305 . Because I’ve been sharing this idea with a lot of friends interested in hiking & photography, a few huge strategic connections with influencers and other well-established hiking-related sites have sprung up. I launched the giveaway, it picked up some momentum on Reddit and I reached out to a handful of photographers who shoot the California outdoors to ask for a share. Click right here to jump down and read more starting from Update #2.

(Final) Update #3: 565 Email Subscribers, Ending the Giveaway, Finding a Product Idea, Building a Proof of Concept, $108 in Book Pre-Sales, Holiday Vacation and a Big New Opportunity .

Dec 30th :   MISSION ACCOMPLISHED . The past couple of weeks have been a rollercoaster ride, but I’ve successfully validated this idea. Thanks to my gear giveaway making it onto Reddit’s /r/giveaways, my email subscriber numbers ballooned all the way up to 565. More later on why that’s not necessarily a great thing. I wrapped up the giveaway and shipped the goods to the winner, sold enough stuff on eBay and brokered a high enough rate on the extra freelance writing piece I took on, to more than pay for the giveaway items already. I spoke one-on-one with my audience and used their feedback to find a product idea with the goal of pre-launching to truly validate this business idea. Next, I built a proof of concept, asked for more feedback and generated $108 in pre-sales (so far). With the holidays, I powered down my computer for more than a week (family time is important to me) and this project led to an exciting new opportunity for both you and I, which we cover in the update. Click right here to jump down and read more starting from Update #3.

It wouldn’t be very fair if I just took an idea I’ve secretly been working on behind the scenes for months or used my existing audience & website to boost my early results, so here are the ground rules I’m setting for myself.

1. You Tell Me What to Build.  There are 3 topic options to choose from at the bottom of this post, which I selected because I have a genuine interest in them (this is a core principle of starting a meaningful business ).  Tell me in the comments  which topic you want me to build a business around. I want to show you that you can quickly build a business around anything you care about.

2. $500 Limit. Sticking with my lean business building philosophy, I’m going to limit myself to spending no more than $500 on validating this business idea. I’ll be showing you how to build a business without breaking the bank.

3. 30 Days to Validate. I’m going to pick a topic, validate it with an email list of potential customers and launch a product or service to that list by the end of December. It’s that simple. I’m going to show you that you too can do this in 30 days or less while keeping your full-time job.

4. I Can’t Use My Existing Audience. To keep things fair, I’m not allowed to use my existing ryrob.com audience or website traffic to accelerate my early results. I’ll show it’s possible to build an audience in 30 days.

5. 25 Hours/Week Maximum. For this challenge, I’m going to limit myself to treating this like a side business—I’m only allowed to allocate 25 hours per week to validating this business idea. I’m not taking any time off to focus solely on this. The show must go on with my freelance business and course students, so this will be my side business for the month of December. This is also the same amount of hours I was putting into building my freelance business on the side while I still worked at CreativeLive. I’ll show you that it’s possible to build a business around your day job in no more than 30 days.

I’m going to be doing this completely from scratch. Zero traffic. Zero list. Zero existing customers.

Do you want to see that? If so, tell me in the comments.

I have 3 topics in mind. All of which I’m genuinely interested in and aren’t around selling my content marketing strategy services (i.e. my existing freelance business).

Topic #1 : Hiking in California

Topic #2 : Cooking Hacks

Topic #3 : Long Distance Running

Which one would you like to see?

Tell me in the comments below.

Kickoff Note: We’ve Chosen the Business Idea.

Dec 2nd : WOW! After 205+ votes in the comments and well over 400 email replies (holy crap), the winner for the topic for me to validate a business idea around is…

Hiking in California?

Cooking hacks was a very close second for you all, so that may have to be my next challenge in the new year. What do you think?

For now, I’m pumped. Hiking in California is something I’ve had a strong interest in for the past several years, so I’m up for the challenge—this is going to be fun. Here’s a picture from the summit of Mt. Whitney, the highest peak in the contiguous United States at 14,505ft when I hiked it in 2014 (you get pretty light-headed at that elevation ascending from sea level in one day).

So now, here’s what comes next.

First off, I have to admit I already made my first mistake—or at least a deviation from the advice I typically give (shockingly, I’m still human).

In my excitement around 5:15am yesterday morning once I saw that hiking in California was going to win, I bought a domain name .

With most of the people I connect with through my site, my blogging courses and in The Launch Formula , I usually advise people NOT to immediately rush out and buy a domain name , start a website or jump straight into other tactics that equate to spending money without first having a clear path to making a return on that investment.

But, I promised I’d share everything with you—the good and the bad—so consider this my first hand slap. Now it’s time to back-pedal a bit.

Luckily it only cost me $13.95 to register the new domain where I keep all of my domains over on  Dreamhost .

That now leaves me with $486.05 left of the $500  that I’ve allocated to validating this business idea.

However, since I’ve had so much experience over the years with quickly whipping up ( read: very simple ) WordPress websites to test out ideas, I already know that I can take a stock self-hosted WordPress template and get a functional website ready to go in no more than 1-2 hours.

I view this ability as a strength of mine—I’m working with the tools and skill sets I already have. Call it what you will, but you have to play with the cards you have at your disposal today.

Right, so how do you start when you can’t just pull a website out of thin air?

Google Docs  (free).

Like the vast majority of people just getting started with their business ideas, if you don’t already possess the ability to quickly build a simple website, my advice is to work with what you’ve got and leverage the immense number of free online business tools already out there, like Google Docs.

What skills and strengths do you already possess?

Can you make do with creating a simple Google Doc outline of the solution you want to build?

Don’t sign up for paid email list-building tools to collect leads either. Save your money.

Go with either a free Mailchimp account  or even better (less time and effort), use a Google Form to collect email addresses for your first potential customers (we cover how to do that in my free course about Finding the Right Business Idea ). They’ll be stored in an excel-like Google Sheet (for free) where you can reference them and easily send email updates anytime in the future.

Now, I’m going to take a step back.

Since I already started to deviate from the advice I usually give, I’m taking a step back.

I’m not going to launch the website yet.

It’s not worth investing the time building a website before I know exactly what I’m going to be selling.

So, I’m going to turn to more manual, organic methods of connecting with people I know will be interested in hiking in California. I want to hear from them, exactly what they need before I go out and build a solution to a problem that doesn’t really exist ( like I’ve done before ).

UPDATE #1: Elevator Pitch, 47 Email Subscribers, Generating Product Ideas and a Giveaway.

Dec 8th : As I ended last week’s update, this week’s work began with taking a step back and going to more manual, organic methods of connecting with my audience and learning about  exactly what they want  from me within the topic area of adventuring & hiking in California.

Manual. Organic. Natural.

But before I began my manual reach out, I had to craft an elevator pitch so I could concisely describe what my website is going to be so my friends will quickly understand what’s in it for them if they decide to join my early feedback list. This is particularly difficult when I’m still not 100% sure what this business will actually be once it launches, but that’s not important . Pushing forward.

What IS important is that I communicate the value my early readers will get from checking out my website. The product, service and monetization will come later once I’ve learned how to give these early readers exactly what they want and need—for now, I’m gathering my circle of people to test with.

Crafting an elevator pitch.

With focus on value, I sat down and wrote out a list of what I thought was missing from current sites that tried to be hiking guides, adventure manuals and general resources for doing cool stuff outdoors in California.

Surprisingly, I found that most of the websites talking about hiking and outdoor adventures in CA had pretty mediocre content—images were often stock photos, the written content tended to be overly generalized and not very helpful for hikers seeking to capture great photos while they’re on a hike (a narrow niche I think I can address very well). I think there’s a serious opportunity for having hiking guides and outdoor adventure resources that have a significantly higher quality of images and other content.

So, my hypothesis is that by going into content mediums like drone footage and 360 cam images (that others aren’t trying in this space yet), I’ll be able to win some readers that appreciate the new innovations and higher quality.

After 20 minutes of research, I came up with this short elevator pitch that I could customize for each person I reach out to:

Is it perfect? No. But that doesn’t matter, I’ll refine as I go and tweak it over time as I learn more about what my audience wants.

Manual outreach begins.

The first thing I did was started texting my closest friends and old co-workers I still keep in touch with. Only the ones who I thought would be interested in a website about hiking and adventuring in California. Here’s what those text conversations looked like:

Before I started my reach out, I did my best to quickly make sure these friends would be within my target so I wouldn’t waste time presenting an idea they wouldn’t be interested in.

To me, being within my target market meant that each friend I reached out to needed to (1) live or frequently spend time in California and (2) have a somewhat active lifestyle, which would indicate to me that they’ll probably be interested in adventuring and hiking.

After going through the 20 people in my recent iMessages conversations who I thought would be a good genuine fit for this, I had  17 email subscribers who’d be interested in getting updates on my project.

Some people said yes , some said no and others I could tell were just saying  yes to be nice. I only added the 17 people who I thought were genuinely excited—the last thing I want to do is to guilt trip friends into pretending like they’re into an idea.

17 email subscribers.  This was hardly enough to feel confident in when it comes to actually taking the time to build a proof of concept for my site yet, so I took my reach out to the next level.

I pulled up my list of Facebook Friends (2,119 as of today’s date) and started scrolling through to see who I may have missed. Each time I came across someone who I thought could be right for checking out my site, I added them to a GoogleDoc Excel sheet so that I could easily keep track of all my leads.

Then I again began sending emails, texts and Facebook messages to the people on this list and updated their status back in my Excel tracking sheet as I heard back.

Here’s what those emails looked like with a couple of friends. Matt is a hobbyist adventure photographer and we used to work together at CreativeLive. Charbel is an entrepreneur that shares a lot of the same interests as me, so I knew they’d both be a good fit.

I’m friends with both of these guys, but didn’t feel like texting was as appropriate for something like this, so I went with email based on gut feeling—I didn’t want them to feel too pressured to respond if they didn’t want to.

Notice again how my outreach emails are custom tailored to each person and mention a mutual interest we have or reference our last conversation. I’m not copying and pasting my elevator pitch template and you shouldn’t either.

Here’s a pitch I made over Facebook messages to an old friend of mine, Randi who’s now a photographer in Southern California.

My response rate was by far the highest when I texted people. 19 of the 20 people I texted got back to me with a yes or  no . Email has been the second most effective (feels more like a work-related task) and Facebook messages have been by far the least effective (people often forget about their Facebook messages or don’t frequently log in).

I recommend going with texting people as your primary outreach medium to build your early feedback group.

47 email subscribers.

I’m now up to 47 people who are interested in getting updates on my hiking & adventure California website. I’m going to keep going until I’ve reached out to all 100 people I flagged on my prospect list.

Since several of the friends I’ve reached out to are photographers, a few of them proactively offered up letting me borrow some of their equipment to help document the hikes I’m planning to go on because they liked this idea so much . They want to be part of what I’m planning on building in some way.

This is one of the biggest benefits of involving your target audience in the creation process as you go—some of the people that are interested in what you’re doing will want to participate  with you . I’m all in for that.

I now have access to a drone and a 360 cam—SCORE.

This could’ve been perceived as a barrier to entry for this business, but I side-stepped that by involving my target audience in the process of building. These items are pricy to buy and still a little expensive to rent, so it’s great knowing that I’ll be able to borrow this gear when it’s time to shoot my content.

MailChimp and Gmail (whoops).

Over the past week, I also took 10min to sign up for a free MailChimp account on my lunch break so that I’d be able to send email broadcasts to my early subscribers in the near future. In hindsight, did I absolutely need to do this already?  No . It was a waste of that 10min.

I won’t be using this service immediately since I’ll be primarily sending individual emails to my early subscribers to keep it very personal, but got excited and wanted to lock down the MailChimp account now while I was thinking about it.

No particular reason why I did this already—and to be honest I really didn’t need to. In retrospect, this was not the best utilization of my time and isn’t how I advise managing opportunities .

Same goes for the Gmail account I created this week—did I absolutely need to get a new email account just for this website (that doesn’t even exist yet)? No, not yet at least. But I got excited and did it.

I don’t have plans to use this email address immediately either—I’ll get to that point once my site is up and I need to list a more relevant contact email.

Generating product ideas.

I’m going to keep these 1-on-1 conversations going with my early feedback group. My goal is to learn how I can best help them—and to come up with product or service ideas that deliver value.

I already had a few ideas for products and services in mind that I think my audience will find value in, but during a few of my conversations with my early feedback group already— something incredible happened .

My audience started telling me what they wanted.

Check out this text from my friend Michael that lives in Los Angeles, a traditionally very tourist-heavy city.

I like that. There’s definitely something there with this angle of providing a more in-depth point of view and guide to the “locals only” experiences in California. The hikes, adventures and destinations that are just off the beaten path.

Perhaps there’s a way to monetize an in-depth guide to 10 or 25 of these destinations—with high quality photos, video, drone footage and 360 cam images to make it particularly unique.

Two other friends of mine, Bryan who worked with me at CreativeLive and loves photography, and Alan who’s an active outdoor enthusiast in his own rite, now work together and talked about my website idea at lunch.

Interesting. I like this one too.

I honestly hadn’t thought of that—providing a monthly subscription service where I line up a curated, local adventure and discounted deal for my subscribers to go on once a month. Keep it simple by not handling transactions myself, but instead connecting them directly with vendors.

This concept could also be combined with the same approach that my friend Michael alluded to earlier as well—off the grid, secret, less touristy adventures that I could line up for my subscribers.

This is getting exciting.

I’m going to take this weekend to build upon these two ideas and see what else I can come up with as far as product & service offerings to pitch my early feedback group members over the next couple of weeks.

Building my audience beyond just my close circle of friends.

A huge component of what I teach in The Launch Formula is that you need to get objective feedback on your ideas from both people you know and  people you don’t know . So, it’s time to strategize on how I’m going to do that—quickly.

I’m starting to build some confidence now that I have 47 email subscribers in my early feedback group, but I still want to spread this out to friends-of-friends and that layer of second or third degree connections that may not know me personally. Those are the people who are likely to be most honest with me.

On top of that, before I invest time into building anything, I want to get more people engaged in my idea as it takes shape.

Enter: A giveaway idea.

One of my favorite potentially viral marketing tactics that I used during my time at CreativeLive was giveaways.

The idea is simple: Run a sweepstakes and give away an awesome,  relevant product or service for free in exchange for asking entrants to sign up for your email list first. Incentivize them to share the giveaway on the backend after they sign up by offering a few “extra” entries into the giveaway for every friend they refer to my giveaway.

If I get 50 of my early feedback group members to enter my giveaway and share the giveaway with just 3 of their friends each… that would lead to me generating 150 new subscribers to join my feedback group.

There are tons of tools for doing getting a giveaway up and running very quickly and effectively.

I chose KingSumo Giveaways by AppSumo, a WordPress plugin , mostly because I have a lot of friends whom it’s worked well for and Noah Kagan who runs AppSumo has been a great source of advice to me —I figured I owed him one by now.

Here’s a snapshot of the giveaway landing page in action on Buffer’s website:

I found a flash deal for KingSumo Giveaways online from an affiliate partner of AppSumo (which of course is no longer available) and picked it up for $49.50. Seriously, it was just lucky timing that I got this discount. These discounts come and go all the time, so keep an eye out and be patient.

You can still grab the plugin from another affiliate of theirs for $99 right here  and if you sign up for their email list (and AppSumo’s ), they often discount down to the $49.50 price point when running specials.

Now, I’m left with  $436.55 of the  $500 I’ve limited myself to. I’ll have to get creative with my budget for this giveaway.

Since I only want people entering my giveaway who are likely to be interested in hiking & adventuring (preferably in California), I’m probably going to make my giveaway item(s) very closely related to hiking gear. Things like: A backpack or tent, sleeping bag, jacket and so on.

But first, I’m going to take the weekend to  ask a few people in my audience what type of gear they want (and will use)—I’ll run a few giveaway suggestions by them and see what they think.

What’s next?

Once I land on the giveaway item I’ll be offering to my early feedback group, it’s time to promote the hell out of the giveaway . I’ll start with opening it to my small email list, then spread out.

Next, I’ll build a targeted list of online communities, forums, Instagram & Twitter influencers (think: outdoor photographers in California) who might be interested in sharing my giveaway with their audience in exchange for a future feature on my site once the site is live. It’s a long shot since the site doesn’t exist yet, but all I need is a couple of yeses that could make all the difference. To help boost your legitimacy a little bit before your outreach, you can consider buying Twitter followers as a means to stand out a bit.

After my email list has grown in size from my giveaway, I’ll individually pitch my refined product or service ideas to a handful of people in my feedback group. I’ll take their consensus on what sounds most appealing, whip up a quick landing page and launch it on pre-order to my full email list.

Will all of this going according to plan?  No way .

But I’m going to grow and adapt when I need to… for now, it’s back to work.

UPDATE #2: 305 Email Subscribers, Strategic Connections, Reddit, Launching the Giveaway and Influencer Outreach.

Dec 15th : Buckle your seat belts because this is a HUGE update. As Keri Vandongen put it (near the bottom of the comments section below), this feels to her “like she’s reading my diary of validating a business idea,” which is a huge complement and also exactly what I’m going for. So, brace yourself for this latest entry. ?

Here are giveaway email subscriber numbers, as of this afternoon:

I’ve yet to count my total number of subscribers (assuming some people from my early feedback email list may not have joined this giveaway list), which I’ll be reporting on in the next update.

Now, before we dive into the specific strategies and tactics I employed to achieve massive results this week (305 subscribers and still growing quickly), I want to highlight a recurring theme that’s incredibly important to any entrepreneur looking to validate a business idea and build something meaningful.

Sharing your work is hard.

I get it, trust me. It’s STILL hard for me, even today. It’s hard because you’re exposing who you really are deep down. You’re making yourself vulnerable. You’re actively creating opportunities for people to judge you and the quality of your work.

However, the more people I reached out to and shared my idea with, the more great things started to happen for me.

It was genuinely difficult for me to share this website idea and ask for feedback… even from 47 of my closest friends and acquaintances whom I know won’t judge me.

As I was contemplating hitting send on my first big update email (and the giveaway announcement) to the 47 or so subscribers in my early feedback group on Tuesday of this week, I had a rush of anxiety .

• What if my friends think what I’m trying to build is dumb?
• What if asking them for feedback on a business idea damages my relationship with them?
• What if I end up failing with this idea? How will I explain that failure?

These were the types of questions running at light speed through my mind.

I literally tried to think of excuses for why I shouldn’t send the email on Tuesday… Oh Tuesday’s are the busiest days of the week, they probably won’t have time to read my email. I bet if I wait until Wednesday or Thursday, I’ll get a higher open and click rate (the curse of thinking like a marketer).

In the end, I decided to hit send despite all of my reservations.

Here’s how—I reframed the situation by asking myself, “Which decision (to send or not send) will you regret making the most in 1 week? How about 1 month?”

In this context, the answer was a no brainer. I’d clearly regret it more if I didn’t take the opportunity to confront my fears and anxieties—if I didn’t give myself the chance to see if this idea really has the potential to succeed.

In 1 month from now, who’s going to care that I sent them an email asking for feedback on an idea and to enter a giveaway to win some pretty cool stuff? Nobody.

Here’s me sending out my first update + giveaway announcement email to my early feedback group using the free Chrome extension, Yet Another Mail Merge . I highly recommend it for sending customized bulk emails.

After sending out this update and giveaway launch announcement, a lot started happening.

Let’s dig into it.

Reaping the rewards of sharing my idea.

Almost every time I shared this new website idea with a friend, old co-worker, family member or otherwise, they had something insightful to share with me.

Whether it was a tip for their favorite must-see hike in California for me to document, directional advice on how I can position my content to be unique in this crowded space, a referral to someone they know who either operates a site in this space already (or has worked with this topic area in the past), or even potential revenue-generating business models for the site based on their biggest pain points—the constant theme has been that by sharing and growing the size of me early feedback group, they’re helping me build my business .

Seriously, this is something I want you to PLEASE read twice.

By involving people who are interested in the solution I want to build, they’re naturally helping me to create a version of it that they’ll find value in.

This means I’ll have an engaged, involved group of people who are already (practically) guaranteed to at least consider paying me for what I’m about to launch. They’ll already feel like a part of my site when it launches.

Let’s start with this email from my friend, Jake just a couple hours after I texted him about this idea.

(!!!) How amazing is that?

Jake took an active role in helping me shape my idea by sending me an existing site that could serve as inspiration for me as I build—and give me a sense of how to make my content more unique or different than what’s already out there.

What’s even more impactful is that  he’s somehow connected to the person who owns Weekend Sherpa , a site that’s been in the California outdoor niche for over  ten years .

Think that’s a person I should connect and collaborate with in the future? (Hell yes)

If I hadn’t shared my website idea with my friend Jake, I would never have known this connection existed.

Share what you’re working on—you’ll be surprised by how many people will want to support and help you.

This happened again with another one of my friends, Matthew.

Knowing that he and I share a common interest in trail running around the Bay Area, after texting him about my idea, he mentioned that a former business partner of his worked with one of the HUGE original websites in outdoor activity recommendations —Every Trail.

Talk about another person I’m going to want to connect with soon.

By sharing my idea with less than 50 people so far, I had already uncovered hidden mutual connections to 2 of the largest, most established, reputable hiking and outdoor adventure websites in California.

No joke, I had no idea those connections existed. And in business, an introduction from a friend goes a long way beyond just a cold outreach email sitting in the inbox of someone you don’t know.

These connections can be very powerful potential partnerships for me in the near future.

Deciding on what I should give away (with the goal of building an email list).

Before deciding to allocate some of my budget to buying gear for my giveaway, I wanted to make sure it’d be stuff that my target audience would actually want—something they’d be comfortable signing up with their email address for a chance at winning.

I had a few ideas in mind already, but because I know the importance of asking my audience what they want (instead of trying to guess and decide for them), I decided to ask them which item they liked best.

It was between an Osprey hiking backpack, GoPro HERO 5.0 and a FitBit Surge—all gear that someone who’s active in the outdoors will appreciate.

So, I reached out to a few of the people in my early feedback group and did a quick poll to see what type of gear they’d want most.

The answer: GoPro’s and hiking backpacks .

Next, I did a quick check on Google Shopping & Amazon to see how much the GoPro and Osprey bag would run me.

Surprisingly, I found that I could get both of these two items for relatively cheap compared to how much I thought they’d cost.

The GoPro HERO 5.0 MP would be somewhere around $175 .

The GoPole extending stick goes as low as  $28 .

And the Osprey Atmos 50, my favorite pack of theirs is as low as $170 + $15 shipping.

Since the feedback from the 6 people I asked about which giveaway item they’d want most was pretty split evenly between the GoPro and the Osprey pack (and the cost for both would still be within my budget), I decided to just include both of them in the giveaway to make it more exciting and appeal to more people.

Plus, I knew that at least these 6 people would be pumped to see both in the giveaway.

Buying both of these items would take up a whopping  $388 (of the remaining $436.55 I have left for validating this business idea).

Important Note: I still have not bought these items… for a very good reason.

I don’t love spending money. I also don’t like taking big risks without a clear potential return.

Over the next couple of weeks (before I have to fulfill this giveaway to the winner), I’m going to work my ass off to try and find a sponsor who’d be willing to either gift me these items or discount them heavily.

There are literally more than 260+ sporting goods stores in the greater SF Bay Area. I’m going to call or visit a few dozen of them and try to work out a deal in exchange for promoting some of their products and sales to my email list of outdoor adventure junkies.

Most companies build in margins that allow for discounts, promotions and deals—I’m willing to bet they’d be up for giving me even a 25% discount on buying this gear in exchange for exposure to my highly targeted audience.

That’s worth something. It’s a numbers game, but it’s only a matter of perfecting my pitch and talking to the right decision-maker.

But in the meantime, I still don’t like spending money.

So, to compensate for the money I’ll eventually be spending on buying these items, I decided to make an extra $400 this month just in case I won’t be able to get any sponsors. Here’s exactly what I’m doing to get that extra income:

I knew that $400 in extra income probably won’t be coming from this website idea yet, so I got creative…

1. I’m selling some stuff .

I don’t know about you, but over time I tend to collect stuff. Clothes, shoes, gadgets, the list goes on.

I actually think of myself as being fairly minimalistic compared to a lot of my friends, but to be completely honest, I don’t really need (or use) a large proportion of the stuff I own.

So, yesterday afternoon I went through my closet to look for some stuff I could sell to offset what I’d potentially be spending to buy these giveaway items at full retail.

In 10 seconds, I found a pair of Nike running shoes I had worn once. They didn’t fit quite right, but I had already thrown out the box and receipt (dumb), so they sat at the back of my closet for 6 months. Those went up on eBay about 3 minutes later…

The next thing I found was a pair of jeans I hadn’t worn once, despite owning them for almost a year. Same story. They didn’t fit well, but I had already cut the tag off. Why did I even have these still? Anyway, up on eBay another 3 minutes later…

Neither of these are guaranteed to sell of course, but if they do, that’ll be an extra $125  to go towards my $388.

Not bad for 10 minutes of work, plus I thinned out my closet which my girlfriend greatly appreciates. Win-win.

That still left me with a pretty sizable gap, and I didn’t want to take a ton of time looking for more stuff to sell. So, I turned to making some extra money with my craft: writing.

2. I’m using my skills .

This morning, I searched through my Gmail folder I keep to tag all conversations I’ve had with freelance clients (and potential freelance clients) over the years. I frequently turn to this first when I’m looking to restart client relationships and pick back up where I left off with someone when I need more work.

In a few minutes, I found the right opportunity.

I reached out to the editor for a business-related blog I used to write for earlier this year, but for some reason things just fizzled out and I hadn’t pitched a new piece since April.

This particular blog pays  $250 /article, which is now a little ways below what I typically take for writing a post (a lot has changed this year), but I’m doing this to prove a point ?

Check it out. Blurred because they don’t like publicly sharing writer rates :

In another 10 minutes, I had secured an extra $250 in future income for this month.

Just like that, I had created enough  potential upcoming cash flow to cover $375 of the anticipated $388 I’d be paying for the giveaway items if I need to buy them at full retail.

Again, I’m still very confident that I’ll be able to at least get these prices knocked down considerably by knocking on enough doors at sporting goods stores. But, just in case… I wanted to cover all of my bases. Another alternative could be seeking the right small business grant to help fund the start of my business, but I don’t want the strings that come attached to that.

But Ryan, that’s not fair. I don’t have $400 lying around to spend on a giveaway right now and I can’t just send an email to someone & get paid for writing an article today.

Stop wasting time complaining. Seriously.

I just problem-solved the shit out of this situation in 20 minutes.

You can do the same thing in your own way .

Will it take you more than 20 minutes to figure out? Probably, but that’s not the point. The point is that when you want something bad enough, you’re going to do  whatever it takes to make it happen.

Here’s a little tough love: In business, you’re going to run into a lot of problems, challenges, tricky situations. It doesn’t slow down—in fact, the challenges usually get more complicated as time goes on and you experience some success.

If you allow yourself to get hung up and stop right here on the very small (but meaningful) goal of validating your business idea, you’re never going to accomplish your biggest goals.

I’m doing everything I have to do right now, today… to achieve my short-term goal of getting enough email subscribers to validate this idea. That’s it. Nothing else matters in this moment.

You have to get creative. You have to become the chief problem-solver in your business.

Even more importantly, you have to realize that you don’t need to make it back the way you lost it . (Which Tim Ferriss also talks about in detail during  a recent episode of the Tim Ferriss Podcast )

Meaning, I didn’t need to make the $388 directly from my non-existent website in order to balance out the numbers in my bank account at the end of the day. I could turn to other revenue streams (like selling stuff and using my skills) to pick up the gap in my income and completely pay off this giveaway before even buying the gear.

No excuses. Work with the tools you have and the situations you’re in.

Setting up the giveaway.

Now that I knew exactly what I was going to include in my giveaway, it was time to get into my KingSumo Giveaways Wordpress plugin and whip up a quick landing page.

No frills, nothing too crazy. Again, simple is the name of the game.

Here’s the giveaway page. Sorry you can’t enter—against the rules for me to link to it and use my own audience, remember? ?

(you can click here to see the full image of the landing page and read the copy easily)

To logo or not to logo? (I made another mistake… sort of)

I wanted this page to look professional to the people who’d be coming here without knowing me, so I decided I should have a logo.

I’m on the fence about this one, but it’s kind of a dumb utilization of time in hindsight, because you don’t really need a logo for a website that doesn’t exist yet. But, I had already gotten the thought into my mind and I couldn’t shake it. So, I limited myself to spending  no more than 10 minutes on it .

How do I make a logo that doesn’t look awful in 10 minutes? Ok, problem-solver cap goes back on.

Really quickly, I Google searched for “mountain graphic” and that led me to FreePik.com where I grabbed the first free stock mountain clipart graphic that caught my eye.

Next, I used my (very limited) Adobe Illustrator  skills to quickly change the color of the mountain & update the text to, “Let’s Hike California.”

Not terrible for ~10 minutes of work and I now have a logo to plug in on the giveaway page to make it look more legitimate.

After writing some copy that explained the giveaway, why I was hosting it and why people should enter, all I had to do was upload the pictures I had grabbed of the GoPro and Osprey pack & it was ready to go.

The giveaway goes live.

Immediately after getting the giveaway page live, I started writing my first update + giveaway launch email to my early feedback group of 47 subscribers (the one I mentioned earlier in this update).

I wanted to keep it as short as possible, thank these friends for their feedback and help thus far and explain the specifics of the giveaway in an easy-to-follow manner.

Here’s that email:

(you can click here to see the full image of the launch email and read the copy easily)

Did I really need to design an image to use in just this email? Nope, that’s another (sort of) mistake.

But like with the logo, it took me ~10 minutes to get it to what you see below, so I figured that was justified in case any of my friends wanted to share the image and promote the giveaway on their social profiles.

Pretty much immediately after sending out the giveaway link to my early feedback group, they started to enter.

And thanks to the clever guys at Appsumo who built the KingSumo Giveaways plugin, immediately after you enter the giveaway, you’re presented with this screen:

This means that everyone who enters my gear giveaway is incentivized (in a big way) to share the giveaway with their friends—giving this the potential to go viral.

For every friend a contestant refers to my giveaway using their special link, they’ll get 3 extra entries, thus increasing their chances of winning. Genius.

And… the giveaway is starting to go a little viral.

My friend Matt, who’s on my early subscriber list shared his giveaway referral URL with his Facebook friends.

A lot of his Facebook friends (people I don’t know) joined the giveaway afterwards, and he got a ton more entries.

Multiply this effect by the ~20 friends who replied to my email telling me they joined & shared the giveaway, and I now have the recipe for something that could generate a lot of email subscribers.

I started to notice people I didn’t know sharing the giveaway on Twitter…

I also started to notice a trickle of traffic coming in from Reddit , which means someone who joined the giveaway shared it in the /r/giveaways sub-reddit.

Not ideal that it went up onto Reddit in my opinion, since that’ll probably lead to a lot of people joining who just want want  free anything and aren’t really into hiking, the outdoors or even spending time in California.

Oh well, this can at least lead to a higher chance of the giveaway going viral and getting me a high volume of potential new customers which could make up for the lack of targeting on them.

After the first 24hrs or so, I had about 160 new subscribers who’d joined through the giveaway, but momentum was starting to slow down a bit.

So, I wanted to try out another marketing tactic (specifically an Instagram marketing tactic ) that has traditionally worked very well for me, especially with my freelance content marketing clients: Influencer marketing.

Influencer outreach on Instagram.

One of the friends I strategically chose to include in my early feedback group, Justin Katz , is a super talented photographer here in California.

He has a really engaged Instagram following and takes a ton of his free time to go out and capture amazing images from different trails and locations around the state—he’s literally my target market for this site. And so are his followers.

See what I mean? Yeah.

He also has a sizable following where he’s learned how to grow a blog covering topics like the best gear for photographers, online courses for learning new photography techniques and how to build a photography website, so I knew I’d want to tap him and get him involved with this project somehow.

Once momentum on my giveaway started to slow on Wednesday, I sent Justin an email asking if he’d be up for promoting my giveaway from his Instagram account with the next image he shared.

Here’s how I pitched that:

(you can  click here to see the full image of the email and read easily)

Super simple, I just asked him to post a photo that he’d normally post (less effort) but mention the giveaway in the caption of the image and place the link to enter in his bio for the next 24hrs.

Here’s that feature:

This post already has 484 likes and 18 comments, making it one of Justin’s most engaging posts recently. The image is incredible, but people were also pumped about the giveaway. That jump-started the momentum for the giveaway again, and pushed it past the 300 mark in another 12 or so hours.

But what do you do when you don’t have a friend with a large Instagram following already?

Here’s what I’m doing: Cold pitching people who might  realistically be interested in sharing my giveaway,  in exchange for something valuable to them .

Realistic means that you’re not reaching out to people with hundreds of thousands or millions of followers. For them, their Instagram account is probably a full on business, which means you’d have to pay to play. Set realistic goals.

To me, that meant targeting more influencers that were in the 5,000 – 50,000 follower range and had solid engagement.

Now, what kind of value do I exchange in return for them posting to promote my giveaway? Time to once again put my problem-solver cap back on…

What do photographers who are trying to grow their Instagram following (and business) like?

• More followers
• New business
• Good press features (which can lead to new followers and new business)

Going down that list to figure out what value I can contribute to their business…

I know that I don’t want to pay for sponsored posts (which would be much quicker & easier), because I hate spending money. That’s out.

I don’t have an existing Instagram account (or website) yet for this project. No followers of my own to push towards these influencers. That’s out too.

I couldn’t think of a  quick way to help these guys get new business right away, though there could be something there. That’s out for now.

Good press features . Now that’s something I could promise them (in the future) since the upcoming website I’m working on will have a cleverly named blog as the main components of inbound marketing .

So my hypothesis is that maybe some of these influencers will share my giveaway with their followers, in exchange for highlighting them in a feature on my site. If I could bring my readers over to follow them on Instagram, that’d be valuable to them.

It’s settled. I decided to try and pitch a handful of influencers on  future, non-monetary value I could provide in the form of featuring them on my website.

Even still, this is an incredible long shot since I have absolutely zero proof that this website will ever exist.

I’d have to be VERY convincing.

Time to start finding the right influencers to reach out to.

The first thing I did was go to an Instagram location in California that I knew would be rich with photographers an influencers: Yosemite National Park . Thankfully, you can now access Instagram on desktop, so this is much easier than fumbling around on my iPhone.

Boom. There are seriously thousands of images post on Instagram, tagged at Yosemite every single day.

I decided to try skipping the  top posts at first, because most of those photographers had an insane number of followers and I didn’t think they’d be very realistic to convince to share my giveaway. So, I moved down and started scrolling through recent uploads at Yosemite. As an aside, I’ve finally gotten around to publishing my own guide to the best hikes in Yosemite (on my new hiking blog, Hike with Ryan ).

I was looking for photos that had a sizable number of likes in relation to how long ago it was posted—which would tell me that the person likely has a good number of followers.

The first one I came across that fit this bill was right here:

Next, I clicked through to the profile for the person who posted that photo to see if they looked like a good candidate to reach out to. His name is Alex and he has nearly 9,000 followers. A lot, but not unattainable to reach out to. More importantly, he had great engagement with his photos.

Here’s his profile:

Green light. Let’s give this a try.

Next, I went over to the website he links to in his bio to see if I could track down his email address.

Unfortunately, it was nowhere to be found. However, there was an email address listed for his business partner, Jen.

So I decided to shoot Jen an email with an introductory pitch.

IMPORTANT: I did not immediately reach out and ask to have my giveaway shared (resisting my urge to be selfish and ask for what I want). They don’t care about my giveaway. Like all of us, they’re selfish too… so I want to talk first about  what they want —not what I want.

Finally using that new Gmail account I set up for this project, I started my email with a quick complement and referenced a project they’re working on right now, to show that I took an interest in them.

Next, I jumped into why I’m reaching out & made my ask of seeing if Alex would be interested in getting featured on my new website once it launches. Finally, I wrapped it up by name-dropping a few photographers I had gotten to work with during my last job at CreativeLive (and I really do have connections to still).

Note: Never lie to people or make promises you can’t keep. I’m going to follow through with featuring Alex on my site once it goes live if he’s up for it—you have to honor your commitments.

Here’s the exact email copy I sent:

Hey Jen! I came across a recent photo that Alex posted from Yosemite on IG earlier today and I love the work you’ve both been doing with Light Shed. I’m pumped to see your Psycho Vertical project come to life 🙂 The reason I’m reaching out is because I’d love to feature Alex (and yourself, but I couldn’t find you on IG) on a new website I’m currently building, Let’s Hike California. It’s not live yet, but I’m working with several photographers and producers to document all of the best adventures & hikes California has to offer in stills, video, drone footage and 360 cam images. Right now, I’m building my list of cool photographers to do features on when we go live—do you think this would be something Alex and yourself would be interested in? In my previous job at CreativeLive, I worked with photographers like Chris Burkard, Art Wolfe, Frans Lanting and others whom I’m working on lining up features with as well.. so this is going to be a blast! Let me know what you think, Ryan

Here’s the full screenshot of how that conversation evolved…

I could go into a ton of detail about the nuances of this conversation, but for now I don’t have time ?

(you can click here to see the full image of the email conversation and read easily)

After a shaky start, the conversation ended with Alex agreeing to do a free feature on my website once it goes live.

I saved my ask for promoting the giveaway until the very end and this was just a couple hours ago, so I still haven’t heard back from Alex on whether or not he entered/shared. I’ll update this when I do hear back!

I’m thinking it’s still a pretty long shot that he’d share it with his audience, but we’ll see. This is a fun experiment and I made it pretty far with my first prospect here. This morning, I sent this basic outreach email (customized for each person) to 9 more influencers, so we’ll see what type of response I get with more numbers.

I now have the basis for a system to perfect and repeat with this process, and it might work if I reach out to enough people.

Only time will tell. More influencer outreach to come this weekend.

For now, I need to get back to work if I want to actually validate this business idea on time!

UPDATE #3: 565 Email Subscribers, Ending the Giveaway, Finding a Product Idea, Building a Proof of Concept, $108 in Book Pre-Sales, Holiday Vacation and a Big New Opportunity.

Dec 30th :  The last couple of weeks have been pretty crazy on all fronts so let’s take this one step at a time.

To start off this update: I was successful in validating this business idea .

For now, let’s go back a few steps and talk about how I got there.

How I built a list of 565 email subscribers in 2 weeks.

A total of 513 people entered my gear giveaway.

On top of that, my manual list building efforts with friends & acquaintances had grown to 52 subscribers (minus duplicates from those who entered the giveaway).

That brought me up to a total of  565   email subscribers .

We ended the last update with the gear giveaway (a GoPro and Osprey pack) still open. I had secured one influencer promotion on Instagram from a friend who’s a talented outdoor photographer in California—perfect demographic for me.

His Instagram post (and giveaway link in his bio) drove in  38 new email subscribers  who entered my gear giveaway after seeing his post. 484 people liked his post promoting the giveaway, so 38 people joining would be a 7.85% conversion from like-to-signup. This is great considering I was leveraging an existing relationship that didn’t cost me anything.

What about the other Instagram influencers I didn’t already know?

Alex Gorham, one of the other Instagram influencers I reached out to (in the last update above) also entered the gear giveaway on the last day it was open. Alex didn’t promote the giveaway very heavily after joining (or post on his account about it) and since there were only hours left by time he joined, I didn’t feel comfortable asking him to do more.

More importantly, as one of my readers Sid Jacobson pointed out in the comments section below—I had just established a little bit of trust and rapport with Alex by offering to interview him for my upcoming website (a little bit of value).

Immediately asking him to share my giveaway would likely explode all of that trust I had just built. It would seem a little disingenuous given my website doesn’t actually exist yet, right? Major no-no on my personal business ethics, so I’m glad I didn’t go through with it.

If I were to use this cold Instagram influencer outreach strategy again, I’d give myself way more lead time  and reach out to the people I want to promote my giveaway weeks before the giveaway even started. I’d build more of a relationship with them before making an ask—on top of that, I’d  ask them directly how I can provide value to them & their business.

I’d get my website live before reaching out, that way I’d be able to immediately follow through with the interview questions and have a published piece of content for us both to promote.

Important : In your business, getting more established people to help you build your own audience will be all about building relationships and providing value , which are both very powerful long-term strategies. I was working under the confines of a 30 day challenge, so I made some sacrifices I wouldn’t normally make if I was building this without time limitations.

Of the other 9 Instagram influencers I reached out to with the same customized template as my conversation with Alex, only 2 got back to me, albeit after the giveaway had already ended. What’s important is that I still had great conversations with them, which will lead to mutually beneficial interviews in the coming months.

That brings my total up to 3 out of 10 influencers who responded to my cold email—a 30% response rate .

One of the influencers is  Zachary Domes , an amazing commercial and outdoor photographer who has almost 42,000 highly engaged followers. Photography is his core business and he’s definitely someone I’ll want to associate my brand with.

Zachary also lives in San Francisco (where I live) so I used that mutual connection to suggest we get together over the coming months to chat about my site & do our interview in person. Here’s his reply to my cold email.

The other influencer who got back to me is Ed Rader , who appears to primarily be a hobbyist photographer (assumption based on not having a website linked in his bio)—but a very skilled photographer nonetheless.

Ed also lives in the bay area, so I was able to use the same localized connection approach and suggested we meet up to chat about my project in the new year. Here’s his quick reply to my cold email.

All in all, my Instagram influencer outreach netted  46 new email subscribers —almost all of which came from the influencer I already had a relationship with.

If I switched up my approach the way I outlined above and had a live website to boost my credibility before reaching out, I’m confident I’d be able to get better results next time.

Regardless, the giveaway continued to pick up pace thanks to the viral sharing tools that are built-in.

Ending the giveaway and earning back what I spent on gear.

By time the giveaway ended, I had 518 entrants.

After scrubbing the list of a couple of duplicates and spammy looking email addresses, that brought it down to 513 unique entrants in the giveaway.

I used the built-in random selection tool to choose a winner and reached out to them to confirm they wanted to accept the prizes.

After the winner confirmed, I bought the GoPro ($184.99 with tax and shipping) & Osprey Atmos pack ($259.95 with tax and shipping) for a total of $444.94, which would have  put me at $8.41 over budget for the $500 I’d allocated to validating this business idea.

Total dollars spent was now sitting at  $508.39  for this project.

However, because I hate spending money, I chose to sell some stuff and earn at least an extra $400 this month, remember? I was also planning on brokering a discounted deal on this gear from local retailers.

Well, shit happens and I didn’t have time to visit or reach out to stores and secure discounts like I thought I would.

But last week, my never-worn pants and shoes both sold on eBay. That instantly recouped $95 of the money I’d spent on the giveaway items which brought me back down to a total of $413.39  spent.

In the last update, you saw that I reached out to a brand I used to do some freelance writing for—in order to see if I could secure a quick paid post that’d boost my income and recoup some more of the giveaway costs.

I used to get paid $250/article with this particular brand when I wrote for them last year, but I was able to negotiate $400 for the new article I pitched them last week. Boom.

That means I had now recouped almost everything I spent validating this business idea.

Now, I was sitting at just  $13.39 in expenses that I’m out for this project.

Remember, you can’t afford to waste time making excuses for why you can’t achieve your goals.

You have to become the master problem-solver in your business (and life). It’ll take creativity, sure. But if you dedicate yourself to kicking ass on small, incremental wins that path you towards eventually creating something great, you’ll get there.

I needed to do everything I possibly could in order to build my email list (goal #1), which meant spending some upfront money on giveaway items—I put it on my credit card, so nothing was actually deducted from my checking account yet.

Then, I used my skills to recoup those expenses in less than 1 week from a totally unrelated business.

I used my skills to fund validating this business idea extremely quickly.

You can do the same in your own way.

Finding a product idea and having more 1-on-1 conversations with my audience.

Now that I’d built a solid list of 565 email subscribers, I needed to figure out what exactly I was going to sell to them.

To be completely honest, I spent half of this month without even thinking about what that product or service would be.

I got a couple of suggestions from friends who I shared my site idea with, so I decided to start with those and see if they resonated with some of other the people in my audience. Here were those two product ideas…

1. An off-the-grid digital guide to the most under-appreciated, top adventure destinations in California.

2. A monthly subscription service that’d plan you one curated local weekend adventure per month.

Before doing anything else, I revisited a core belief of mine that’s been built over years of experience…

In order to build an eventually profitable business, you need to work directly with your (potential) customers at every stage to build and deliver exactly what they want.

So, my next step was to reach back out to a few of my friends I had been updating throughout the month to get their opinion on which product idea sounded more appealing  to them.

Here were their responses:

The adventure guide won  3 to 1  over the subscription service.

It was settled.

Now, how do I build a super cool adventure guide in the next couple of weeks? Answer:  I don’t.

Before investing any time or money into building a product, I want to first  validate that enough people would be willing to pay for this guide. I want people to vote with their wallets before I go out and build something that might not be appealing to enough people for me to have a legitimate business.

Don’t get hung up thinking that it’ll be too difficult to pre-sell a product or service, and that you should just take the time to build it first because it’d be “easier to sell the finished good.”

The purpose of validating a business idea is to avoid wasting time and money.

To make sure you’re not building a solution to a problem that doesn’t really exist—and you need to get people to pay for your solution to show you that they’re actually serious about wanting it when it comes out. We’re looking to build confidence in your business idea here.

Plus, if you can pre-sell something before it even exists, based purely on your enthusiasm, energy and ability to convey confidence with your customers that you’ll deliver a solution they’ll like, you’ll have no trouble scaling your business in the future.

So, this all means I’ll need to pre-sell my adventure guide to enough people for me to have  reasonable confidence that there will indeed be a market for this product.

This reasonable confidence level needs to be physically represented by  a validation goal , which is the number of pre-sales I’ll need to hit in order to validate a business idea—a core principle we cover in The Launch Formula .

For me, I felt that if I could get 10 people to pre-order my guide, that would be enough to confidently move forward.

My validation goal is locked in at 10 pre-sales.

What comes next?

Time to build a proof of concept so I could actually validate this business idea.

Next, it was time to build a very simple proof of concept that’d serve as a tool to outline & highlight exactly what this adventure guide would be.

A proof of concept is a realization of your method or idea that demonstrates its feasibility. Its purpose is to verify that your concept has the potential of being used (not a guarantee of future success, but rather an affirmation that what you’re creating could turn into your eventual business). A proof of concept is usually small in scope and it’s generally not a finished solution. It’s designed to solve the most basic form of the problem your business is hoping to solve—perfect for when you need to validate a business idea.

The primary purpose of my proof of concept will be to convince my new email subscribers why they need this guide. The selling points, the change it will create in their lives, the benefits they’ll get from reading it.

So, I took a couple of hours and wrote out a simple Google Doc Proof of Concept  that was just a few pages long (you can check it out and grab the template for it  right here ).

I pulled in some of my Instagram photos I took at cool California destinations from the past year or so to help tell a more visually compelling story and give people a more clear idea of the types of places I’d be including in the guide.

Important :   At the end of the proof of concept page, I wanted to include a link to where people could immediately go and pre-order the guide. Giving readers the option to go and buy the guide without me first directly asking them to purchase would tell me a lot about how excited they are for this guide.

To keep things as simple as possible, I took 15 minutes to set up a product page on Gumroad , an extremely easy-to-use platform where more than 24,000 people have set up online stores to sell both physical & digital products.

I also had to choose my price point for the guide.

I wasn’t too worried about the dollar amount I earned from pre-sales of the guide, since my goal at this stage is to validate my idea—not make ten thousand dollars from it this week.

The dollar amount isn’t important— hitting my validation goal of 10 pre-sales is important .

I want to reiterate again, that  the only thing that mattered at this stage was validating my business idea —not earning thousands of dollars from this today. This is a step that so many aspiring entrepreneurs neglect to see the importance of, which often leads to failure, loss of motivation and disinterest in an otherwise great idea.

Many of us can’t even  imagine the idea of selling a book for less than “what other experts are selling their books for” or selling online courses for below “market rates,” but this line of thinking is inhibits you from properly validating a business idea (if you have no established audience of your own).

You have to use the tools at your disposal, especially as you’re just getting started and seeking to validate your idea. One of those tools is choosing to offer an otherwise too low price point for your product or service when you go out to pre-sell it to early feedback subscribers.

That discount is in exchange for giving you a vote of confidence and waiting a bit while you actually produce the product—in turn, you get to prove that there is a paying market for your product before investing in it. It’s a win-win.

So, as a starting point for pricing my digital guide, I decided to take a look around and see exactly what others were charging for similar hiking-related guides and see if I could price myself in the same ballpark.

I made it clear on the product page that the price point would be higher ($29) for the guide once it’s finished, to increase the urgency for those who are interested in it to pick it up right now.

Here’s what that product page looked like (it had the same copy & images as my proof of concept Google Doc):

Before emailing my big new list, I wanted to go back to the 4 friends I had consulted on which of the two product ideas sounded more appealing. I texted them a customized variation of this—skipping the proof of concept Google Doc and linking them straight to the purchase page to see how they’d respond:

1 of them bought after sending out this text that included the link to the Gumroad product page.

That gave me a little boost of confidence, but I wanted to see how much I could accelerate this now.

Next, I revisited ~15 of the individual email conversations I had going with the friends & acquaintances who’d joined my early feedback group. I wanted to stick with manual conversations before moving to bulk emailing of my new list because I was still familiarizing myself with selling this guide & learning what was most attractive about it.

Since some of these people I’d reaching out to via email weren’t my closest friends, I didn’t want to immediately ask them to directly buy my guide. I wanted to ask for their opinion and gather their feedback first.

So, I turned to using my  Feedback to Pre-Order Sequence (you can download the copy/paste email scripts right here ) I use to pre-launch courses and other products. It’s another extremely useful strategy & toolset we cover and use in much more depth within  The Launch Formula  when it comes to learning how to quickly validate a business idea.

Step 1:  Ask the person to read through your proof of concept and complete a short survey leaving feedback about it.

Now, here’s my Feedback to Pre-Order Sequence in action with a former co-worker and photographer, Matt who’s been giving me feedback on this project for the past couple of weeks.

The pre-sales continued to climb throughout the day.

Did it take a LOT of time having these 1-on-1 conversations with more than a dozen people? Hell yes .

But with every conversation and feedback form that rolled in, I learned something new about both my audience and what my product represented to them. I was getting a step closer to validating this idea each day. A lot of people really resonated with the idea of getting curated adventure recommendations that aren’t mainstream, touristy and crowded—that fueled my motivation every time I got positive feedback.

This process of sparking 1-on-1 conversations made me more effective at identifying the people who’d be the best fit for my guide.

By the end of last week, I was sitting at  12 pre-sales totaling $108 in revenue .

I validated this business idea .

Adding this $108 in pre-sale revenue to my figures for this project now puts me into the positive (factoring in the income I drove from selling some stuff on eBay and landing a new paid post to fund the giveaway).

All in all, I earned a net positive  $94.61 validating this business idea in 1 month.

And at a whopping 37.5% conversion rate on the sales page, too. That means most of my viewers were already committed to buying once they landed on the page.

I would’ve kept the manual outreach going beyond just the ~15 people I got to in the first couple of days of pre-selling the guide, but I was coming up onto Christmas and I had planned on setting aside a week of very limited computer time with friends & family (which means a lot to me).

Since I achieved my validation goal through just manual outreach with my early feedback group, I decided to relax and enjoy my vacation time.

If I hadn’t reached my validation goal of 10 pre-sales yet, I would’ve continued the manual outreach to everyone who’d joined my early feedback list and then moved into manually reaching out to the giveaway entrants until I had validated my business idea.

Plus, I’ve been busy working this week on an exciting new project  and I need your help again…

Do you want to validate a business idea of your own in the next 30 days? ?

I did everything in this Validation Challenge in less than 30 days with around 5 – 10 hours of work per week, maximum. And that was with a week-long vacation built in.

All of the money I spent validating this business idea (less than $500) was recouped within the same month and I was able to generate $108 in pre-sales of a book that doesn’t yet exist, to a handful of my email subscribers… thus validating my business idea.

I want you to  get real results . And if you’re up for it, I’d love to help you do this right now .

Are you ready to finally do this?

Hi I'm Ryan Robinson

I'm a blogger, but I'm not my blog. I am not my business either. Occasional podcaster and very-much-recovering side project addict. Co-Founder at RightBlogger . Join me here, on ryrob.com to learn how to start a blog and build a purpose-connected business. Be sure to take my free blogging tools for a spin... especially my wildly popular free keyword research tool & AI article writer . They rule. Somehow, I also find time to write for publications like Fast Company , Forbes , Entrepreneur , The Next Web , Business Insider , and more. Let’s chat on Twitter (X?) and YouTube about our feelings (and business, of course).

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262 replies to “9 Steps to Validate a Business Idea in 30 Days with Less Than $500 (My Validation Challenge)”

I would like to start a site for kids to learn how to do what you just did. Kind of like https://lemonadeday.org/ — just simple things like school supplies, sweats T’s Hoodies, and/or accessories; liteup shoe laces, bracelets, etc. I am a graphic arts Tech so not even a newbie, but would be glad to follow along on your next project. Thank you for making it look so easy.

I completely agree with you on this subject, Donna. This is a massively neglected component of primary education, which can (at the right developmental stage) plant the seeds for many more future entrepreneurs. I’m really into this concept. I just sent you an email with some details on how we can kick off validating this idea!

Hey Ryan! Love what you were able to do in 30 days. Thanks for letting us look behind the curtains! I would love to help beta test your course if there is still room. I have an idea (health & fitness for Entrepreneurs) and I would love to create a course to get Entrepreneurs to their optimum health. Cheers!

You’re very welcome, Miles! Actionable fitness content for busy professionals and entrepreneurs is an awesome niche.. something I’m always personally interested in so count me as subscriber #1 for your idea. I sent you an email with some details on how we can kick this off and validate your idea ?

Hi! I’ve been interested in business since I was little! In middle school and high school I would earn extra revenue by buying whatever was in fashion and reselling it. This, of course, wasn’t major income, but I’ve always enjoyed the organization and number work that comes with business. I am currently in college part time, working full time, and would be drastically interested in seeing this work out for myself. I’m not so sure I could do this on the same timeline, but this was a very interesting guide. After years (yes, years) of extensive online research, you are the only one who has gone into such detail about your experiences. You have inspired a young girl. Thank you.

Nailah! You rock, thank you so much for the kind words and feedback on the course content 🙂 Replying to your email now ?

Hey Ryan, Thanks for sharing your experience in such way, it really lighten the way for any one with doubts. I am really wondering how to validate an idea that is mainly for corporate, not for people; where the idea end user is a department in any industry (finance, media, construction,… ) how to validate your idea in such case?.

Thanks, Ahmed! Glad you found it helpful 🙂 I got a lot out of it, myself. Even if your idea is for something that’ll ultimately be sold to a business (B2B), will you not be selling it to *people* who will make the purchasing decision anyway? Following along with the steps I outlined in this post on how to validate your idea, you’d just want to make sure that everyone you reach out to for inclusion in your early feedback group is indeed someone who’d understand what you’re wanting to build—bonus points if they’d be potential customers or advisors one day. Step #1 for you is connecting with the right people and having conversations with them around the pain point you’re seeking to help them solve. Where are a couple of places you might find these right people?

This article is INCREDIBLY comprehensive and value-packed. Thanks for taking the time to create it! Are you still looking for beta testers? If so, I’d very much interested and would love to find out more!

Awesome, thanks Daniel! Just shot you an email with details 🙂

Great advice, thanks, Ryan!

I would personally suggest starting even *before* building a landing page or an MVP to gauge initial interest: Time is your most valuable resource – don’t spend any more than necessary on something that you don’t even know is actually viable.

Another point I would make is to not mistake your friends & family for your target audience – sometimes there may of course be overlaps, but a “yeah, that sounds cool” from your friends & family doesn’t cut it. There’s something called “Interviewer bias”, which means that your friends will rate your ideas more favorably than the general public.

I’ve personally used ideacheck to validate my startup idea and get an initial sense of whether my ideas might actually be valuable. They take care of generating a questionnaire from the idea and put it to a panel of users from your target group. So far, the response to my ideas was mostly negative, but I’ve gained valuable feedback through this process.

Man, quick and dirty this is not. Maybe that’s okay for some people, but if you have the idea hashed out for the most part, why not skip to the landing page and opt-in/buy part? That’s where the rubber meets the road as far as lukewarm leads. Quick and easy to get into say, Leadpages and bang out a template page. No, I don’t like that Adwords seems to dock quality score a bit for off domain- you pay a little more, but the results still come in. You can always tweak the page, keywords, ads, and intended demographic all together, or separately, and test away. Take a few weeks, even. If you can’t pull in adequate business that way, would you really base it all off the slow-burn social and influencer hype posts?

Ideas are cheap. People’s input and opinions, although useful, are far different from what they actually want/do. I’ve tested a few ideas already using landing pages and facebook ads and adwords. Solid interest, high CTR’s but not enough dice on actual would-be sales or pre sale opt-ins. That’s great- the instinct is to can it and move on (maybe the world doesn’t need your idea, or wants but won’t pay), but having run a bunch of PPC, etc campaigns for my business, part of me wants to tweak elements until it’s right. However, sometimes your test idea is crap, and all that tweakage is good practice but a huge waste of time if pursued beyond mediocre response. Yes, people can be interested, curious, wooed by your excellent writing, but not want to pull the trigger.

Two more things: Facebook and Insta are interruption marketing, Google is needs/demand based. They DO overlap, but serve far different purposes and require much different approaches (Though FB wants you to order your pizza through them- a bit unnecessary). Every sort of business can use both, but some are far more geared toward one or the other. And, your sort of validation process is great for info/digital and even lifestyle products, but what about the local auto resto shop, coffee house, or cleaning business? Those would not lend themselves so much to the typical lead magnet bribe and typical info product approach, though for two of them there are angles. You could argue that maybe these audiences need to or will be trained, but the world “don’t work that way”.. yet. The info product and techsphere demo are trained and accustomed to bribes, so there is a sort of organic precedent helping you. For trad businesses, I can see somewhat leveraging influencers, but I can also see more typical sales techniques that would have to be employed. FB and Insta (bots aside) allow for more romancing of the leads. There’s more of a dance there. But lots of service businesses, like mine, are demand based. I know lawyers that try to run Instagram game.. it’s bad. They’d be better off tweaking their $57/click ads on Google 😉

GREAT comments, Stephen. Hell yes, thank you for sharing so much!

To your biggest question—”If you have the idea hashed out for the most part, why not skip to the landing page and opt-in/buy part? That’s where the rubber meets the road as far as lukewarm leads.”

My reply, which is obviously based on my own personal experiences with validation and in helping others through the process—I’ve found that the majority of people (who I talk to) that skip straight to that stage of the more mechanical aspects of validation… void of doing any community building around the idea first (and chatting with people you personally know) will be moving forward with an idea that hasn’t been shaped at all with outside feedback from other people who are in your target market. That’s hugely important, and in my opinion/experience worth the pit stop for a week or two (depending upon how much free time you have) of customer development.. even if you’re just getting people on the phone from something like Mechanical Turk. Not only will it help shape your idea and potentially make it a more valuable offering, but it’ll bring you more qualitative feedback that you so rarely get from looking at landing page drop off statistics.

On top of that, skipping straight to this more mechanical stage of validation often nets false positives by pre-selling something to a group of people that are supportive for the sake of their personal relationships. Sure, you can bring in a unique audience through Google/FB ads, but unless you have some experience at writing landing page copy and putting those elements together in a way that they’re actually convincing, it’s difficult for many people to get conclusive results. And to be honest, the vast majority of people don’t have the skill sets and experience (that you clearly do) to pull these tasks off in quick succession… they’re learning as they’re going, which is why the more manual customer development process up front is easier to wrap your head around, implement and get similar early learnings.

You brought up some awesome points and advice, and I’m so pumped to have you here. Love it, Stephen. Thanks for contributing!

Well, this seems to be such a hard experience but surely an amazing one, I’m talking here about Hiking in California and I would love to join the group that are going for hiking. I think that it would be something different and brings me out of the routine. Thank you for the detailed article and the encouragements to validate a business idea with less than $500. Evan

Great post! I am also in the middle of a validation process for my new project, a business validation deck of cards. I had 80 subscribers in 5 days on my landing page. All these people are unknown to me as I did not leverage my own network yet. My next step is to grow that number and start engaging with the community.

This is immersive and powerful as always.

The ideas on how to go about validating a business are absolutely powerful. A business started this way is on a solid foundation.

Thanks Ryan for this. Great work.

I find This article is very helpful and value-added packed. Thanks for providing such a useful for sharing your experience in such a beautiful way,

Thanks a lot!

Thanks for sharing this fantastic blog, really very informative. Your writing skill is very good, you must keep writing this type of blogs.

Thank you for the detailed article

You’re welcome, Naman!

I am working hard for this

Just an amazing blog. Learnt a lot. Would have paid for this as well 🙂 Kudos.

Ah, thanks so much Suyash 🙂

It was a very insightful article! I am so glad that you shared this journey with the readers. Although I wasn’t here when you first had this idea, I sure loved reading about it now. Thanks a lot for sharing this with us, and believing that we all can do it too. It really inspired me, and I learned a lot from this amazing resource. I really appreciate you sharing everything about idea validation and your 9 step process. It was such a great read. Looking forward to checking out more amazing articles like this.

Ah, thanks for the kind words John! 🙏 stay tuned for another version of my validation challenge I’ll be kicking off soon (if you’re on my email newsletter) 🙂

Hey Ryan! Love what you were able to do in 30 days. Thanks for letting us look behind the curtains! I have an idea (Graphic Design) and I would love to create a site to get Entrepreneurs to their optimum Graphical Work what helps them with their business strategy. Thanks

That sounds great, Moinul! I’m looking forward to seeing how you do with your site 🙏

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Lean Market Validation: 10 Ways to Rapidly Test Your Startup Idea

Jim Semick Co-founder, Board Member at ProductPlan

This article outlines the advice I gave students and includes updates on some of the concepts to my current thinking on lean market validation. For many first-timers with great ideas, the process is exciting but also a bit intimidating. I believe that the tactics can help both entrepreneurs and product managers launch better products with a higher chance of succeeding in the market.

So, What is Lean Market Validation?

What is market validation? It’s a question I hear a lot, especially when mentoring newer entrepreneurs and product managers .

Market validation is the process of determining whether your product is of interest to a given target market. Market validation involves a series of customer interviews with people in your target market, and it almost always takes place before you’ve made a significant investment in your product/concept.

The goal for my talk at Startup Weekend was simple: To lay out a few practical tips for entrepreneurs to quickly validate their ideas. I also wanted to help them understand that even first-time entrepreneurs can launch successful products by taking a few easy (and often free) steps.

After using lean market validation to launch several software products, including ProductPlan , I’ve discovered that with the right process, even inexperienced entrepreneurs can bring exceptional products to market with excited buyers on the first day.

10 Ways to Rapidly Test Your Startup Idea

Here are my tips for using lean market validation to confirm whether you have a product/market fit with real customers. By simply engaging with real people and asking the right questions, you can confirm if your idea solves a problem, who your potential buyers are, and ultimately whether or not there’s a market for your product.

1. Write down your product concept.

Just the simple act of writing forces you to consider things you may have previously glossed over. I’m not talking about writing a “business plan.” (For startups, a business plan isn’t the best use of time and will change as soon as you start talking with prospective customers).

I’m talking about answering a few key questions that you can go out and test. These are your assumptions, and the sooner you can test them, the less risk you will have when launching your product.

Download the Anatomy of a Product Launch ➜

You can start with the questions below or use a tool such as the Business Model Canvas to guide your thinking.

Write down some basic assumptions that you can go out and test:

• Who is your customer? If you say “everyone,” you are already setting yourself up for a tough time. Be sure to get specific. For example, if your customer is a business, answer: What kind of business? How big or small is the typical business? In a particular market? What is the title of the buyer?
• What problems are you solving? Many entrepreneurs think about the product first — they fret about the features, launch the product, and then wonder why their product has trouble getting traction. My suggestion is to start with the problem first. What this means is being explicit about the problems your product solves. By writing down these problems, you can validate whether customers also see them as problems. And, more importantly, whether customers think they are problems worth solving.
• How does your product solve those problems? Only after writing down the problem do you move to the product. From here, you tie the value of your product directly back to customer problems. How does solving their problems make their life better? Does it make them more money? Look better?
• What are the key features of the product? The features need to be more than cool — they need to solve specific problems—the more quantitative (e.g., time saved, money made), the better. I encourage you to think Minimum Viable Product and limit the feature set as much as possible (you need to provide just enough value for some customers to buy).

At Startup Weekend, 54 hours go quickly. The same concept holds for startups and new products in the real world. Time and resources are scarce. There isn’t time to agonize over details that, in the end, may not matter.

For that reason, lean market validation helps successful teams get just enough information and data to make decisions. And then they make them. I like to adhere to the 80% rule — get just enough (valid) information from customer interviews and other data sources and then decide. In the end, you will never get to 100% certainty, and getting close will eat up an excessive amount of time.

3. Most of what you write down are assumptions.

This brings me to my third point: All the writing you do, the discussions (and debating) you have, are assumptions. Teams often take these discussions (and what’s in their heads) as facts when they are simply assumptions that need to be tested.

I like to think of the scientific method when reviewing ideas — how can they be tested?

I often see teams (at Startup Weekend and at startups) debate minor details, waste valuable time rather than make a guess (a temporary decision), and then get out into the real world to test whether it’s the right idea. It’s essential just to make a guess and get started because your assumptions may turn out to be wrong, and you’ll have spent valuable time (not to mention the toll on team dynamics) debating something that didn’t matter in the first place.

4. Find the truth by getting out to test your assumptions.

As soon as you’ve made some basic decisions, and written down your assumptions, get out to test them to see if they resonate with potential customers. I encouraged Startup Weekend attendees to get out on the street and save valuable time by getting on the phone if the customer type warrants.

Lean market validation relies on customer interviews with potential buyers of your product. You can also test your assumptions by interviewing experts (for example, analysts for the industry, people who have been employed by the industry, consultants, etc.). There are also some great ways to test digital ideas with landing pages and inexpensive ads.

Download the Product-Market Fit Book ➜

5. start with your network..

I’m often asked how teams can easily find prospects to speak with. I recommend working with your own network and the networks of friends, mentors, investors, and others to reach potential customers.

The downside of interviewing people in your network is they are friendly to your cause. This means that you are introducing some potential bias into your learning. But my attitude is that some bias is better than not interviewing and getting closer to the truth.

6. Interview your customers.

When I mention interviewing, I’m not talking about a cursory conversation (or worse, a survey). Start with a list of questions but deviate from the questions as you learn more information. Approach the conversation with a sense of curiosity about the customer’s problem and needs, and you’ll get some really valuable insight.

Download our Customer Interview Tool Box , including templates you can use to track your interviews.

7. Ask, “Why?”

“Why?” is by far the most important question you can ask. With it, you can get closer to the truth from customers. Unfortunately, this question isn’t used often enough — too many people ask a question and then take the answer at face value. It’s a missed opportunity to understand motivation and validate what someone would really do.

The Five Whys is a great technique for getting to the underlying reason — the real reason — behind a customer’s motivation.

8. Find the value proposition.

I encourage entrepreneurs to focus less on features and more on explaining the value proposition for their product. What does that mean? A value proposition is the expected gains that a customer would receive from using your product. Value can be quantitative, such as time saved or additional revenue earned. Measuring this is usually straightforward.

But value can also be qualitative, such as pain relief or lifestyle benefits your product provides. By thoroughly understanding and documenting this qualitative value through customer interviews, you can set your product apart from the competition.

For example, it could be time saved, more revenue, or maybe some social benefit (like looking good). Whatever it is, these value propositions are directly tied to the problems that you have previously discovered.

9. Liking your idea is not the same as buying your product.

Unfortunately, validating a product idea with prospective customers is subjective. There is no black and white answer. In fact, because people are generally nice and want to please you (especially the friendly university students at Startup Weekend), you need to be careful about accepting their answers at face value.

When someone tells you enthusiastically, “it sounds great,” or “that’s an interesting idea,” your first reaction should be to follow up with “why?” It’s important to understand that someone liking your idea is not the same as buying the product. Your challenge during your lean market validation process eliminates as much of these “false positives” as much as possible.

10. Jump off the cliff and have fun!

My advice to the group (and all entrepreneurs) is to take a risk, jump off the cliff, and have fun with the lean market validation experience. It’s taking chances that are the hallmark of successful entrepreneurs, and using these techniques helps you get closer to success.

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Critical Steps to Validate Your Startup’s Business Model

By: Martin Luenendonk

A business plan is at the heart of every business. But instead of just writing down your business plan, your startup’s business model will require proper validation before you start doing business. If you don’t validate it, the investor simply won’t invest. You can validate your business model through three core assumptions: delivering, creating and capturing value.

Three Steps to Validating Startup Business Model

Businesses are based on ideas and assumptions. But the difference between a good and a bad business is in the ability to validate those assumptions. By validating your core assumptions, you save time and money. You ensure your startup’s business model will be able to weather the storms, be attractive and create a profit.

Now, the below steps follow closely the famous Business Canvas Model by Alexander Osterwalder. The model is useful for drawing up the hypothesis about how you can deliver, create and capture value.

Each step of validating your business model will examine different segments in the nine-step business model. So, let’s delve deeper into how you can validate your startup’s business model in three simple steps.

Step #1: How will your startup deliver value?

The first part of validation is about understanding how your startup is going to deliver value to its customers. You essentially need to validate three core ideas:

• What your value proposition is?
• How are you going to create and nurture customer relationships?
• How will the customers be able to access your startup?

Your value proposition shouldn’t be a singular benefit to the customer but a core value you are looking to offer. Good value propositions are about performance, customisation, design, price, cost-reductions, risk-reduction and accessibility.

In terms of customer relationships, your focus needs to be on solving how you will acquire, retain and upsell to your customers. Many businesses make the mistake of focusing just on acquiring new customers and forget about the importance of maintaining customer loyalty after the first purchase.

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The third core assumption to validate deals with the customer channels. The channels determine how the customer will access your solution and there are typically two options for businesses to choose. You can either have a direct or indirect channel.

The core focus here should be on the customer. You’ve made assumptions of their pain points but the real question is whether these pain points are real. It can be tempting as a startup owner to think customers want the solution you are offering. But you really need to prove the pain is there – you need to validate the problem in order to validate the customers.

So, how can you validate these core ideas?

In order to validate your value proposition, your customer relationship and customer channels, you need to talk to the actual customers as well as conduct thorough market research. It’s important to pay attention to understanding what the customer pain points are and how your solution is actually going to solve them.

There are three clever ways to validate these assumptions and to talk directly to customers:

• Conduct market research.
• Talk to customers about the pain points and demonstrate how your solution works (create a Minimum Viable Product for this).
• Receive feedback and use it as validation through queries, interviews and surveys (use survey sites, landing pages, and cold calling).

Nabila Amarsy has written a compelling post on Strategyzer about the differences in customer experiments. The post points out how customer behaviour and responses will change regarding whether you are watching them or not. For example, if you observe customers using your product, you can focus on the non-verbal cues during the experiment. However, customers might also react and speak about the product differently when you are directly asking the questions. The key is to use both indirect and direct observation methods to validate your business model with customers.

Step #2: How will your startup create value?

Next, you need to validate your ability to actually create value. Your attention turns to three core issues of resources, activities and partnership. You must answer these three questions:

• Who are the partners that your startup will need to work with in order to get things working?
• What are the things that you need to do in order to generate things such as: y our value proposition; d istribution channels for your solution; c ustomer relationships; r evenue
• What are the specific resources you need to generate value?

In terms of the partnership, startups have numerous options available from starting a strategic alliance with a non-competitor to launching a joint venture. The issue also deals with buyer-supplier relationship. When it comes to activities, the startup must validate the supply chains, train and hire human capital and manage the customer communities. Much of this steps also deals with the competition and understanding what resources are needed in order to boost the startup’s competitiveness.

In order to validate the above points, the startup has two great options:

First, it can launch a minimum viable product (MVP) . MVP will allow validating all three sections – it will outline what resources you need in order to create the solution, it will show what strategic partnership help or hinder the process, and it will make it easier to understand what activities can improve your startup’s ability to create the value.

At this stage, you could also begin validating the core points through a limited launch of the product or service. The limited and restricted launch will put your key assumption to test without jeopardising your startup’s finances.

Step #3: How will your startup capture value?

The final step to validating your business model deals with your ability to capture the value you’ve created with the previous segments. You will essentially need to figure out whether your startup has chosen to right approach to making a profit by reducing fixed costs and maximising your gross margin.

There are two core issues to validate at this point:

• What does the cost structure of your startup look like?
• What are the different ways you can generate revenue?

Validating directly with the customer:

Validating your startup’s ability to capture value will be easier if you’ve already taken the above two steps. With the creation of an MVP, you have an idea of the cost structure of delivering the solution to people. You’ve also paid attention to your customer service channels, identifying the marketing routes you need to take in order to acquire customers.

Furthermore, by talking to your customers, you’ve learned more about their views on pricing. You should further use surveys and competition pricing to identify what kind of revenue model best works for your business. You can’t just validate your market; you also need to ensure the market is willing to pay for your proposed solution. If you don’t achieve traction – if no one is willing to pay for your product – you haven’t nailed your value proposition. You don’t have a real problem because if there were a real problem, customers would pay. Therefore, testing pricing points is important at this point and it can be done easily in focus groups or with the help of a simple landing page.

Here you want to pay attention to the ways you can also create revenue. There is no singular model startups should use – the best revenue model depends on your product and your customer base.

It’s important to consider different revenue options during the validation process. You want to test customers’ willingness to subscribe to a certain payment structure – you could essentially be able to generate the same kind of revenue with two different models. However, customers might only prefer one of these options.

Calculating core metrics:

In terms of capturing value, startups have three key objectives:

• Being profitable
• Generating cash
• Attracting growth

In order to validate these core objectives, you need to focus on measuring the following metrics:

• Customer Acquisition Cost (CAC) – divide your sales and marketing costs for a given period by the number of customers you attracted during the same period.
• Retention – the number of customers you maintain even after initial purchase. Always check with inactive customers to find out why they are not using your product or service.
• Churn – the measure of customers who stop paying for your product.
• Life Time Value (LTV) – the duration customers stay with you multiplied by the monthly revenue you expect to get from the customer. LTV should always be 3x greater than CAC.
• Revenue – the money you bring in through sales and other income. Pay specific attention to Monthly Recurring Revenue (MRR).

Your bottom line is mostly influenced by CAC, LTV, revenue and churn. When you are validating your ability to capture value, these metrics will matter the most.

When you are validating metrics, you want to focus on the worst and the best assumptions. So, calculate the worst-case scenario first and then create estimates based on the higher end of predictions. These will be helpful as you start tracking your actual metrics, making it easier to adjust your outlook into a realistic view – when you are raising capital, this will be a key to success.

Define, Test and Correct

Validating a startup’s business model is reliant on key three behaviours: defining, testing and correcting. You don’t want to approach validating without having a clear set of assumptions you are testing – if you haven’t defined your hypothesis carefully it will be hard to validate whether you’re telling a compelling story or not.

In terms of testing and validating, startup’s need to go out into the real world and not just sit in front of the screen calculating figures. Market research, reports, calculations are all great tools for validating startup’s business model but you also need to emphasise actual opinions, figures and findings. Validations cannot just be assumptions but they must be based on evidence and data you’ve gathered.

Finally, the critical thing to realise about a business model is that it cannot be set in stone. When you are validating your core hypothesis, you might notice that things require refinement. Don’t be afraid to go through with this process and change your model. The best thing to remember is that failing early is much better than failing late.

Steve Blank has said, “You may be smart, but you are not smarter than the collective intelligence of your potential customers” and it perfectly reflects the importance of validating a business. You need to make assumptions about how you will create, deliver and capture value but you also need to validate those points through testing, talking and measuring.

By Martin Luenendonk

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10 Steps on how to validate your business idea.

Launching a new product or service.

Are you launching a new product or service? Do you need help validating your business idea? This article covers the essentials of product validation and provides you with helpful steps for any new launch or existing product. Download a business plan template here .

From finding potential buyers to making sure the product is catering to the right niche, we explain the most common methods for validating a product. With this guide, you will have the confidence and clarity you need to get started. So, choose any of the steps outlined below and begin validating your product today!

1. Visualization

It’s easy to get excited and rush into creating something based on what you see in the market. But before investing your time, energy, and money into a project, it’s essential to make sure that your idea is viable. Conducting research and validating your product will increase your chances of success in marketing, sales, and product development.

2. Accept Advice

We often make the mistake of not sharing our ideas with others. However, renowned entrepreneurs recommend openly discussing our ideas with friends, family, or even strangers. This helps refine and clarify our ideas, making them stronger. It is also important to remember that no one can steal an original idea – if it has the potential to flourish, it will remain with the original thinker. Openly discussing and sharing your ideas can help bring your concept to life.

3. Research your Market

Before launching a business idea, it’s important to conduct a market survey. This survey can help you understand the needs and wants of potential consumers. It can also provide valuable insights on pricing, competition, and other aspects related to product design and sale. Gathering this data is a key step in the production process, as it guides entrepreneurs in their decision-making.

4. Check for Similar Products

Having competitors can be beneficial to launching a successful product. They’ve already completed market surveys and validated the product or service, giving you a head start. You can also be sure that there is a demand for the product, and you can use the competitor’s product as a benchmark to make yours even better. Take advantage of this great opportunity and create a product that stands out!

5. Start Small

If you’re looking to start a small business, try testing your product first before investing time and money into production or securing a location. It can be as simple as selling it at a stall, exhibition, or out of your car or truck. Take for example GODIVA chocolate. They started from their home before becoming the giant they are today. Or look at food truck owners who tried their specialty before investing in a restaurant. This feedback and data can help you gain insight into what people desire, so you can revamp your product and stay ahead of the competition.

6. Select your Target Market

Knowing who your target market is and understanding their needs is incredibly important in developing a successful product. Creating a survey for your target market is now much easier and more affordable than ever before. To get started, outline the key demographics and psychographics of your potential market to better understand where your product will fit. Once you have the data from the survey, you can start designing, packaging and marketing your product to the right audience. With the right target audience in mind, you can confidently move forward with implementation and development.

7. Presell your Product

Testing your product is a great way to get feedback and refine it before launching it. One way to do this is to start with your own contact list and ask what people think of your product and how they react to it. This method can be helpful in performing a market survey and understanding the needs and requirements of your target audience. Take advantage of social media to spread the word about your product and gain valuable insights from your customers.

8. Have you heard of Crowdfunding?

Crowdfunding is a great way to raise funds for your product without having to approach investors. It involves collecting small amounts of money from a large group of people over the internet. In recent years, crowdfunding has become a very popular and successful practice. There are multiple websites that support crowdfunding campaigns, such as 1000 Angels, Indiegogo, and Kickstarter. Setting up a crowdfunding campaign does require some time and effort, but the end result is worth it!

9. Make a Landing Page

The Landing page is the first impression of your product, so it’s important to create an engaging experience for your visitors. Make sure to include AIDA (Attention Interest Desire Action) triggers, such as interesting visuals, engaging content, and a clear call to action. This will help ensure that your visitors get the most out of their experience and will help you track their progress. With the right tools and planning, you can create a landing page that meets your goals and converts visitors into customers.

10. Test All Things That You Have

Validation of your product is not always straightforward, but these steps can help you make informed decisions about the direction of your product. Putting in the effort to do the research and testing can save you time and money in the long run, and will give you a better understanding of the potential success of your product.

We hope that you find success in validating your business idea!

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The 7 Best Business Plan Examples (2024)

As an aspiring entrepreneur gearing up to start your own business , you likely know the importance of drafting a business plan. However, you might not be entirely sure where to begin or what specific details to include. That’s where examining business plan examples can be beneficial. Sample business plans serve as real-world templates to help you craft your own plan with confidence. They also provide insight into the key sections that make up a business plan, as well as demonstrate how to structure and present your ideas effectively.

Example business plan

To understand how to write a business plan, let’s study an example structured using a seven-part template. Here’s a quick overview of those parts:

• Executive summary: A quick overview of your business and the contents of your business plan.
• Company description: More info about your company, its goals and mission, and why you started it in the first place.
• Market analysis: Research about the market and industry your business will operate in, including a competitive analysis about the companies you’ll be up against.
• Products and services: A detailed description of what you’ll be selling to your customers.
• Marketing plan: A strategic outline of how you plan to market and promote your business before, during, and after your company launches into the market.
• Logistics and operations plan: An explanation of the systems, processes, and tools that are needed to run your business in the background.
• Financial plan: A map of your short-term (and even long-term) financial goals and the costs to run the business. If you’re looking for funding, this is the place to discuss your request and needs.

7 business plan examples (section by section)

In this section, you’ll find hypothetical and real-world examples of each aspect of a business plan to show you how the whole thing comes together. 

• Executive summary

Your executive summary offers a high-level overview of the rest of your business plan. You’ll want to include a brief description of your company, market research, competitor analysis, and financial information. 

In this free business plan template, the executive summary is three paragraphs and occupies nearly half the page:

• Company description

You might go more in-depth with your company description and include the following sections:

• Nature of the business. Mention the general category of business you fall under. Are you a manufacturer, wholesaler, or retailer of your products?
• Background information. Talk about your past experiences and skills, and how you’ve combined them to fill in the market. 
• Business structure. This section outlines how you registered your company —as a corporation, sole proprietorship, LLC, or other business type.
• Industry. Which business sector do you operate in? The answer might be technology, merchandising, or another industry.
• Team. Whether you’re the sole full-time employee of your business or you have contractors to support your daily workflow, this is your chance to put them under the spotlight.

You can also repurpose your company description elsewhere, like on your About page, Instagram page, or other properties that ask for a boilerplate description of your business. Hair extensions brand Luxy Hair has a blurb on it’s About page that could easily be repurposed as a company description for its business plan. 

• Market analysis

Market analysis comprises research on product supply and demand, your target market, the competitive landscape, and industry trends. You might do a SWOT analysis to learn where you stand and identify market gaps that you could exploit to establish your footing. Here’s an example of a SWOT analysis for a hypothetical ecommerce business: 

You’ll also want to run a competitive analysis as part of the market analysis component of your business plan. This will show you who you’re up against and give you ideas on how to gain an edge over the competition. 

• Products and services

This part of your business plan describes your product or service, how it will be priced, and the ways it will compete against similar offerings in the market. Don’t go into too much detail here—a few lines are enough to introduce your item to the reader.

• Marketing plan

Potential investors will want to know how you’ll get the word out about your business. So it’s essential to build a marketing plan that highlights the promotion and customer acquisition strategies you’re planning to adopt. 

Most marketing plans focus on the four Ps: product, price, place, and promotion. However, it’s easier when you break it down by the different marketing channels . Mention how you intend to promote your business using blogs, email, social media, and word-of-mouth marketing. 

Here’s an example of a hypothetical marketing plan for a real estate website:

Logistics and operations

This section of your business plan provides information about your production, facilities, equipment, shipping and fulfillment, and inventory.

Financial plan

The financial plan (a.k.a. financial statement) offers a breakdown of your sales, revenue, expenses, profit, and other financial metrics. You’ll want to include all the numbers and concrete data to project your current and projected financial state.

In this business plan example, the financial statement for ecommerce brand Nature’s Candy includes forecasted revenue, expenses, and net profit in graphs.

It then goes deeper into the financials, citing:

• Funding needs
• Project cash-flow statement
• Project profit-and-loss statement
• Projected balance sheet

You can use Shopify’s financial plan template to create your own income statement, cash-flow statement, and balance sheet. 

Types of business plans (and what to write for each)

A one-page business plan is a pared down version of a standard business plan that’s easy for potential investors and partners to understand. You’ll want to include all of these sections, but make sure they’re abbreviated and summarized:

• Logistics and operations plan
• Financials 

A startup business plan is meant to secure outside funding for a new business. Typically, there’s a big focus on the financials, as well as other sections that help determine the viability of your business idea—market analysis, for example. Shopify has a great business plan template for startups that include all the below points:

• Market research: in depth
• Financials: in depth

Your internal business plan acts as the enforcer of your company’s vision. It reminds your team of the long-term objective and keeps them strategically aligned toward the same goal. Be sure to include:

• Market research

Feasibility 

A feasibility business plan is essentially a feasibility study that helps you evaluate whether your product or idea is worthy of a full business plan. Include the following sections:

A strategic (or growth) business plan lays out your long-term vision and goals. This means your predictions stretch further into the future, and you aim for greater growth and revenue. While crafting this document, you use all the parts of a usual business plan but add more to each one:

• Products and services: for launch and expansion
• Market analysis: detailed analysis
• Marketing plan: detailed strategy
• Logistics and operations plan: detailed plan
• Financials: detailed projections

Free business plan templates

Now that you’re familiar with what’s included and how to format a business plan, let’s go over a few templates you can fill out or draw inspiration from.

Bplans’ free business plan template

Bplans’ free business plan template focuses a lot on the financial side of running a business. It has many pages just for your financial plan and statements. Once you fill it out, you’ll see exactly where your business stands financially and what you need to do to keep it on track or make it better.

PandaDoc’s free business plan template

PandaDoc’s free business plan template is detailed and guides you through every section, so you don’t have to figure everything out on your own. Filling it out, you’ll grasp the ins and outs of your business and how each part fits together. It’s also handy because it connects to PandaDoc’s e-signature for easy signing, ideal for businesses with partners or a board.

Miro’s Business Model Canvas Template

Miro’s Business Model Canvas Template helps you map out the essentials of your business, like partnerships, core activities, and what makes you different. It’s a collaborative tool for you and your team to learn how everything in your business is linked.

Better business planning equals better business outcomes

Building a business plan is key to establishing a clear direction and strategy for your venture. With a solid plan in hand, you’ll know what steps to take for achieving each of your business goals. Kickstart your business planning and set yourself up for success with a defined roadmap—utilizing the sample business plans above to inform your approach.

Business plan FAQ

What are the 3 main points of a business plan.

• Concept. Explain what your business does and the main idea behind it. This is where you tell people what you plan to achieve with your business.
• Contents. Explain what you’re selling or offering. Point out who you’re selling to and who else is selling something similar. This part concerns your products or services, who will buy them, and who you’re up against.
• Cash flow. Explain how money will move in and out of your business. Discuss the money you need to start and keep the business going, the costs of running your business, and how much money you expect to make.

How do I write a simple business plan?

To create a simple business plan, start with an executive summary that details your business vision and objectives. Follow this with a concise description of your company’s structure, your market analysis, and information about your products or services. Conclude your plan with financial projections that outline your expected revenue, expenses, and profitability.

What is the best format to write a business plan?

The optimal format for a business plan arranges your plan in a clear and structured way, helping potential investors get a quick grasp of what your business is about and what you aim to achieve. Always start with a summary of your plan and finish with the financial details or any extra information at the end.

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How to Update your Business Plan?

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• June 3, 2024

Finally, after a lot of effort, you wrote a business plan. But the journey doesn’t end here!

A business plan is a living document—you need to work on it continuously to keep it relevant and up-to-date according to the market situations.

Your plan should evolve along with your business. This ensures it remains a valuable tool for decision-making. Regular updates can help you adapt to new opportunities, overcome challenges, and maintain a clear path toward your goals.

Let’s explore the hows, whens, and whats of updating a business plan .

Why should you keep updating your business plan?

The first question that arises is why a business plan update is necessary. Is it not possible to have a plan that remains relevant for a longer duration?

Moreover, some might wonder if updating a detailed business plan halfway could have a negative impact. All of these questions may cross your mind when managing a small business.

There are several benefits of updating a business plan, some of them are:

1. Keeping up with the demands of the customer base

The first and most obvious reason is to keep up with the needs of your customers. A business’s one of the key drivers is an increased demand. When you create what people want, it naturally leads to more consumption.

Many businesses make the blunder of never altering products that worked once. However, in the case of businesses, demands change constantly – whether one likes it or not!

For instance, Blackberry phones were considered the go-to phones for professionals in one era, and now they are just nostalgia. So, going with the trends and changing your plan accordingly becomes necessary to stay significant in the industry.

2. Accommodating and expanding market requirements

There are prominent benefits of updating your business with a market expansion strategy. What does this mean?

With ever-increasing products and services in every domain, expanding your product to a new market can help you increase your sales.

For example, a company serving coffee beans to the urban market could expand its reach by offering instant coffee to consumers who don’t have specialized equipment for coffee beans.

3. Keeping up with the competitors

To succeed, businesses need to keep up with their competitors. It means updating your plans and strategies after analyzing your competitors to make your brand stand out.

It includes updating your marketing strategies, pricing models, product offerings, and more to stay relevant for your customers.

4. Tracking your progress

Updating your plan allows you to compare your projections with actual results. It helps you to understand in which areas you are performing well and which needs better performance. It’s like checking the map to make sure your small business is still heading in the right direction.  

How to update your business plan?

The next thing to talk about is what exactly is to update. Is it the strategy that needs a change? Or do the actual technical aspects of the business need to be updated? The answer to that is – both. Some constant checks need to be kept on integral aspects. Let’s move ahead and see the steps for updating a business plan:

1. Review the mission and vision statement

The mission and vision statement of the plan defines the purpose, values, and long-term goals of the business. Therefore, it is necessary to review and update them first.

Check if are they still pertinent to your long-term goals. Think about any changes in your business world or new ideas that might make you need to update these statements to keep them current and motivating.

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2. Conduct industry and market analysis

Research about recent trends & developments going on in the industry. Also, check for any regulatory shifts or changes in consumer behavior.

If there are any changes, then update the sections to reflect current trends and insights that might affect your business strategy.

For instance, let’s say you are running a tech startup. And in your market research, you explored current trends like AI and eco-friendly tech. After knowing the current trends, you might make any changes in your business strategy.

3. Reassess your business strategies

Based on the market and industry analysis, revisit your strategies and determine if all the strategies & business objectives are still up-to-date with the analysis.

Revise your strategy according to the current situation and make sure that your goals are achievable through the new strategies.

For example, you are running a bakery business, and after market analysis, you got to know people are preferring more gluten-free items. So, now you reassess your strategy and include more dishes on your menu that are gluten-free.

4. Update your financial projections

See your current financial situation and match it with financial plan projections to know the difference. Now, update your forecasts (cash flow, profit & loss, & balance sheet statements) to reflect your current financial situation and performance.

Adjust the new forecasts in a way that reflects new assumptions, strategies, and initiatives that have emerged from your reassessment.

At last, review the overall plan thoroughly and make necessary changes where needed in the whole business plan. This way you should make your planning process continuous and smooth.

When to update your business plan?

For a successful business, you need to update your plan yearly or whenever there are any internal or external changes. Some of the situations when you need to alter your plan are:

• It’s been a year since you last reviewed your business plan
• You’re adding any new products or services
• Your direct competitors are changing
• There is a change in the market demand
• If there is any financial change
• For internal changes (supply chain issues, management change, etc)
• If you are applying for funding

Thus, for any significant changes, you need to update your plan and accommodate it as per the current situation.

Update and transform your plan with AI

So, without a doubt, keeping a business plan up-to-date is necessary for your business. But, doing it regularly need a lot more effort.

An AI business plan creator —Upmetrics provides you with AI features that save time. Its AI assistant can automatically write and improve sections of your business plan, and answer all your business-related queries.

Apart from all that, it is efficient and affordable. The plans start from only $7 a month which is great when you want to continuously update your business plan.

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Frequently Asked Questions

Do i need to rewrite my entire business plan when i update it.

No, you don’t have to rewrite your whole plan when you update it. If the changes are small, you can update the parts that need changing. But if the changes affect important parts like your market research or financial plans, then rewrite those sections. Anyway, it’s always a good idea to review your whole plan.

What tools and resources can help me update my business plan?

Updating your plan becomes easy with the help of business planning software like Upmetrics , where you can collaborate in real-time, use AI assistance, and get a step-by-step guide through the entire planning process.

Should business plans be updated annually?

Yes, business plans should be updated annually or when the time feels right. For example, you need to update your business plan when you start using a new tech platform, machinery, or other raw materials. Even an annual review of the plan might lead to minor updates.

Which aspects of a business plan should be updated?

When updating a business plan, key aspects to revise include the executive summary, company description, and market analysis.

Additionally, update the organization and management structure, product or service offerings, financial sections, and marketing strategies based on current performance data.

About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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14 Reasons Why You Need a Business Plan

10 min. read

Updated May 10, 2024

There’s no question that starting and running a business is hard work. But it’s also incredibly rewarding. And, one of the most important things you can do to increase your chances of success is to have a business plan.

A business plan is a foundational document that is essential for any company, no matter the size or age. From attracting potential investors to keeping your business on track—a business plan helps you achieve important milestones and grow in the right direction.

A business plan isn’t just a document you put together once when starting your business. It’s a living, breathing guide for existing businesses – one that business owners should revisit and update regularly.

Unfortunately, writing a business plan is often a daunting task for potential entrepreneurs. So, do you really need a business plan? Is it really worth the investment of time and resources? Can’t you just wing it and skip the whole planning process?

Good questions. Here’s every reason why you need a business plan.

• 1. Business planning is proven to help you grow 30 percent faster

Writing a business plan isn’t about producing a document that accurately predicts the future of your company. The  process  of writing your plan is what’s important. Writing your plan and reviewing it regularly gives you a better window into what you need to do to achieve your goals and succeed. 

You don’t have to just take our word for it. Studies have  proven that companies that plan  and review their results regularly grow 30 percent faster. Beyond faster growth, research also shows that companies that plan actually perform better. They’re less likely to become one of those woeful failure statistics, or experience  cash flow crises  that threaten to close them down. 

• 2. Planning is a necessary part of the fundraising process

One of the top reasons to have a business plan is to make it easier to raise money for your business. Without a business plan, it’s difficult to know how much money you need to raise, how you will spend the money once you raise it, and what your budget should be.

Investors want to know that you have a solid plan in place – that your business is headed in the right direction and that there is long-term potential in your venture. 

A business plan shows that your business is serious and that there are clearly defined steps on how it aims to become successful. It also demonstrates that you have the necessary competence to make that vision a reality. 

Investors, partners, and creditors will want to see detailed financial forecasts for your business that shows how you plan to grow and how you plan on spending their money. 

• 3. Having a business plan minimizes your risk

When you’re just starting out, there’s so much you don’t know—about your customers, your competition, and even about operations. 

As a business owner, you signed up for some of that uncertainty when you started your business, but there’s a lot you can  do to reduce your risk . Creating and reviewing your business plan regularly is a great way to uncover your weak spots—the flaws, gaps, and assumptions you’ve made—and develop contingency plans. 

Your business plan will also help you define budgets and revenue goals. And, if you’re not meeting your goals, you can quickly adjust spending plans and create more realistic budgets to keep your business healthy.

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• 4. Crafts a roadmap to achieve important milestones

A business plan is like a roadmap for your business. It helps you set, track and reach business milestones. 

For your plan to function in this way, your business plan should first outline your company’s short- and long-term goals. You can then fill in the specific steps necessary to reach those goals. This ensures that you measure your progress (or lack thereof) and make necessary adjustments along the way to stay on track while avoiding costly detours.

In fact, one of the top reasons why new businesses fail is due to bad business planning. Combine this with inflexibility and you have a recipe for disaster.

And planning is not just for startups. Established businesses benefit greatly from revisiting their business plan. It keeps them on track, even when the global market rapidly shifts as we’ve seen in recent years.

• 5. A plan helps you figure out if your idea can become a business

To turn your idea into reality, you need to accurately assess the feasibility of your business idea.

You need to verify:

• If there is a market for your product or service
• Who your target audience is
• How you will gain an edge over the current competition
• If your business can run profitably

A business plan forces you to take a step back and look at your business objectively, which makes it far easier to make tough decisions down the road. Additionally, a business plan helps you to identify risks and opportunities early on, providing you with the necessary time to come up with strategies to address them properly.

Finally, a business plan helps you work through the nuts and bolts of how your business will work financially and if it can become sustainable over time.

6. You’ll make big spending decisions with confidence

As your business grows, you’ll have to figure out when to hire new employees, when to expand to a new location, or whether you can afford a major purchase. 

These are always major spending decisions, and if you’re regularly reviewing the forecasts you mapped out in your business plan, you’re going to have better information to use to make your decisions.

7. You’re more likely to catch critical cash flow challenges early

The other side of those major spending decisions is understanding and monitoring your business’s cash flow. Your  cash flow statement  is one of the three key financial statements you’ll put together for your business plan. (The other two are your  balance sheet  and your  income statement  (P&L). 

Reviewing your cash flow statement regularly as part of your regular business plan review will help you see potential cash flow challenges earlier so you can take action to avoid a cash crisis where you can’t pay your bills. 

• 8. Position your brand against the competition

Competitors are one of the factors that you need to take into account when starting a business. Luckily, competitive research is an integral part of writing a business plan. It encourages you to ask questions like:

• What is your competition doing well? What are they doing poorly?
• What can you do to set yourself apart?
• What can you learn from them?
• How can you make your business stand out?
• What key business areas can you outcompete?
• How can you identify your target market?

Finding answers to these questions helps you solidify a strategic market position and identify ways to differentiate yourself. It also proves to potential investors that you’ve done your homework and understand how to compete. 

• 9. Determines financial needs and revenue models

A vital part of starting a business is understanding what your expenses will be and how you will generate revenue to cover those expenses. Creating a business plan helps you do just that while also defining ongoing financial needs to keep in mind. 

Without a business model, it’s difficult to know whether your business idea will generate revenue. By detailing how you plan to make money, you can effectively assess the viability and scalability of your business. 

Understanding this early on can help you avoid unnecessary risks and start with the confidence that your business is set up to succeed.

• 10. Helps you think through your marketing strategy

A business plan is a great way to document your marketing plan. This will ensure that all of your marketing activities are aligned with your overall goals. After all, a business can’t grow without customers and you’ll need a strategy for acquiring those customers. 

Your business plan should include information about your target market, your marketing strategy, and your marketing budget. Detail things like how you plan to attract and retain customers, acquire new leads, how the digital marketing funnel will work, etc. 

Having a documented marketing plan will help you to automate business operations, stay on track and ensure that you’re making the most of your marketing dollars.

• 11. Clarifies your vision and ensures everyone is on the same page

In order to create a successful business, you need a clear vision and a plan for how you’re going to achieve it. This is all detailed with your mission statement, which defines the purpose of your business, and your personnel plan, which outlines the roles and responsibilities of current and future employees. Together, they establish the long-term vision you have in mind and who will need to be involved to get there. 

Additionally, your business plan is a great tool for getting your team in sync. Through consistent plan reviews, you can easily get everyone in your company on the same page and direct your workforce toward tasks that truly move the needle.

• 12. Future-proof your business

A business plan helps you to evaluate your current situation and make realistic projections for the future.

This is an essential step in growing your business, and it’s one that’s often overlooked. When you have a business plan in place, it’s easier to identify opportunities and make informed decisions based on data.

Therefore, it requires you to outline goals, strategies, and tactics to help the organization stay focused on what’s important.

By regularly revisiting your business plan, especially when the global market changes, you’ll be better equipped to handle whatever challenges come your way, and pivot faster.

You’ll also be in a better position to seize opportunities as they arise.

Further Reading: 5 fundamental principles of business planning

• 13. Tracks your progress and measures success

An often overlooked purpose of a business plan is as a tool to define success metrics. A key part of writing your plan involves pulling together a viable financial plan. This includes financial statements such as your profit and loss, cash flow, balance sheet, and sales forecast.

By housing these financial metrics within your business plan, you suddenly have an easy way to relate your strategy to actual performance. You can track progress, measure results, and follow up on how the company is progressing. Without a plan, it’s almost impossible to gauge whether you’re on track or not.  

Additionally, by evaluating your successes and failures, you learn what works and what doesn’t and you can make necessary changes to your plan. In short, having a business plan gives you a framework for measuring your success. It also helps with building up a “lessons learned” knowledge database to avoid costly mistakes in the future.

• 14. Your business plan is an asset if you ever want to sell

Down the road, you might decide that you want to sell your business or position yourself for acquisition. Having a solid business plan is going to help you make the case for a higher valuation. Your business is likely to be worth more to a buyer if it’s easy for them to understand your business model, your target market, and your overall potential to grow and scale. 

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• Writing your business plan

By taking the time to create a business plan, you ensure that your business is heading in the right direction and that you have a roadmap to get there. We hope that this post has shown you just how important and valuable a business plan can be. While it may still seem daunting, the benefits far outweigh the time investment and learning curve for writing one. 

Luckily, you can write a plan in as little as 30 minutes. And there are plenty of excellent planning tools and business plan templates out there if you’re looking for more step-by-step guidance. Whatever it takes, write your plan and you’ll quickly see how useful it can be.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Table of Contents

• 6. You’ll make big spending decisions with confidence
• 7. You’re more likely to catch critical cash flow challenges early

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Medicare Plan to Verify Negotiated Drug Prices Spurs Unease (1)

By Nyah Phengsitthy

The Medicare system proposed by the Biden administration to verify negotiated drug prices reach eligible individuals is generating concerns about compliance and operational challenges for manufacturers and dispensing entities.

The Centers for Medicare & Medicaid Services continues to swiftly roll out its drug price negotiation program after publishing a draft guidance earlier this month for the next cycle of its price-setting scheme. The plan, created under the Inflation Reduction Act, is expected to lower the costs of 10 Medicare Part D drugs as of 2026 and another 15 drugs in 2027.

The guidance introduced new details on the implementation of the maximum fair price (MFP) of selected drugs and the use of a Medicare transaction facilitator (MTF) to streamline the exchange of data and payments among pharmaceutical supply chain entities to verify drug prices are dispensed to eligible individuals.

The agency is asking the public to weigh in on the guidance by July 2, but feedback already is underscoring the slew of responsibilities handed to drugmakers and dispensing entities, such as pharmacies, to carry out the drug’s maximum fair price.

“The prior finalized guidance from last year had left open a bunch of questions that were to be addressed in this next round. It was really important that all of those issues were addressed in this round because the clock is ticking,” said William Sarraille, a veteran pharmaceutical defense lawyer, now a regulatory consultant at Saraille & Associates.

But the guidance “pulls back from significant portions of what needs to be done and sort of dumps those critical activities on manufacturers, covered entities, contract pharmacies, and the rest of the players in the distribution channel,” Sarraille said. “That’s really unfortunate. It may suggest that the start of this program might be very bumpy, very rocky.”

Manufacturers must comply with requirements such as following a prompt payment window, recording and documenting claims, and avoiding duplicate discounts that may occur between the maximum fair price and the federal 340B Drug Pricing Program—all of which could be subject to a dispute process or civil monetary penalties if not properly executed.

“Public feedback has been instrumental in implementing the Inflation Reduction Act so far, and CMS will continue this engagement as we move forward,” the agency said in a statement to Bloomberg Law.

“CMS is holding listening sessions with impacted parties to provide feedback on Medicare Transaction Facilitator (MTF) policies, relating to the effectuation of the Medicare Maximum Fair Price (MFP), and more information about these sessions will be forthcoming,” the agency said.

“CMS is also issuing a draft Statement of Objectives in order to acquire a vendor that will build, test and operate the data exchange functionality of the MTF. Potential bidders are invited to submit questions as part of the MTF procurement process.”

Data, Payment Facilitation

The facilitator’s primary focus is to collect and send claim-level data to manufacturers and receive payment information from manufacturers. The CMS proposes drugmaker participation for the MTF data exchange is mandatory to verify that the drug’s price was carried out in each instance.

But drugmakers “may need to invest in new systems, enhance coordination with dispensing entities and other manufacturers, and navigate complex regulatory requirements to ensure compliance and avoid penalties,” said Eliza Biedziak, senior manager in the forensic and integrity services at Ernst & Young LLP.

Manufacturers are also up against the “complexities of receiving and processing claim-level data elements, conducting secure data exchanges, calculating accurate refunds, and maintaining compliance with statutory obligations,” Biedziak said in an email.

The agency requires drugmakers to meet a “14-day prompt MFP payment window” for executing the MFP refund for each claim. Manufacturers may be liable for civil monetary penalties if the price is not available to a dispensing entity or if the report with payment-related data is not provided to the facilitator within that window.

That window period may also pose as a concern for dispensing entities because the “true-up” payment a manufacturer pays a pharmacy to fulfill their obligation to make the MFP available to dispensers “could actually be much longer than 14 days,” said Ronna Hauser, senior vice president of policy and pharmacy affairs for the National Community Pharmacists Association.

“We’re very concerned about floating this program” because “manufacturer refund payments could take up to four to six weeks to arrive in pharmacies,” Hauser said.

“Providing patient care and counseling for these drugs is very important, and we want to make sure patients are getting the benefit of using these drugs. We have to remain a viable partner in dispensing these drugs,” she said.

NCPA represents over 19,000 independent pharmacies, which feeds into the thousands of other dispensing entities and providers that distribute Part D drugs.

The CMS also seeks comments on using the MTF as a voluntary payment facilitator to address the “lack of connection” between manufacturers and dispensing entities.

The agency weighs two payment options: the first requires the MTF to collect dispensing entities’ banking information and provide it to manufacturers, and the second option requires the MTF to receive aggregated refund amounts from manufacturers and pass them through to dispensing entities.

The Pharmaceutical Research and Manufacturers of America, a top drugmaker industry group, said it welcomes the opportunity to provide input on the guidance.

“We appreciate the consideration CMS is giving to operationalizing the maximum fair price,” said Nicole Longo, deputy vice president of public affairs for PhRMA. “The proposal to use a Medicare Transaction Facilitator to help with the exchange of data and as an option to facilitate access to the maximum fair price is a step in the right direction.”

Avoiding Duplicate Discounts

Section 340B of the Public Health Service Act requires drugmakers to discount drugs for qualifying providers that treat low-income and uninsured patients. Under the plan, eligible health-care organizations can receive certain drugs at discounted prices from manufacturers.

The 340B statute prohibits duplicate discounts.

Drugmakers are required to provide access of the MFP to 340B covered entities in a nonduplicated amount to the 340B ceiling price if the MFP is lower than the 340B ceiling price for the selected drug.

The agency said it won’t assume responsibility for “deduplicating” discounts, and it is handing that task to the drugmakers. The CMS intends to provide “a process to identify applicable 340B eligible claims through the reporting of payment elements to the MTF.” The eligible claims can be voluntarily supplied by a dispensing entity.

The voluntary nature of providing 340B claims, though, “will pose a significant challenge for the manufacturers to identify 340B claims, and they will be at risk to possibly extend double discounts via MFP and 340B,” Biedziak said. “The current framework requires manufacturers to validate 340B claims and ensure compliance with pricing obligations yet does not equip them with the necessary data to efficiently identify 340B utilization.”

If it is later determined that the MFP of a drug was provided to a 340B-eligible individual and the 340B ceiling price is lower, manufacturers must promptly refund the difference to the 340B covered entity.

“We think the objective is entirely reasonable—duplicate and cumulative discounts not be part of the system moving forward,” said Mark E. Miller, executive vice president of health care for Arnold Ventures. “CMS has created a transition system, and manufacturers will be required to utilize it in order to properly litigate these discounts.”

To contact the reporter on this story: Nyah Phengsitthy in Washington at [email protected]

To contact the editors responsible for this story: Zachary Sherwood at [email protected] ; Brent Bierman at [email protected]

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