How do you know if your business idea will be a winner?
We often get lost in the process of building the perfect product without first getting validation from the market.
I’ve been there myself. You get blinders on and ignore the advice to test your idea.
To really build your hustle from the ground up, you need to show people the most basic form of your product. And I don’t just mean physical products.
Any idea has a basic form – from a blog to a motor vehicle. People need to understand what you are trying to do at its core. The value of your project, idea, or product. And the way to do that is by building a minimum viable product – an MVP.
That’s what we’ll look at in this newsletter.
What you can expect this week
- Trends. There are a lot of interesting studies and data about MVPs out there, and we have it all in one place for you.
- Strategies. This week we’ll teach you all about “Minimum Viable Products,” what they are, their importance to your hustle, how to build one, and what to do after you have.
- Tool of the Week. Creating a product from scratch can be hard, but this week’s tool recommendation will give you a great jumping-off point.
Now that you’ve had a taste of what’s to come let’s get started!
Trends
The primary reason you should create an MVP is to minimize risk. The unfortunate truth is that a large percentage of businesses fail before they even get going. If you test your idea in the market before going all in, you’re less likely to experience the high cost of failure – both mentally and financially.
Let’s look at some of the concerning stats on business survival that make an MVP such an essential piece of the puzzle.
Business Survival Rate by Age
The graph below analyzes the survival rate of businesses after they are started. While almost 90% of companies make it past the first year, that number drops dramatically in years 2, 3, 4, and 5.
In fact, only one-third of businesses will make it past 10 years – that’s a LOT that don’t.
Business Failure Rate by Industry
If we dive a little deeper into the business failure rate by industry (in the first four years of operation), it sheds further light on the challenges of certain sectors.
The highest failure rate is in the information industry, which might be surprising, at first glance. The information industry, however, has a relatively low barrier to entry and includes a large portion of the true high-risk startups, which might bump the average failure rates up.
Top Reasons for Business Failure
It’s also important to note that funding isn’t always the problem. Even funded startups fail, as the following graph illustrates, which reinforces just how vital testing your idea with the market is.
- Money and time are finite and need to be allocated judiciously. Running out of cash is the top reason startups cite for failure.
- Tackling problems that are interesting to solve rather than those that serve a market need is the No. 2 reason for failure, noted in 35% of cases.
- While obsessing over the competition is not healthy, ignoring it was also a recipe for failure in 20% of startups.
- Most failed founders agree that a business model is important – staying wedded to a single channel or failing to find ways to make money at scale left investors hesitant and founders unable to capitalize on any traction gained.
- Sometimes a startup can evolve from a simple idea and enter a world of legal complexities that can ultimately shut it down.
And these are just the top five reasons startups with a ton of cash fail!
We’re not publishing these statistics to scare you. But they reiterate just how hard it is to launch and maintain a successful business. If you are frugal with your money and take the appropriate steps to test your idea with real customers using an MVP, your road to success will be much less painful – albeit still challenging!
Strategies
These stats paint a confronting picture of the failure rates of new businesses. It’s the primary reason that creating an MVP is so important. So let’s take a closer look at what this concept is all about.
What is an MVP (Minimal Viable Product), and Why Does It Matter?
An MVP is a product or project with just enough features to entice early adopters and validate a new concept early in the product development cycle. It was traditionally a means for software developers to gather feedback from their consumers. But an MVP may be almost anything; it’s all about providing your users a taste of what you have to offer.
Image by Wikimedia
According to Eric Ries, the man that first pushed the concept of the minimal viable product as part of his Lean Startup technique, an MVP is the version of a new product that enables you to get the most validated learning about customers with the least amount of effort.
Why would you make an MVP? There are multiple examples:
- Getting a product to market quickly
- Testing your idea with real people before investing more money
- Discovering what works and what doesn’t
So, an MVP can help you save time and resources that may have gone to waste if your idea doesn’t hit the mark.
The Benefits of Creating an MVP
You get to see how your product is received
You can never really know how your intended target audience will react to your product until you launch. Even with all the data and tools available today, it’s impossible to predict how much people will like your product. An MVP allows you to get real-world data to see if your plan can work or not.
You can focus on the strengths of your product
As you develop your idea, you may focus on the wrong aspects, resulting in a complex product that loses its primary value. Maybe you are thinking of offering things that don’t really connect with the product or adding features that aren’t necessary. The minimum viable product allows you to concentrate on the product’s fundamental value and the features that the consumer truly needs. This assists the development team in determining what is and is not required. So, rather than squandering money on a feature that no one will use, it is critical to concentrate on the main characteristics contributing to the product’s market success.
By focusing on the essential aspects of the product during production, you can save a lot of the money, time, and effort required to launch the product. So, rather than spending a long time building a product that may or may not be successful in the market, you shorten the process by releasing a scaled-down version. If there are flaws in the product, you can choose to modify it or discontinue it without incurring additional time and cost.
It’s faster and easier to make changes
Instead of a linear process, you can employ an agile and iterative approach. The product release allows you to obtain customer input, which you can then use to improve the product’s future versions. Rather than the traditional method, you release the product, allow people to test it out, and then collect input to fuel the iterative cycle to produce subsequent versions of the product.
Examples of Successful MVPs
Numerous success stories demonstrate how an MVP has transformed a small business into a multimillion-dollar market leader. Here are some high-profile examples:
Amazon
Amazon was founded in 1994 to focus on low-cost books, with an easy site design based on a minimal viable product; this was all they needed to build and establish their business in the retail sector.
Twitter took an unusual approach. It was initially known as “twttr” and was only used as an internal business tool. However, the team made a significant investment in the SMS feature to publish it to the platform and test it with users. In 2006, Twitter was finally made available to the whole public.
Today, Facebook is one of the most popular social media networks with a full suite of features. However, its MVP focused on connecting students based on classes and colleges – a very simple idea. People fell in love with this software and began sharing it, allowing the Facebook team to expand the feature set over time.
It didn’t have all its features and functionalities in its early stages. It was tested on a few people and slowly iterated once features were used and became popular.
Further Reading:
How to Build an MVP
Below I break down an example of the MVP process into four simple steps you can use for your side hustle:
1. Define your idea. Start by documenting a clear description of the core problem you’re trying to solve (and how you believe you can solve it). Make this as simple as possible and avoid going on tangents.
2. Research the market and your competitors. Next, you should determine whether or not your target audience will be interested in your idea. You could run surveys or questionnaires on social media, for example. The more genuine client feedback you have, the better your chances of success. Also, be sure to analyze the key competitors in the market, the market size, and whether or not there is a gap you can fill.
3. Prioritize your features. Make a list of all the features you wish to see in your product or service. Go over the list and cross out any features that aren’t essential. After you’ve prioritized the features, you can determine their scope for the product’s first version and begin constructing the MVP.
4. Build It. After determining the important features and learning about market expectations, you can construct an MVP and use it to receive customer feedback.
Yes, this is a “minimal viable product,” but that doesn’t mean it should be poor quality. It still needs to deliver a solution for your customers so that you can adequately test the idea in the market. Sure, it doesn’t need to be perfect, but it must be functional – simple to use, visually appealing, and address the primary “pain point” that justifies its existence.
Below is a visualization of The Lean Startup Methodology – a variance of the MVP process you may like to draw inspiration from:
Image by Rebeca Zuñiga on Flickr
Further Reading:
- Step by step guide to building an MVP by Net Solutions
- An MVP is not a product, it’s a process
- Tips and mistakes to avoid when building an MVP by Dreamcode
After Launching an MVP (Measure, Collect Feedback, and Iterate)
After you’ve launched your MVP and tested it, you’ll need to examine everything. Creating an MVP helps you learn about your customers’ demands, feedback, and the dangers of releasing the whole product to the market.
The effectiveness of your project is determined by initial user responses and comments from potential customers. You may ask them if they would choose that product over one of your competitors, or what else they want to see from it when it enters the market.
Measuring the performance and reception
There are a lot of ways to check how successful your MVP launch is. However, the most crucial metric is if it solved the problem or addressed the need that you set out to. You want to know if your idea met its mark or not.
Having a successful MVP, one that addresses the needs of your users, is critical to making money. People will flock to you if they see you know what their issues are and how to fix them.
The best way to know just how successful your MVP has been is by tracking relevant data parameters. Things like how many times it was shared, downloaded, or used.
These are known as KPIs – Key Performance Indicators. They are your reliable measures for tracking your growth and performance. They will tell you what changes you need to make to improve your product.
In an open format, ask your customers questions like:
- What are your thoughts about this product?
- Was there anything you didn’t like? Why?
- Are there any features you’d like to see added?
- Would you recommend this to a friend?
You can get feedback like this with simple interviews or surveys.
Will people pay for your product, and what features are worthy?
There are different theories on what an MVP should be called when it hits the market, but most people prefer to call it a “BETA” version of the end product so that first-time users are patient with its functionality.
It’s common for startups to offer the MVP free. However, we recommend you charge people for it – even if it’s just a few dollars. Part of the testing process is to determine whether or not people will pay for your offer. Giving it away for free won’t accurately determine this.
As you collect client feedback, consider which features are significant enough for people to pay for. What functionality are they willing to pay for? How much are those features worth? Which features aren’t important? To answer these questions, you can set up mini-tests within the MVP process, for example, by offering different features and plans to various user groups.
Expectations vs. Reality
You should also assess how your customers use your product against how you expected them to use it. What you think is good about your product and how they use it aren’t always the same thing.
Despite your best efforts, consumers will occasionally interact with your product in unanticipated ways, for better or worse. An unanticipated use can sometimes reveal a far larger market opportunity. It may also offer you a better understanding of your target audience and how to address their issues.
Promotion
When developing your idea, it can be easy to forget about actually promoting it. However, if you don’t have a strategy in place, you may find yourself asking, “So, what happens now?” Unfortunately, simply having a great product does not ensure users will sign up to use it.
The goal of your promotional plan is to attract new customers to your product. Then you can use their feedback to decide which features to implement next. You’ll also learn where your product falls short, allowing you to move forward from those ideas (or the product entirely).
Attracting users who have never heard of you requires more than merely putting up a website or emailing some subscribers. You’ll need a specific strategy for your company, product, and market.
Also, if you find the right audience, your MVP users will help spread the word about your product.
Further Reading:
Tool of the Week
Leadpages is a user-friendly landing page tool that helps non-technical users create web pages without coding. It’s the perfect tool for launching an MVP because you can create a simple web page to promote your product without investing money in web development, hosting, and other time-intensive processes.
This tool is especially helpful if you plan on running a series of tests during your MVP process. For example, you could test landing page copy for different target markets, give prominence to certain features, or even garner interest in your product idea before you build it. Creating multiple landing pages is super easy with Leadpages, making this testing process much more efficient.
You can even take payments, collect contact information, or direct users to another platform.