How do you know if a side hustle will work before you launch it?
Starting your own business takes time, money, and energy, so if you work on an idea that doesn’t go anywhere, you’ve wasted all that effort.
You might have a great business idea, but the truth is you shouldn’t jump on a project before verifying whether or not it will work.
Idea validation is something that I apply every time I think of a new project, and the feedback I receive helps me to shape my future product.
This week’s newsletter brings you:
- Trends – We review the data on business idea validation based on current trends.
- Strategies – This week, we discuss why you should validate your business idea, show you how to do it, and throw in some real-world examples.
- Tool of the Week – Looking for tools to help you validate an idea? We’ll show you why Validation Canvas is all you need.
Ready? Set? Hustle!
Trends
From lack of product-market fit to disharmony on the team, this week we analyze the top 12 reasons startups fail. Check it out below!
Top reasons startups fail
After reading through 111 post-mortems since 2018, CB Insights learned there is rarely one reason for a startup’s failure.
Since many startups offer multiple reasons for why they failed, you’ll see that the chart highlighting the top reasons doesn’t add up to 100% (it far exceeds it).
Money and time are finite and need to be allocated judiciously. For most startups, running out of cash — tied with the inability to secure financing/investor interest — was the top reason cited for failure.
Tackling problems that are interesting to solve rather than those that serve a market need was cited as the No. 2 reason for failure, noted in 35% of cases. This just goes to show that you really do need to validate your idea before you get into deep!
Strategies
Before you can start hustling, you need to know your project is viable. Let’s learn how to do that by validating your business idea.
Validate before launching
You should validate your ideas before launching because:
Validating ideas accelerates the development of your product. You have no idea what reaction your clients will have. Validating a business idea allows you to determine whether there are any flaws in your concept that could result in a large return, discount, fix, or substitution cost.
It makes it less likely that a bad idea will be launched. It’s easy to become obsessed with an idea. However, there is something about the brooding process that can alter reality, making you incapable of looking at your product objectively.
It shows your ability to market the product. Hopefully, you create products or services that solve the difficulties that your target customers are experiencing. And you must understand exactly what your customers are looking for if you want them to buy from you. The benefit of business concept validation is that it demonstrates to you the needs of your potential clientele.
You never know when you’ll be inspired to make changes to your product. You can find out if your concept is in high demand. With idea validation, it will be easy to forecast and come up with fresh highlights, discover benefits your product offers that you were unaware of, or advise you to adjust your packaging, price, or other aspects.
Your costs are reduced. Remember, the more you invest in idea validation, the less money you’ll lose during the launch phase. The confirmation of an idea does not ensure the success of your startup. However, it gives you a unique opportunity to determine whether you are investing your time and money in a viable product.
What if you don’t validate your idea?
Regrets, grief, and remorse. Are you willing to risk money, waste time, and lose confidence in your business to achieve your goals? Entrepreneurs often overlook the importance of validating their ideas because they are focused on implementing strategies and ideas. These individuals believe that following their instincts will guarantee success. There is no guarantee, but idea validation has numerous advantages. Ignoring them can have severe consequences.
Thinking about your concept all day and all night may cause you to lose the ability to analyze and examine your idea. Concept validation can identify weaknesses and improve them before a product reaches the market.
Validating your idea does not ensure that your business will succeed, but it does allow you to evaluate your investment of time and money. You can determine whether or not your idea is in demand.
Resources:
Why Validation of a Business Idea is Important by Adloonix
4 Strategies for idea validation
There are different factors to consider when looking to validate a business idea. Take into account the following strategies when you are trying to determine whether your idea will work or not.
Assess market size and share
Before starting your business, try to figure out how big your target market is and how much of a share you might be able to grab. It’ll help you figure out the potential of your company.
In his online class Entrepreneurship Essentials, Harvard Business School professor William Sahlman uses Casper as an example. Casper’s defining features included an online business model, a 100-day return window, and viscoelastic foam in its mattresses.
By comparing Casper to the bigger market, Casper’s founders estimated the market size for their product in 2014.
The founders of Casper looked at market statistics at the time, such as the portion of the market owned by foam mattresses, the number of e-commerce mattress retailers, and the units sold per year, to determine that a few percentage points would make up a big chunk of the market.
You should do this for your intended market. Study sales data, the number and share of manufacturers in your segment, and the market share you take for products like yours. Determine where your product fits in the market and how much you can own.
Consider assumptions, hypotheses, and goals
To be successful in market validation, your company needs to write down its goals. In defining your vision, you can uncover any assumptions and determine your final destination.
For example:
- How much is my product worth?
- Who is my intended audience?
- How does my product differ from the competition?
- How do I envision my business model, product, and pricing?
It is helpful to answer these questions to communicate your product’s value and unique features and to reveal assumptions and hypotheses that have yet to be validated and verified.
Research search volume of related terms
Another way to determine whether your business idea will work is to look at the search volume of phrases related to your product. Most people use a search engine to determine what the market offers.
Utilize terms that convey the client’s intent if there isn’t much interest in your product. If you want to develop a mattress made of a new, more supportive material, you may investigate how frequently people search for the “best mattress for lower back pain patients.” According to Moz data, the question receives 240 monthly searches.
Test your product or service
Make sure you release the most useful, intuitive version of your product. Beta testing can help you do so.
The internal staff tests a product in a staged environment during alpha testing. Before releasing the product to the public, alpha testing removes bugs, defects, or quirks.
Beta testing involves testing a product with a small group of real consumers who are specially instructed to spot flaws. In the case of software or apps, beta testing may be open to the public with a notice informing them that the version they are testing is incomplete.
Having real users test your product can be invaluable if you want to determine market viability. There may be a market need, but customers may choose your competitor if your product is unreliable, complex, or difficult to use. You can better reach and satisfy your customers’ needs by leveraging the feedback you receive from beta testers.
Resources:
10 Proven Ways to Validate Your Startup Idea by Medium
3 Businesses that validated their ideas
We can talk theory all day, but seeing real examples of successful idea validation is much better. Take a look at these three real-world examples:
MailChimp
MailChimp is the world’s largest and most popular email marketing service provider. But it wasn’t always that way.
Ben Chestnut, co-founder and CEO of MailChimp, started an e-greeting website in 1999, which failed.
Then he and Dan Kurzius established a web design firm. The team discovered that individuals needed email marketing services as they worked on client projects.
According to Ben, this is what the bulk of their clients asked for.
The duo recognized they could construct a software service that met their web design clients’ needs.
MailChimp was the tool they created.
MailChimp was a side hustle for several years, but in 2007, Ben and Dan decided to go all-in on MailChimp and close their web agency for good.
They validated their idea by soliciting input from real people who paid for their web design services.
Hubspot
Dharmesh Shah and Brian Halligan founded Hubspot in 2006 as a marketing, sales, and customer support software company. The terms “Inbound” and “Hubspot” are almost synonymous since Brian Halligan coined the term “Inbound Marketing” when Hubspot was still young.
But how did Hubspot prove its business idea as a startup? One word: content.
Inbound marketing blog Hubspot existed before Hubspot as a SaaS.
The two clever entrepreneurs used a blog to test their idea (and have fun) and find out what people wanted.
Hubspot confirmed its product proposition through its blog, which hadn’t been published yet.
Content is a great way to verify an idea and grow an audience before launching a minimum viable product.
Drift
Drift is a startup that popularized the term “conversational marketing.”
It is a shining example of how a SaaS may become successful by incorporating consumer feedback into developing a spectacular product.
In 2015, David Cancel and his co-founder (and Drift’s CTO) Elias Torres decided to launch Drift to transform how B2B enterprises engage with their clients. With over 100,000 businesses utilizing Drift in only three years, it’s obvious that Drift is doing something right.
In interviews, David stated that in the beginning, they had an idea, a product notion of what they were attempting to produce. He claims that they were so preoccupied with investigating and finding answers to crucial concerns that they didn’t have time to develop a website or even a single landing page.
They only introduced a minimum viable product after extensive research into various target groups and the completion of the validation procedure.
Resources:
5 Examples of Successful Startup Idea Validation
Tool of the week
This week, we bring you one tool so simple you can use it with pen and paper! If you want to validate a business idea, try Validation Canvas by Ash Maurya.
Validation Canvas is a tool that you can use to track your progress as you validate your ideas. The validation process aims to learn as much as possible as quickly as possible. You’ll want this process to take as little time and effort as possible to maximize results. So, you’ll have to run experiments iteratively. The validation board is the brains of this whole thing.
It starts with your Value Proposition. That’s your “best guess” for who your customer is, what their problem is, and what your solution is. No need to complicate it. Make it simple, and test it. As pivots change, so will your best guess.
The best guess you have right now is based on assumptions. Find the one with the most risk: the one that, if it’s wrong, completely disproves what you thought. Decide how you will test that assumption and define the minimum success criteria. Plug that stuff into the experiment report and run it.
You can experiment with exploration, pitching, or even a concierge model. You’ll learn more about the problem you’re trying to solve through exploration.