In our last column, we discussed creating your minimum viable product, otherwise known as the MVP. It’s a critical step to building your startup in its first infant year and allows you to make many iterations based off of customer feedback.
For even more about the MVP, pick up a copy of The Lean Startup at Amazon today!
In this column, we are going to focus on how to validate your startup idea by talking to real customers. I’ll teach why it’s so important to your startup’s livelihood then tell you how I have approached it with my two most recent startups, eCommetize and FreeeUp.
What is a Validation Strategy?
When building a new business, you should always be able to answer the questions:
What problem are you solving?
How do you know that it is a real problem for the proposed customer?
A Common Mistake
Creating a new startup idea is something that millions, maybe even billions, of people have done around the world. People see an issue in their life and they create a product or service that could solve it. The issue is that most people don’t realize that there is already a solution to the problem in the market or that the problem doesn’t exist for enough people to make it a real business.
One of the most common mistakes of starting a new business is exactly what I have outlined above. Building a product for a problem that doesn’t exist or that already has sufficient solutions in the market.
Getting Input from Your Customers
A validation strategy is a set of processes that brings your startup idea from simply an idea to a product or service that solves a real problem in your customer market. A validation strategy helps to curb entrepreneurs from falling into the trap of building a product for a problem that does not exist.
A validation strategy is a period of time before, during, and after building your minimum viable product that you get out into the market and talk to potential customers about your idea. During the time that you are validating your startup idea, you listen diligently to your customers, take notes, and make a list of proposed adjustments to your business idea.
A Real Life Example: FreeeUp.com
When the idea of FreeeUp first came to fruition in the summer of 2015, my cofounder and I decided that we were going to talk to at least 20 potential customers before committing to further building the idea. We would get their honest thoughts on the business, ask pressing questions about the service, and get a better understanding of whether it was a need in their market.
Finally, we would ask each person that we talked to if they would be willing to pay for the service if it existed. We thought that if we could get an answer to this question from a strong variety of people within different niche industries, we could understand where our service may be most needed.
Going off of the Javelin Board, we created four different customer markets based off of the activities guidance. We searched within our networks and identified 20 different people that fit within our customer markets. Over the next month, we spent time reaching out to each of them. The Javelin Board is a great resource for validating your startup idea.
It took time to record all of our observations from our conversations, but it taught us a lot.
- Mixed results from our different markets. Our startup idea wouldn’t work with all 4 customer markets that we hypothesized.
- An outspoken “Yes” from the eCommerce customer market
- Handfuls of questions that we hadn’t asked ourselves yet
A Second Real Life Example: eCommetize
Before we officially decided to start eCommetize, we had already landed our first client. While networking in Chicago, I met an individual who owned a website with traffic over 250,000 page views per month. He had started his site 7 years ago and had built it into a leading website for resources and coaching within his niche.
After a few rounds of drinks and sharing stories, there was a clear solution to combining our sets of skills. He had a huge community who he knew how to communicate with. I had the expertise in creating drop ship eCommerce companies. We continued our conversations after Chicago and eventually started working together to build him an online store.
While it was a great start to proving our hypothesis that online influencers with large communities would be interested in a service where they could sell products directly to their users without the hassles of building and managing the online store, one customer is never enough. In order to validate your startup idea, you must speak with more potential customers and hear a resounding “yes” to paying for your service if it was available.
And so we set out on our validation hunt. We decided to tackle 4 different groups of people that we knew would give us honest feedback on our startup idea.
- Local Orlando entrepreneur –> who to better give you advice on your startup than other successful entrepreneurs who have gone through the validation process.
- Local investors and mentors –> we tapped into our network to get honest feedback from an investor and mentor perspective. Could they understand the value of the business that we were trying to build?
- Bloggers, vloggers, and online influencers –> our proposed customer market
- Competition –> what does our competition look like and how many similar products are there already in the market? Has the idea been attempted by others? Why has it or has it no worked out?
The results to our validation strategy were very similar to those of FreeeUp. We received pages of questions that we had not considered before and we were challenged to think more deeply about the business model of the service. The most important group of people was the people that would actually be our customer market…the bloggers, vloggers, and online influencers.
In the month or so that we validated our idea, we researched and contacted over 1,000 people within this customer market. We spoke with over 100 and there was a resounding interest in the service that we were proposing.
We received feedback that many online influencers had tried to start their own store, but that the management and product acquisition was too difficult or they did not have enough time. We also heard that people were frustrated by the low margins offered by affiliate marketing programs so they would love if they could have an online store where they could improve their margins.
The end result was that there was enough interest in the market to move forward. Our idea had not been fully validated yet, but it was moving in the right direction.
Why Is the Validation Process Important?
1. It confirms our initial hypothesis
2. It challenged us to build upon our initial startup idea
3. It gave us a glimpse into our MVP
4. It got us into the mind of the customer
5. It helped us to avoid chasing an idea that had no market
The first year of building a business requires continuous validation of your startup idea. Throughout the first year, you are constantly speaking with new potential customers, hearing feedback, and making adjustments on the fly. While you should have a short term strategic plan that guides you through all of the necessary steps to building a valuable business, you must follow the advice of your customer market. If you aren’t building a product or service that is going to solve a major problem for them, your startup will eventually dry out or be pushed out by a better competitor.