Business Idea Validation

[amyrabbit]

Hi Everyone,

I'm new to this game, or should I say I've been trying to get a business started for about a year, but for one reason of another it hasn't happened yet, not beyond the business plan in any case.

I have in fact 3 ideas that I feel are worth pursuing but one that I hope will be the winner and the one I make the priority. I'm just at the point where I need to test the validity. What are everyones thoughts on the landing page to test conversion/hit rates (my business is an I.T service). I feel more comfortable exposing my ideas to the public if the public think my idea is just about to launch as opposed to a twinkle in one's eye; if you catch my drift.

Any other ideas for testing validity without exposing too much? (reason being this will require a fair amount of capital and it might take me some time to obtain)

Thanks!!

[Freelancier]

The only validation you really want is to find good-paying customers who value what you're offering. Everything else is a data point with lesser validity. I had a LOT of customers for my consulting business tell me before I launched a software product that they needed what I was creating... none actually bought it, though.

[Harold Mansfield]

You could create a working prototype and test with focus groups.
You could talk to a consultant to play devils advocate and see it the idea is in fact original, doesn't already exist or is already outdated.
You could talk to people in the industry to get opinions.

Ultimately you can't both keep it a secret and get opinions. And even if you get opinions, it doesn't mean the idea will work one way or the other.
You don't really know until you get off the pot and get the product out there.

[vangogh]

but for one reason of another it hasn't happened yet, not beyond the business plan in any case.

The reason is because you're looking for guarantees about which idea to pursue instead of pursuing them. The way you test and validate your ideas is to start a business and try to make it work.

There's no advance test to see which ideas will work. You have to pick one, give it a try, and see what happens. If it doesn't work, do your best to understand why and learn what went wrong so you can do better next time. If it does work spend even more time trying to understand why and learn so you can do better next time.

You're looking for assurances where there are none. I understand. I know it can be scary starting a business and it's easy to worry about not making it. However, the only way to know if an idea is a good one, is to start the business.

[turboguy]

Personally I don't think there is any real way to find the potential of a product or service without just jumping in and trying it. You need to trust your own judgment and have faith in yourself. I have had people use me as a Guiney pig to do research and usually the questions they ask and the information they get is useless.

Here are a couple of my past attempts to research the potential of a product.

1. Back in the 80's there was a company in England that made a product I wanted to import and sell. They told me that at that time they could not sell me the product that I wanted but they did have another product they could sell me which was a specialized mower for use on golf courses. It would only fit one tractor which happened to be a Ford model. They came in for a meeting and I took them to the largest Ford tractor dealer in the North East who did a lot of business with golf courses. We met with the owner and sales manager and they said that model of Ford was one of their most popular and very popular with golf courses and they thought the mower had lots of potential. I told them I would give them one on consignment to see how it went and bought one mower (6 grand in 1980 dollars). Well, they never did manage to sell any and when I asked about it they said because there was no catcher available for it there was no market for it. I sure wish they would have figured that out before I spent 6 grand. I never was able to sell that mower. The good side of it was that down the road they did make the other product that I had wanted available to me and I did turn into one of their biggest customers and did have a lot of success with that product.

2. I look back on the second example and chuckle sometimes. I had wanted to get into the manufacturing business. One day I was visiting a Ford tractor dealer in CT. I will call him Archie (mostly since his name was Archie). One day Archie and I were sitting around talking and he said to me. There is something that no one makes that I think would have a lot of potential. There are tons of little dump carts for behind lawn tractors sold every year. There are also a lot of big dump trailers sold to landscapers for behind pickup trucks that basically let them do with a pickup what they would normally need a dump truck for. There is nothing in between and I think if someone came out with something it would be a big seller. Well, I thought about that idea for a while and then got my pencil out and started designing. I incorporated features that no one else had and really had a cool design. I went out and bought a few cheap machines, took a 4 night course in welding, formed a corporation, had a sheet metal shop cut and bend the big parts and introduced my first product. Actually it was reasonably successful. Everyone did seem to like it and it did sell. It turned out to be a difficult product to make any real money on however.

Well, about 4 months after introducing the new line which had 3 models I happened to be back up in CT. I stopped to see Archie. I thought this would be the easiest sale I ever made. I gave Archie my best pitch on the carts. He thought for a minute and said he wasn't interested. He didn't think there was a market for it.

I think one of the problems I had with my first example was that they felt the manufacturer had come all the way from England and they didn't want to throw cold water on the product. I wish they had but that is life and that is business.

[Fulcrum]

I think you need to jump right in and start. You will never get answers without risking both idea and financial exposure.

[Memphis DogHouse]

I tried doing something like that but it didn't really work out. Built my site, put up a few ads, waited a month, and got no calls. It wasn't until I decided to do it anyway and go full swing until we started getting customers.

[tallen]

Chicken and egg problem, I suppose, but you say your idea needs capital, so why not approach potential investors to see what they think --if they are willing to invest, then you have validity (at least to start). Of course the investors are probably going to want to see some other evidence that your idea has validity, which I guess is where you are stuck.

Is there anyway to begin your business in a less capital-intensive way? What are the stumbling blocks to getting started? Work on those and get going -- try it out.

[Paul]

I know nothing about internet marketing or IT services .However, there have been many cases of testing a market with “test adds” and even test “closes”/conversions. It seems easy enough to do that in your case. Close some deals and then either scramble to fulfill them or simply apologize if you can’t. You will at least answer your own question about conversions and be able to demonstrate viability to investors. You may want to use a temporary name so not to taint the permanent name.

[billbenson]

I know nothing about internet marketing or IT services .However, there have been many cases of testing a market with “test adds” and even test “closes”/conversions. It seems easy enough to do that in your case. Close some deals and then either scramble to fulfill them or simply apologize if you can’t. You will at least answer your own question about conversions and be able to demonstrate viability to investors. You may want to use a temporary name so not to taint the permanent name.

This is what I did using AdWords. I built a web site and put a bunch of adwords ads up. In my case, the phone started ringing off the hook. I had 20k in sales in the first month.

But if I didn't get calls or emails, I'd know something was wrong. This also requires knowing the proper way to write the ads and landing pages.

You can use AdWords to get a lot of statistical information if you are cleaver about it.

[amyrabbit]

The only validation you really want is to find good-paying customers who value what you're offering. Everything else is a data point with lesser validity. I had a LOT of customers for my consulting business tell me before I launched a software product that they needed what I was creating... none actually bought it, though.


Thank you. Yes I think I just have to do it!

[amyrabbit]

Thanks everyone, probably easier to reply to everyone at once.

I made a breakthrough yesterday and discovered that the platform I need for my service is already available (turnkey) and therefore it will save me thousands of dollars and also reduces the time it will start to get going. The best part is I won't need investors now.

I am going to do this, but I think I will still test with a landing page and I'm also going to ask some of the people who would be the potential customers what they think.

I'm getting a Facebook page setup so that I can post on relevant sites to offer a month of free service to guinea pigs (hoping this might reduce the chicken-egg scenario) and I'll link from my Facebook page to my landing page, which will have a sign-up on it.

I'm really excited to get started on something. I think working full time and raising two kids has been my excuse, but I'll never be content working to accomplish someone else's dream.

[Jsnlee927]

You can get a pre-feasibility studies to do a quick analysis in the market for I.T. services in that area. There are some great third-party data out there, where you can see if the Project is feasible or not.

[BusinessBySusan]

Some of the easier ways to test whether a business is GO or No Go is:

1. Creating an idea of the concept -- service value, identify target market, identify pricing, identify channels, costs, and do you have funding?

2. Pre Market Testing and Surveying -- once you identify the aforementioned, then you test it out and survey target market potentials on their preferences

3. Evaluate pre market testing

4. Research industry you are in and analyze market trends and patterns

5. Develop financial projections -- can you afford to do what you would like by analyzing start up costs, operating costs, salaries/wages, and forcasted sales. What's your bottom line?

[turboguy]

There can be a lot of steps to starting your own business.
1. You need a location. Sometimes this can just be your home or apartment other times it needs to be a commercial facility. In some businesses location can be nearly everything.
2. You need products or services. If you are selling something you need a supplier that either gives you prices that let you compete or products that will have enough advantages to be marketable or if you are doing your own product or service you need the skills to offer that have value.
3. You need customers. You need to understand how to reach people and how to present your product. This can be online or in a retail location but if you have no customers you have a hobby not a business.
4. You need the legal requirements satisfied. This may be a permit to operate from your local municipality, it will often include completing the requirements with the state and or city to collect sales tax. It may be the rights to use the name you will use for your business (either a DBA, S-Corp, LLC etc.
5. You need the infrastructure which may include accounting programs or skills, POS terminal, inventory management, web site, advertising materials etc.

[jlee1994848]

Hi Everyone,

I'm new to this game, or should I say I've been trying to get a business started for about a year, but for one reason of another it hasn't happened yet, not beyond the business plan in any case.

I have in fact 3 ideas that I feel are worth pursuing but one that I hope will be the winner and the one I make the priority. I'm just at the point where I need to test the validity. What are everyones thoughts on the landing page to test conversion/hit rates (my business is an I.T service). I feel more comfortable exposing my ideas to the public if the public think my idea is just about to launch as opposed to a twinkle in one's eye; if you catch my drift.

Any other ideas for testing validity without exposing too much? (reason being this will require a fair amount of capital and it might take me some time to obtain)

Thanks!!

This can be a tough one. I've been there once and too much secrecy was not a good thing. My partner insisted on it and we missed a lot of information that we needed. It's best to start your own research but eventually you will have to trust someone. Finding someone you can trust can be daunting but not impossible.

A couple of sources of information that would be trustworthy would be the SBA and Score. Your local college probably has a business development center that could help you with your questions. You might want to check them out.

Actually, I'm a little confused. Why would you want to create a landing page if you don't have a business yet? You could probably start with a survey that doesn't give away too much information and get a good idea on whether your product or service is viable.

Good luck,
John

[steve imke]

Can't agree more. I fell into the same trap and spent a year developing a product everyone said they WOULD buy if i made it. Only one did buy.

[steve imke]

I like the 3 page web site idea postulated by Ferris in the book 4 hour work week.

Moreover I recommend you consider using the strategic partnership principle to get your idea launched. One of my business mentors, used the strategic partnership principle very effectively when he started his business. He developed a strategic partnership with three clients to develop a software application to track calls in computer service departments. Each strategic partner contributed technical specifications and provided capital toward the development of the first deliverable. In the end, he owned the rights to the underlining software. This software morphed several times based on the surprises and new information as his business and economic model matured. Ultimately, the product went on to become the wildly successful GoldMine CRM application and spun off several other successful businesses.

Hope this helps.

[damienzero]

I know this thread is a year old, just wondering if the OP idea ever took off.

[turboguy]

I think testing the validity of an idea isn't especially reliable. People sometimes tell you what you want to hear and sometimes what they think they may want isn't something they will lay out their hard earned cash for. Here are a couple of my real life experiences.

I was wanting to import some products from England. The product I really wanted wasn't available to me but they had another product that I thought might give me a foot in the door. It was an attachment that only fit one very popular ford tractor and would be used by golf courses. The sales reps from England came in and I took them to the largest Ford tractor dealer in the North East whose business was heavy into golf courses. They told the guys from England that they thought it was a great product and they would be interested and could sell a lot of them. I gave them an order and had units in stock at the dealer but with my money in it. A year later they had yet to sell one and told me it was unsaleable. I never was able to sell any of them and basically junked the units which I had paid 6 grand for each.

I had always wanted to get into the manufacturing business. One time I was having lunch with a large Ford tractor dealer in Connecticut. Just in conversation he told me what he thought would be a hot item. It was a niche that no one had ever filled. I thought about that for some time and then got busy designing what he suggested. I introduced the product about 6 months later and we did ok with it. About 6 months later I was back at the same dealer who gave me the idea and presented it to him. I really thought he would jump on it and wondered if he would remember that it was his idea. When I showed him our new product line his answer was that he wasn't interested and didn't think there was a market for it. It was a salable product and launched us into the manufacturing business but was a hard product to make money on. I did eventually drop the product line but not for lack of sales.

Peoples opinion isn't the most reliable indicator of marketability.