Here are six steps to validating your business idea:
1. Check for Profit Potential
Identify people or businesses doing your type of business idea you have and see how profitable it is for them. Most often than not, there should be some competitors in the market which indicated a ready market waiting to receive your idea. The lack of any visible competitor may mean either the business idea is not realistic or God may be taking you to a totally virgin land and giving you the first mover advantage. Search Google, Amazon or Craigslist and all the social media platforms to identify businesses already in your target market.
2. Determine If Your Target Audience Is Large Enough
One of the easiest ways of doing this is to use the Facebook Ad Manager inside Facebook to accomplish this. Pretty much every demographic is represented on Facebook with over a billion active users. With the Ad Manager, you can know the approximate number of users that fit your target market based on your given demographics. Knowing the size and reach of the specific group your product or service will serve will help you decide if this would be viable in terms of profitability or not. You do not want to spend time, money and resources building a product around certain segment and later realized it is not large enough to be profitable.
3. Determine How Much Your Product Or Service Would Cost
Identify a price range that would be consistent with your pricing strategy and target audience as well as with the going rate for your offer and go with it. Your price will probably change once you create and implement your offering anyway, so it’s not a huge issue as this stage. Setting a price for your product or services at this level will help you determine if you can make profit doing this business.
To determine how much money you could make serving 1% of the market, use your estimated total market size, multiply that figure by 1%. Then take that number and multiply it by your price.
Here’s the formula.
ETM x 1% = Total Annual Sales (TAS) TAS x YOUR PRICE = Gross Profit
Whatever outcome you get should be a number you are comfortable with and if not, you may not have a viable business idea after all.
Is that a number that would make you profitable after one year of sales having accounted for both fixed and recurring expenditures that would be deducted as well? If not, you need to consider if you’ve got too small of a market, too low of a price, or a bogus idea. If you’re thinking that 1% is an overly conservative estimate in sales, you’re right. If you’ve got a ripe market, you’ll likely sell more than that.
4. Test Your Idea
Now, you just need to know, will people actually buy your product or pay to use your service? This is a really important step in the process because people will tell you they want to buy all day long, but when it comes time to pay, their wallet stays in their pocket. Testing your offer is the only surefire way to know if you’ve got something worth committing to.
Test your idea online.
One of the easiest and most effective way you can test your idea online is to create a simple landing page that presents your offer to prospects. For example, while I was still writing this book, I had already created a landing page for it at www. gbengaomotayo.com/mybook
There are two ways to do this:
You could actually send people to a page that asks them to buy. Then, when they click on the “buy” link, explain that the product/service is not available yet, but for access to the product/service (at a discount) have them submit their name and email address.
Now, you’re doing three things.
(1) You’re verifying that people actually want to buy.
(2) You’re building an email list, and
(3) You’re lining up future sales.
Or you could drive traffic to a landing page that asks if the prospect would like to learn more about the offer. The data from this testing isn’t as strong as the prior example, because it’s not requiring a buying decision, but if presented properly, it’s still a good indicator.
Explaining how to run ads for testing or learning about creative landing pages that sells for you before you even build your product is beyond the scope of this book, but if you want to learn how to do those stuff, you should visit my website www.gbengaomotayo.com and sign up for one of my free courses.
5. Consider Crowdfunding
Widely known as platforms to raising money for business or project, crowdfunding is also a perfect platform for testing the viability of your business idea because people are actually giving you money to get it off the ground.
It is common sense to know that if people are donating money overwhelmingly to your idea is an indication that same people would be willing to pay for it when it comes out. There are tons of crowdfunding platforms available. Check the chapter on funding for exhaustive list of available crowdfunding websites.
6. Ask Similarly Situated Businesses If They Would Be Willing To Offer Your Products Or Services
Offering your products or services to businesses that offers complimentary products or services to the same target market is the single fastest way to build a customer base (and test the value of your offering). If you make the arrangement sweet enough for the participating business (make sure it benefits them in some way) they can get you instant exposure to a buying audience. This arrangement can be referred to as cross selling in marketing where products or services are offered as a bundle package. Having another business offer your product or service is almost like an endorsement of your offer.
These are questions you should ask yourself to help screen and stimulate your thinking and also clarify as well as streamline your idea thoughts.
• Can you for certain say this was divinely revealed to you?
• Do a lot of people have this problem?
• Are you passionate about this idea?
• Are you willing to commit the next 5-10 years of your life to this idea?
• Who are your competitors?
• Can you do something substantially different or better than others?
• Can you build the business on your capital resources?
• Could you have product and customers in 90 days or less?
• Do you have a background and skill set compatible with this business?
• Do you have competitive advantage on how to get customers?
• If you don’t start this, will someone else?
• Can you court mentors who have been successful doing something similar?
• Does the business risk / reward match your personal risk/reward?
• Does it help you fulfill your purpose?
Whew! Still with me? Good! We’ve made a lot of progress so far. We’ve broken down various ways to test and validate your business ideas.
Coming up next: My final email in this ecourse will discuss what you should start doing immediately if you are really serious about starting a business…
Until Next Time… BE INSPIRED TO SUCCEED!