What's the best way to validate a business idea before getting started?
I've done some reading on the lean startup method and would like to get feedback on my business idea before getting started. A lot of what I have read pertains to tech startups and creating web landing pages. How should I go about getting feedback for a 'brick and mortar' business? I thought about a survey, but I'm concerned that what people say and do are very different.
Looking at what is already out there meeting a need whether brick and motor or through the web is critical. Don't choose not to start a business because of the competition but look at the competition to see what you could add, subtract, do differently to be competitive.
One of the best ways to determine if an idea has validity is to see if another business is already in the market and thriving. If there is no other business, then you need to look at how large of a need or how deep of an interest in what you will be offering exists .
I would suggest finding customers. It's one thing to have people tell you its a great idea and its another to put down money. Go into pre-sale or actually sell your product. This will prove if there is enough demand for you business idea.
Find a way to offer part of what you want in existing stores first. Get competitive intelllegence on sales of similar items. Do a brochure or executive summary and test 1015 people with the idea (mother-in-law survey).
Use Google Adwords to test frequency of unquie searches for this type of product or items. Commons sense. Hard to describe but key is knowing what to ignore and what to listen to from prospective customers: Famous Henry Ford Quote: "If I asked what they wanted they would have said a faster horse".
You must be certain and firm on your core. These means the target market, product offering and where you invest (in retail the location). You MUST be very flexible to listen to the market on nearly everyhthing else.
My web site has lots of help for new startup CEOs/entrepreneurs: www.StartupPlanet.com and my full CEO Boot Camp DVD set with lots moredepth and tools to design, then optimize a business model.
You will never be 100% out of the gate and need to iterate.
It helps to know what kind of business you're planning. But here's a thought; suppose you were planning a high-end shop at the local mall. What test could you perform to validate the business idea? You could go to the mall and hand out "coming soon" flyers for the new business, as if you're well along with the development. Maybe get people to sign up to be notified via email for opening day. If you can't get anyone to sign up, you may be in trouble. If you can get people to sign up, you can email them to set up an appointment to interview them.
Fundamentally there are a series of assumptions you need to validate. Break them down into discrete tests to prove or disprove before you rent a space or develop a product.
I have a healthy disrespect for surveys, which tend to qualify lots of false information. I love conversations over coffee. People will tell you the most amazing things.
First up, best dressed ! But , good idea is not direct ticket to success. In theory gives you advantage but in practice it means that you need to invest more time and more money than second or third one. It is because you are that one who makes strategy, finding way to get costumers and in the end capitalizing you idea. Copy past is most effective (cheaper ) because needs less energy (money) So, if you have any similar "product" all you need to do is getting idea how to. Otherwise you can not find objective feedback , especially if your idea is totally different. One tip: find few potential investors, banks and try to get money from them. That guys have sixth sens for investing (not spendig ) their money.
I would suggest a "go out dirty" concept of the product if possible, following the fail-fast-fix-fast way, if that is doable with your product. In your development, make mock-ups and show to people and get feedback. IDEO would always bring a new "brick" mock-up to the next meeting to get new feedback
I specialize in helping retailers become the best they can be, from startups to those who have been operating for years and are suddenly struggling because they haven't been able to keep up with the changes of the industry.
One thing I will say to you first up is that there is no such thing as a 'lean startup' for a bricks and mortar store. If you don't have financial support in place, for at least 12 months worth of trading, then don't be surprised if you end up on the 70% who fail at retail pile. You may as well start up an ebay store instead and save yourself an incredible amount of effort and anguish.
Assuming you do have backup funds, there is a tried and proven methodology behind ensuring your business will be a success. A step by step process that will give you the best chance. The first step of this process is market research, in particular demographic research, which is about researching the region where your store will be located and comparing things like levels of disposable income, age groups and even race, to the types of offerings you want to provide. For example, different cultures have different tastes, some things appeal better to older people than the youth and targeting too high on price won't work if most of the people in your area don't have much money, (the reverse is true too).
I have turned many long established businesses around by reassessing their target market and adjusting their price pointing and offerings accordingly.
Surveys are indeed part of the process, but nothing more than validation that you have interpreted the demographic research correctly in the first place. Simply tell those you approach, that you are an independent researcher assessing the market, (not the business owner), and they will then give honest answers rather than what they think you want to hear.
In short, demographic research will get you on the right track, surveys etc. will help to validate. I can do the research for you of course but this isn't about drumming up business, rather about putting you in the right direction. There are plenty of experts who can do market research for you.
Yes, you need to love what you do but it doesn't hurt to find out if others will too, before you invest time and money. You will hear mention of the need to create a business plan but the first stages of one will include, "make sure you love what you do", "make sure you are good at what you want to do" and "make sure you have money behind you", then the next stage is market research anyway. My advice to you is to really get this part right, before you fill out an entire business plan or even go any further.
Thanks for the intriguing question. I see that you have received some great advice from some rather noteworthy experts so I won't reinvent the wheel here. Instead, I would like to give you a different perspective. You ask what is the best way to "validate a business idea...". Rather that validating a business idea, have you thought about validating a product or product set? The business idea approach must start with products (or services) as they are the means of driving revenue. You could have a great business idea but if products are not revenue productive, your business idea is "flawed". Brick and mortar space is expensive and requires specialized approach to execution (remember location!, location!, location!?). Given the great advice you have already received from others I would list the activities for you as follows:
1. Establish product parameters - what, how much, logistics, cost, price, quality, quantity, etc.
2. Test consumer market - who wants it, how much do they want? When do they want it, etc.
3. Establish a business model (high level): Brick and mortar, on-line, partnership with established firm, purchase shelf space or sales position, etc?
4. Take your learning from 1 thru 3 above and build a detailed business plan.
5. Phase into your business plan...be careful about investing everything at once or under-funding the start up.
As far a getting feedback for a brick and mortar business...brick and mortar is placed to capture the passing and or interested customer. ...Your product is the first issue you need to analyze and then you have to find the right location that will facilitate customers' access to your products and services.
There is a tremendous amount of detail in the above steps so if you need further help, please do not hesitate to contact those of us who have responded to your question.
I had a look at your profile and it seems you're opening an art gallery.
For me, the starting point would be "what sort of gallery?"
Are you looking to appeal to a broadly "art-loving" customer or will you be aiming at specific segments?
For example, are you seeking to promote new talent or more established artists?
Are you aiming at the more serious collector or people who just want "something nice for my dining room"?
I ask because you will need to understand that in order to have a solid staring point for your research.
Then I suggest you go and look at other galleries in and around your area.
That way you will be able to form an idea of what's popular (and selling) and what isn't.
I would also be very informative to find out how long they've been around. The longer established ones will have discovered their particular market and will understand how best to serve it. I doubt that the owners would tell you how they did it, but casually chatting to their customers might be useful. Or, if you don't want to be seen checking them out, get some trusted friends to do it for you.
I hope this helps, but do please ask if you think I can be of any further help.
I have an interest in startups as I'm co-authoring a practical workbook that aims to help people just like you.
I would work for a related business or industry to validate whether or not you really enjoy the business day to day. Use that experience to springboard into your business.
Analyze the size of the market opportunity; define your products point of differentiation; determine the value of the market you will be targeting; analyze the scalability of your product/service; margin analysis; make your decision...
First, determine your SIC/NAICS Code.
Second, follow the advise of Sean Hurley.
Richard Stern- It is impotant to research the category within the segment of the industry you are trying to sell. This way you can determine whether your service, or product is relevant to the patrons you are trying service.
Secondly, identify the competition and find catefgories that you can provide that your competitors are not servicing.
The key issue is that new companies will gain enterance to the consumer only if you are providing a solution to a problem, or providing an option that other well established companies are not doing a good job providing.
You are right about people saying one thing and actually doing something else such as in the Classic Edsel failure.
Prior to even attempting to pre-sell customers, survey as many friends, colleagues and acquaintances (a giant, informal and less expensive approach than the traditional 'focus group') via email and/or telephone and tell them about your idea -- go for the largest group possible. While many of your respondents may render you 'false positives,' you'll get very few false negatives. If the overwhelming majority of respondents appears strongly positive (I use a 1 - 5 scale when I survey customer groups), it's likely that you're on to a good idea. Best of luck. - Douglas E. Castle
Incidentally, if you'd like my assessment of your idea (at no charge), get hold of me at http://bit.ly/CASTLEDIRECT .
Define your target clientele...then talk to those people and tell them about your idea. Find out what they want and don't want.
Use social media e.g facebook,linkedin, myedge...and design qquestioner according to your work and hopes then analyze it...
Set up a website and see if you get any hits or inquiries.
I think this is the best way to launch a Web page and explore your business opportunity thru internet. This will give you some idea, before investing into real business.