Validating a Business Idea

How do you know what the next steps should be? What should you do?

At a high level, the next steps are to validate (or invalidate) all of the assumptions in the list below. You validate assumptions by running experiments that produce data that causes you to either reject or accept your hypotheses. Note that even if you do validate your assumptions, the environment is continually changing (whether it is your product, other competitors, and/or people’s preferences) and you have to keep validating.

You must validate that:

  • you know who the customer is (i.e your target market)
  • the customer has the problem you think he/she has
  • the customer has the problem, knows it’s solvable, and recognizes the benefits of solving problem
    • The customer may not recognize the benefits of solving the problem or even know they have the problem to begin with. That’s ok, but it does mean that marketing will be more difficult, as well as knowing exactly who to market to, and how to reach them.
  • the customer’s problem is possible to solve (for a reasonable amount of investment in time/money)
    • technically
    • legally
    • etc.
  • your solution solves the problem (or an explicit subset of the problem)
    • note: this isn’t your opinion that your solution solves the customer’s problem, it is that you have data (e.g. revenue, customer feedback, etc.) that strongly indicates you are solving the problem
  • you can reach your target market and get them to respond
    • that is, you
      • have access to the decision makers (and influencers, end-users/etc.)
      • can clearly communicate the value proposition to the customer/end-user
    • responses might include getting them to register their email, or (even better) to buy the product, etc.
  • the customer will pay someone to solve this problem
  • the customer will pay you to solve the problem
    • more specifically, the customer will pay you $X which will lead to $Y profit
  • the solution is profitable
  • the solution is scalable

The goal in the startup phase is to figure which assumptions should be validated first, which is highly contextual and depends on where your confidence is, what data you have, and which assumptions you can validate the quickest and most inexpensively. A solid approach to getting started is to highlight the assumptions that you are least confident in, and figuring out possible ways to get more confidence (quickly and inexpensively). What information/data would validate your assumption (or at least increase your confidence)? What information/data would invalidate your assumption?

Written by Shane Kercheval.

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