How To Market Test And Validate Your New Business Ideas
A common mistake of new businesses, is spending huge amounts of time and money on a product or service and then finding out there’s no demand.
I’ve seen this happen at large corporations as well as small startups.
And when the stakes are high, the consequences of this high-risk approach can be fatal for both the business and individual team members.
How do we avoid these costly mistakes?
Or avoid betting the house?
By validating our business ideas with low-cost, low-risk tests…
Market Validation Tests
Or as I prefer to call them, Smoke Tests.
Why Smoke Tests?
Well, when product testers want to check if a new product works safely, they start by running the simplest of tests. They plug their new product into the mains and see if it emits smoke, if it does, they know that it’s likely to catch fire and therefore something is inherently wrong with the design.
They do this smoke testing as early in the production cycle as possible, so they avoid wasting time and money developing, improving and perfecting a product that was never workable.
We can use this approach to test our business ideas.
Luckily, no flammable materials are required!
Smoke Test vs Minimum Viable Product
MVPs get a lot of coverage in startup circles. And creating an MVP is certainly better than building a full product. But, you’re still putting time and money into building a working version of your product.
I don’t believe it’s necessary.
The best smoke/market tests can help you validate your ideas faster, with less effort and without any product at all.
Features of the Best Market Tests
9 Market Validation Test Examples
Wondering what a market validation test looks like?
Here are a few ideas to get you started:
Facebook Leads Advert
Easy to setup and doesn’t need a website. Will anyone sign up?
Drive traffic to a page with your offer. Will people join the waitlist?
Make the simplest version of your product and offer. Will anyone buy it?
Event or talk about your idea
Will people register or buy tickets for your event?
Are people willing to invest in your new idea?
Can you win over a room full of investors?
Before you develop an App, run a personal concierge service to check for demand. This will also help you find out what people love.
Can you sell your product on spec alone?
Create a group focused on your niche
Will people join your Meetup or Facebook group?
Measure & React to test results
Make sure you measure the results of your Market test.
Pre-test figure out how you will judge the success and failure of your experiment. Consider setting specific criteria for different parts of your test, so you can judge each aspect on its merits.
For example, people may click through from your Facebook advert to your landing page, but then fail to sign up. This is neither a complete success or failure — each aspect requires separate consideration.
What to do with the results?
IF YOUR TEST RESULTS ARE POOR
You need to analyse the situation and consider why the test failed. If you’re running a market stall, the reason your product doesn’t sell might be the location rather than the product. Or simply bad luck, like terrible weather!
But, if you believe there’s something wrong with an idea, it’s time to…
PIVOT towards a solution
This means changing part of your business model/idea, whilst keeping the rest of your idea the same. This might mean changing your product, your audience, your revenue model and a whole range of other issues (I’ll cover this in a future post).
IF YOUR TEST RESULTS ARE GREAT
It may be the perfect time to speed up your business development, so you can keep first mover advantage, or it could give you the confidence to spend more time and money developing a more rounded version of the product. Whatever you do, make sure you use the valuable customer feedback gained during the smoke tests to further improve your offering.
Smoke tests are great for de-risking your business ideas. And they should feature in every new business strategy.