How to Validate a Business Idea: Practical Strategies and Tips

Starting a business is an exciting project, but it also comes with risks. How do you know if people will want your service or product? How do you know if the market is ready for your business? How do you know if your product is viable amongst its competitors?

All of these questions associated with starting a business come down to one core concept: How do you validate your business idea? It can take some insight and effort, but it’s well worth it. We answer that question and lay out the basics of business idea validation below.

What Is Business Idea Validation?

Business idea validation, also known as market validation, is the process of determining if your product or service concept can fulfill a market need. Essentially, if people will be interested in what you have to offer. Going through the business validation process can help you more deeply understand your product or service and what kind of pain points it can solve.  

Business Idea Validation Basics

Business validation can sound like a complex corporate-esque phrase, but it’s a relatively intuitive process with multiple paths to choose from. There isn’t a specific validation technique that works for every business idea. Some are more complex than others, and different strategies may work for different business types.

In the following section, we’ll look at multiple practical methods on how you can validate a business idea. Plus, we’ll hear from fellow business owners on which methods they used and why. But before looking at how to validate an idea, it’s critical to understand the idea in question as much as possible.

A simple way to do this is to write out the assumptions you have about your idea and the market. To get started, try asking yourself the following questions: 

• Who is my target market? Who am I trying to reach? 
• What kind of pain point or difficulty does my product/service resolve? 
• What is my product or service worth? What is its value? 
• What makes my product different from other ones on the market? 
• What is the estimated size of my market?

Once you’ve clarified your idea hypothesis, it’s time to test your assumptions and thoughts. That’s where these market validation methods come into play.

How to Validate a Business Idea: Effective Methods

Now that you know the ins and outs of your idea, we’ll go through multiple business validation methods that you can choose from.

Conduct Market Research

An integral part of determining your idea’s potential success is finding out if the market is suitable for it. You can do this by performing market research.

Market research can be done in two different ways: qualitative research and quantitative research. 

Qualitative Research

Qualitative research focuses on open-ended questions from customers or competitors to determine market trends and high-level analysis. You might ask these types of questions when doing qualitative market research:

• What does the public think of products/services similar to my idea?
• What kind of people are interested in what I have to offer?
• Am I seeing a need in my area?

This type of research doesn’t have to be a massive undertaking, especially if you’re a smaller business. For Sandi Henry, founder of blanket company Minky Couture, market research was simply a form of being aware of her surroundings and how her idea could fill a need. At the time, Henry was in the hospital caring for her daughter and she’d made a comfortable blanket for her to use. Though she didn’t necessarily intend to start a business, her perception of the nurses and staff in the hospital was a form of market research that validated her product.

“For me, what validated the idea that it could be something bigger is seeing how other people responded to it. Every time I’d visit her in the hospital, nurses, patients, even visitors were asking where they could get one. I might not have done your classical market research, but this was me doing market research, even if I didn’t realize it at the time. 

After that, I made a few more and gave them to friends, neighbors, even strangers who needed a little extra comfort. The response was overwhelming,” she tells SUCCESS® in a statement. 

Quantitative Research

Market research can also be done from a quantitative point of view. This is one that focuses on hard data and numbers over open-ended ideas. An example of this type of market research is performing a word search and keyword analysis of phrases similar or identical to your product or service. 

If search engine results for a term related to or integral to your business have a large amount of traffic each month, this could be a sign that the market needs your idea. 

Perform SWOT Analysis

Another effective strategy for how to validate your business idea is through a SWOT analysis.  SWOT is an acronym that stands for strengths, weaknesses, opportunities and threats. SWOT analysis is useful to get a holistic picture of a business’s positives and negatives. By examining these four aspects, you can see where your idea does well and where it could fall short. You can also see areas in the market it can enter into and areas where competitors could have an edge.

SWOT Analysis at a Glance 

This type of analysis is commonly done by creating a four-quadrant box with each section relating to a letter. In each section, answer a series of questions to determine your idea’s strengths, weaknesses, opportunities and threats. Here’s an example: 

Combining SWOT Analysis and Market Research

SWOT and market research can often go hand-in-hand when determining idea viability, as the former tells you about your product and the latter informs you about your customer. This positions you to see if there’s a solid fit between the two.

Jennifer Johnson, founder of the Florida-based lifestyle fashion store True Fashionistas, has successfully used both types of validation methods in tandem when she was deciding on whether to add new assortment items to their retail store.

“I first did a SWOT analysis to see what our strengths, weaknesses, opportunities and threats were. This is where we realized that what we had been missing were new impulse items and new home decor and that was an opportunity and a threat because other stores were already doing this and, to stay competitive, we would need to do the same.

We, then, did the research to see if other stores like mine had tried adding new merchandise to their mix and then I did a small segment market research by actually adding new merchandise in small amounts to see how it would work. I called it ‘working market research,’” she told SUCCESS® in an email.

Determine Your Minimum Viable Product (MVP)

Wondering how to validate your business idea if you’re planning on selling products? Let’s get started. If your idea is in the form of a product, it likely has several features. Some might be necessary to your idea and others just a bell or whistle that slightly improve it.

Determining your minimum viable product—the simplest version of your product with only the core features required to solve your customers’ problem—is a time-tested method to test your idea before full launch. 

Once you have your MVP in place, present it to some potential customers to see how it does. If it performs well, it’s a market fit. If not, you might need to head back to the drawing board to brainstorm better ideas.

Christos Kritikos, a startup product executive and the founder at the CPO consultancy business Emerging Humanity, has used this type of validation method with his clients. Kritikos is familiar with scaling, developing, defining and validating business ideas for his clients. He’s helped numerous businesses validate their ideas using MVPs.

“One of the most effective validation tools I use with startups is the MVP—but not just building a scaled-down version of the final product. Instead, we focus on isolating the riskiest assumptions and crafting experiments to test those directly.

For example, one founder I worked with believed that nonprofits would pay for access to a volunteer engagement platform. Before building anything, we created a simple landing page and ran targeted ads to test interest.

The response rate gave us data on demand and also helped us learn what language resonated most with the audience. This approach saved months of development and helped pivot the concept early,” he wrote in a statement.

Get Feedback From Potential Customers

Even if you have a business idea that solves a clear problem, you still need to validate with outside feedback. Otherwise, you could fail to notice problems with your idea due to personal bias—you want your idea to succeed and that could cloud your judgment.

To get an accurate picture of whether your idea solves an issue for the marketplace, involve potential customers. Use surveys, interviews or dedicated focus groups with customers who are likely to be interested in your product. This can give you insights into your idea from those who could purchase it.

It’s important to ask critical questions if you use this method. You need to get the right kind of information from your potential clients to see if your idea makes sense to consumers. Some potential questions in a customer interview might be:

• What motivates you to choose this product/service?
• Are you using any products/services similar to this one? Why?
• If this was your idea, what would you do to improve upon it?

Keep in mind that feedback in general is rarely a bad thing. If you don’t have access to potential customers yet, get feedback from other industry experts or peers who have extensive knowledge in the domain you’re working in. They can quickly shed light on the strengths and weaknesses of your idea. 

Test Your Product or Service

 If you’ve used the above methods and found that there’s space in the market for your product or service to thrive, now you need to test it. Even if your idea fits a need, if it has bugs or major issues, consumers will simply opt to work with a competitor’s idea instead.

When it comes to testing a product, there are two different types of testing:

• Alpha testing: Have internal employees in your business, or your partners, test the product/service to find issues before final release to the general public.
• Beta testing: Select a small number of outside individuals to test your product/service and report back their experience with it. These users are specifically tasked with trying to find issues so you can further hone your idea.

Once you have feedback from both groups, compile it in a report to present to the team or your partners. It’s important you understand clearly what the test results reveal about your idea’s flaws or strengths and how you can further refine it.

Have a Great Business Idea? Put It to the Test

Figuring out how to validate your business idea can take a little effort, but it’s well worth it. As the adage says, “Ideas are a dime a dozen.” Ideas for a seemingly perfect business idea might come to you often, but how often do you test them to see if they’re viable? Next time you have an idea for a business or a side hustle, try using these business validation methods to test it out. You might be surprised at what you uncover.

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