“A lot of people have an idea for an app and they’re so entranced by their idea they don’t actually think about who is the customer and if it’s something they want,” says Wendy Overton, director of programs at NexusLA, which works to leverage regional collaboration to connect growth-focused companies to capital, resources and diverse talent.
Overton says taking an idea to market, whether it’s in the tech industry or more analog pursuits, takes more than just a good idea. It also requires having an idea that fits with customers’ actual needs and wants — typically defined as product-market fit — as well as a business model case to support the idea. “If those things aren’t all there, it can be a great idea but it’s not feasible,” she says.
These three vital methods can help you test your business idea and set your startup up for success.
Talk To Potential Customers
Overton suggests startups take a cue from the writings of Steve Blank, a California-based entrepreneur and researcher who helped usher in the Lean Startup movement by encouraging early-stage companies to get feedback from potential customers during the development process.
She says Blank was among the first to understand that many successful startups don’t merely build their big idea anonymously, then launch their business to adoring customers. Instead there are plenty of exchanges with customers along the way.
“He realized that these startup entrepreneurs were talking to potential customers and truly finding their idea,” Overton says. “They were talking to customers and finding out directly what their pain points were. In doing that they were able to respond directly to those pain points and to what would bring something better to the customers’ lives.”
During this process, Overton says, it’s important for entrepreneurs to ask specific questions to elicit constructive responses that illuminate actual problems the customer is encountering. It’s also important to carefully and objectively consider the data you gather, she says.
“Taking notes and not judging the responses helps you understand the actual pattern that’s happening — not the pattern that you were looking for because of the confirmation in your head,” she says.
Validate the Problem You’re Solving
Once you’ve gathered enough data from potential customers about challenges they’re experiencing, the next step is to confirm that you properly understand the problem. “Get their reaction to how important that problem is and how big of deal it is that you’ve proposed a solution,” she says.
If the potential customer is ambivalent about the problem or the solution you’re offering, it may be a bad sign, Overton says. If they’re jumping at the chance to participate in your beta test, that’s a good indicator that they’ll be willing to work with you as you develop the early versions of your product.
“Once you have an idea of the product-market fit then you can run some experiments to test that validation,” she says. “It really is about running tests to see if it’s an idea that truly solves the problem.”
For a food startup, that could be as simple as letting people taste your products and gauging their reactions, while a software developer could create a minimum viable product and see how customers respond, she says.
Understand Your Business Model
The final piece of idea vetting, Overton says, is to understand customers’ willingness to pay for your product. The ultimate goal is to determine the financial sustainability of the idea. “I work with a lot of idea-based startups, and they’ll have this grand idea, but the reality is that it’s often not sustainable,” she says.
Overton says one of her favorite business pitches came during a weekend startup event in which a team developed a business idea around community-sourced news articles that would solve for what they saw as a bias in traditional news sources. The team spent all weekend coming up with a business model and gave their final pitch on how the idea would be constructed.
“And then they came up to the screen that says, ‘This is where we realized that our idea stunk because no one will pay for this and we are not passionate enough about this idea to do it ourselves,’ ” she recalls. Overton says it was an excellent example of an interesting idea that, under closer examination, did not have a viable business case.
Overton says determining the willingness of customers to pay for your product is the ultimate test of whether an idea is viable. “Getting people to give you money or a contract is a wonderful test that you’ve actually got something,” she says. “It’s not always feasible, but you can always ask.”
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