Selecting a Business Idea Validation Strategy
"The day someone pays you money for your product or service, you have a business, and not a day before."
In our previous post, we set the stage for business idea validation. Now, let's delve deeper into selecting the most effective strategy.
A paying customer stands as the paramount validation of success. However, the journey to securing that customer varies, especially during the validation phase, where selling services might not always align due to high costs, or the nature of innovation.
Two distinct approaches emerge, each crucial in honing and validating your business concept:
Validation through selling, or
Validating interest through deep research and seeking confirmation.
Selling the Service
This validation method holds immense power as it brings real customers into the fold, providing firsthand insights into the intricate facets of the problem.
A prevalent strategy involves solving the problem manually for a select group of companies before investing in full-scale development. This hands-on approach involves translating your product into a service, saving substantial costs in the process.
Another approach within this spectrum is the creation of a Minimum Viable Product—a distilled version of your offering that delivers value to customers. The MVP strikes a balance between minimal development and maximum customer impact.
Or, you can build anything in between. The goal is to sell.
Validating Interest and Gathering Feedback
Lenny Rachitsky’s research on B2B startups shows two dominant strategies here:
The Listening Path - where engaging in extensive conversations with potential users gives you direct user input that significantly shapes the development process.
The Prototype Path - where building a prototype and testing with potential customers gives real-world insights that facilitate iterative improvements for a market-ready product.
This approach asks for rigorous research since there are no sales and thus direct confirmation. Some startups talked to over 30 potential customers before proceeding.
Knowing When to Move On
The hardest part in validation is to recognize when to move on, especially if we don’t have the opportunity to sell.
Apart from paying customers, several indicators can guide effective validation. The same research shows 3 additional indicators:
Emotional Reactions: Strong emotions—be it dissatisfaction with existing solutions or enthusiastic reactions to your idea—highlight its resonance.
Inbound Interest: Unsolicited interest from potential users or customers in your product. A clear sign of market demand and validation of your idea's appeal.
Sustained Usage: Users continue engaging with your product, even if it's in its early, imperfect stage. This reflects a genuine need and potential for long-term success with iterative improvements.
Understanding these strategies and aligning them with such indicators is pivotal. Combining approaches or tailoring them to suit your business context often yields the most effective validation outcomes.