Can your startup idea become a hit? How to validate your business idea.

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How to Validate your Business IDea
You have an idea for a new business startup. And before you jump in writing code, developing it or pouring money and effort into it, you want to validate if this could work at your targeted customer audience. Here is a methodology on how you could validate your business idea:

Step 1: Create a Coming Soon Sign Up Page

Go to www.launchrock.co. Create a sign in page, describing your idea. Put a nice photo. It takes less than 10 minutes, no technical skills and you’ll have a live website, with a sign up textbox to test your idea immediately. Launchrock provides you also with a list of subscribers, conversion rates and other information. You will get something like this:

Launchrock is free. Alternatively you can use Kickofflabs or Unbounce.

 

Step 2: Advertise the Page to your Target Audience

Let’s say that your target audience is women, from 25 to 35 in Athens, Greece. You have to go to Facebook, create an ad using the demographics tool of Facebook, targeting this exact audience. E.g, you will see that there are 260.000 women in Athens from 25 to 35, with a suggested Bid of 9 cents to get a click to your signup page. For 50euros you can probably get 600 to 700 visitors to your sign up page. You can also dig into the filters of facebook more and select specific interests so that you pinpoint you targeted users even better.

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Step 3: Measure your Signup Conversion Rate

Facebook and 50 euros will get you 700 targeted visitors who could be potential customers for you. How many of them sign up for your product/project/idea launch? Anything above 10% signup conversion rate is a nice indication. Too low conversion rates (e.g. 1%) means that you will probably have to spend a lot of money on marketing to get the sales. Or it means that this is not the correct customer audience for your idea. Experiment with different audiences, until you find out who converts better.

 

Step 4: Do Online Market Research

You have to think of some questions and ask people what they thing, through an online survey. Here are some ways to do this:

a. Go to www.skydrive.com and create an Excel Survey. Get the link and send it to your friends/linkedin connections/email list

b. Go to www.mturk.com and create a survey. E.g., tell users to visit your web site and then reply to 5 questions. Pay 0.20cents per response. With 20USD you will get 100 replies from all over the world. A lot of them may also signing up for your idea. E

c. Go to www.aytm.com and create a survey. More expensive than www.mturk.com but with better demographics.

d. Go to your LinkedIn, export the emails of your contacts using http://www.linkedin.com/addressBookExport and send them an online survey to help you.

 

Step 5: Do Offline Market Research

Create an offline survey. Get people who may fit your target audience and have a chat with them.

 

I suggest  you target more than 200 surveys (online/offline) and more than 3000 visitors to your sign-up page to start making your first conclusions.

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Comments

  1. Kostas Bariotis says

    One of my favorite for app validation is http://www.google.com/trends/explore#cmpt=q. The key here is to validate whether your idea has an increase on search demand over the last period. Try for example http://www.google.com/trends/explore#q=buy%20google%20glass&cmpt=q and you ll see the demand increasing from 2009 and so.

    App validation is the most important stage before trying anything. Is the concept of “hearing” in a such noisy world. We have the tools as successfully Mr. Fotis proved. We must use them.

    Great article! I like your writing.

    KB

    • Fotis Draganidis says

      Thank you Kosta. You can also use the “Keyword Search Tools” of the web engines. This can give you an overview of exactly how many persons search for a specific keyword or phrase every day, locally and globally.

    • Fotis Draganidis says

      George, steps 1 to 3 take just a couple of hours to set up and up to 2 days to get results..Ofcourse, you could run some of the steps in parallel if you have the resources.

  2. Efi Mavridou says

    Great article!
    I am little confused with the last sentence “I suggest you target more than 200 surveys.. ”
    I suppose you mean the same survey (as far as the content is concerned), the same target group but ‘run’ the survey many times in order to get many results?
    p.s. It would be nice to see related posts in the future. For example, what could be the next steps
    after we validate our idea.

    • Fotis Draganidis says

      Efi thank you. What I mean is that it is recommended to get e.g. 100 surveys from the online world and another 100 surveys from the offline world (talking directly with people from your target audience). The survey should be the same in both cases. Moreover, when you survey people face to face it is recommended to:
      - Make open questions and let the me tell you their opinion
      - Ask them “Why” in all cases when they reply positive or negative to a questions. E.g., why do you say you would buy? Why do you say you would not buy? Why do you like this service?
      - Don’t tell them the prices and let them suggest the upper price they would pay for the service. If you suggest a price, you anchor their answers around that price.

      I will have some more posts on the next steps, hopefully soon.

  3. Eugene Hennie (@EugeneHennie) says

    Hey Fotis,

    I am curious to know a couple things. I validate a lot and like soem of the things you mentioned. Are the Mturk replied quality? Also how else do you target your audiences on facebook? Do you do any retargeting?

    Would love to hear your reply. Thanks for the insight!

    • Fotis Draganidis says

      Hi Eugene,
      MTurk replies are usually fine. Around 70% of the respondents are from US and the rest from Asia and it helps if you place closed and open questions so that you gather all forms of input. You can also approve only the meaningful replies and pay only for them.

      Regarding facebook, retargeting can also be used (e.g. I suggest that you use http://www.perfectaudience.com, which gives you 60USD retargeting ads for free). Ofcourse, you have to reach at least 1000 visitors to start the remarketing, so that means with a minimum of 0.1USD per click, you have to pay 100USD to bring your first 1000 visitors to the site and then start remarketing.

      Any input – ideas from your side are also highly appreciated!
      Greetings

      • Vahe says

        MTurk is only available for U.S customers. Do you have any other suggestion or alternatives (besides AYTM) to help get more quality survey respondents?

        Thanks,

        Vahe

        • Fotis Draganidis says

          Hi Vahe – I am not aware of any other alternative that covers Europe and Australia in a way AYTM or Mturk does. However, in some countries, such as Greece, there are local firms that do online researches.

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