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A guide to validating your business idea in a weekend or less

journeyman

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I don't know about you but I am quite risk-averse, usually broke and almost never ready to invest 10,000 $ in my next business idea.

To make sure that a new venture has at least some market value and potential I found a quick and easy way to test this. Obviously, it's not perfect, but it beats the hell out of your friends' (and likely even the forum's) opinion on the matter.

I am writing this post to share what I have learnt in the past few months and to get feedback from more experienced people on this approach. Also as I am going further down my journey I will try to keep this up-to-date with new insights.

Experienced entrepreneurs will likely be familiar with this approach. I don't take any credit for it since its an amalgam of ideas I have taken from various people, this forum included. Also, this is if your business is web-based, otherwise it might be of limited benefit to you.

It will be very useful to calculate profitability if your business will rely on constant advertising and not organic traffic. But, even if you utilize organic traffic, it can be an excellent way to gauge customer interest and engagement.
The reason behind all this hard work is getting real market validation. If I remember correctly, Tim Ferriss said first "Don't ask people if they would buy your product, but ask them to buy it". Meaning that when someone gives you his hard-earned money in exchange for whatever you are selling, you are on to something real. Compare that to someone saying "Oh yeah that sounds like a good idea".

In an effort to make the guide more comprehensive, I am going to list specific websites that will help you in the process. I don't have any affiliate links and derive no benefit from it, I am just mentioning the ones that have worked for me as a starting point.

What we'll need to start:
  • A real, valuable business idea (duh...)
  • Software - Website hosting such as
www.bluehost.com
www.hostgator.com

They are fairly cheap for a year and you can test unlimited websites.

Steps:

1- Buy a domain name (either from a service such as namecheap.com or directly through your hosting provider)

2- Install WordPress through the one-click install in your new account's dashboard

3- Connect your website to Google Analytics that will keep track of your visitors

4- Choose an easy to use (and customize) WordPress theme

5- Focus on creating only a decent homepage, where all your customers are going to land in

6- Fill it with sales copy or description of your business idea

7- Install some sort of easily identifiable and measurable action to your homepage. Examples - A buy button, a form to be filled, a number to be called etc. Most likely you expect your customers to go out of their way and give you their time or money. So we need to install something that can quantify that. Very important - Set up a new conversion goal through google analytics with the URL of your action button. This way, every time a visitor performs the desired action, Analytics will count it.

8- Install inspectlet which will show you exactly what your visitors do when landing on your page. The more people stick around, the better. You will be surprised to see that some people will have engaged with your page but not gone all the way through. Hence, you would have missed their interest by calculating only the conversions.

9- Buy traffic, minimum 100 clicks to begin with and direct them to the landing page. The more money you can afford to spend the better quality data you will get. This is because you can afford to do split testing in several variations of your ad and your landing page.
Where to buy traffic from:
  • If you are selling something that people search for in google, buy clicks through Adwords. For example, if your potential customers look for "how to buy bitcoin with a credit card" or "star wars figures" or "quit your job freelancing" etc.
  • If you are selling something that people didn't expect to see but might find interesting and compelling to buy, then buy traffic through Facebook ads. For example, if you are selling funky t-shirts that catch peoples' eye.
10- Do the math: Your profit = product revenue - (cost of acquisition + product cost/other business expenses). Say that those 100 clicks cost you 50$. If one person bought your product, priced at $5, you would need at least 10 people to buy, just for you to break even. Can you see now why information products are so popular? If just one person buys a 250$ program, even if it cost you 100$ to get his traffic, you have still practically made over 100$ profit. If this is your desired business model, make sure to go through this thread first.

The conversion is the number of people that acted on the action button that you offered them divided by the number of people that landed on your page.

If even during this rudimentary test phase you managed to make a profit, congratulations. You are on to a winner business idea. All you need to is fine-tune the details and scale.

If you get 0% conversion, in my opinion it doesn't necessarily mean that there is a fault with your idea. Rather, it could be your execution (website design, poor sales copy etc). It's always a great idea to test several variations of ads and landing pages if you can afford it.

But then I am not a millionaire yet (quite far from it) so take my opinion with a grain of salt...

Lastly, during the process you should collect e-mails from the people that reached conversion. Make sure to engage with the people who signed up. Ask them what they liked about the product, how it helped them, what you can improve etc.

Business models that can be tested this way:
  • Information products: (Also easily tested through landing page software).
  • Another kind of website: Lead generation / SaaS / Subscription services etc.
Alternatives:
If you don't want to use WordPress, the exact same approach can be used with Landing page creation software such as
www.unbounce.com
www.clickfunnels.com

or an e-commerce platform
www.shopify.com
www.woocommerce.com

Physical products can be very easily tested through an e-commerce platform such as Shopify. Just list pictures and comprehensive descriptions of your products. Structure the website as if you are selling something that already exists. People will put your product in the shopping cart and upon checkout, they will receive a message that the product is "unfortunately not available at the moment and that they haven't been charged for anything". A great advantage with this is that the website is almost made for you. You can skip steps 2-8 from above and dive straight to traffic and conversion.

A few hours/days and a couple hundred $ later, you have a decent clue whether your idea is valuable to other people or profitable. I know that I didn't go into a lot of technical details as I wanted to keep the post manageable so if you guys are interested in the how-to of setting up a basic website, I will make a part 2 of this post using a typical WordPress theme as an example of what to do.
 

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Mercutio

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That's a really comprehensive guide. I have been looking for something like this for a long time. Moreover, I think most people talk way to less about actual steps of validating ideas.

How would you see the whole process of validating internet based / app ideas?

gut instinct > ask relatives/opinions of circle > landing page > MVP > endlessly improve MVP with customer feedback ("final product")
 
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journeyman

journeyman

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That's a really comprehensive guide. I have been looking for something like this for a long time. Moreover, I think most people talk way to less about actual steps of validating ideas.

How would you see the whole process of validating internet based / app ideas?

gut instinct > ask relatives/opinions of circle > landing page > MVP > endlessly improve MVP with customer feedback ("final product")
Glad it was of help to you.

Products/subscription models can be validates easily, any day. You just create the page/MVP, ask people to pay for your product or service and see whether they are willing to.

Things get a lot more complicated when you are trying to create something where there is no immediate money exchange. I.e. if you are trying to get signups or build traffic through a free app.

I don't really have the answer for the latter and it has been a problem with a web app I have made, you are never sure if it is a real need unless people cough up some cash.
 

Mercutio

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Glad it was of help to you.
Things get a lot more complicated when you are trying to create something where there is no immediate money exchange. I.e. if you are trying to get signups or build traffic through a free app.
That's a good point. I think this only works if you have alot of money or get funded in the first place. Something like Spotify. There was no slow building of the service. BOOM, it's there and so good that it can't be overlooked.

Unlike Buffer which iterated slowly and grew organically. @Gepi had an interesting post about this too.

Hi guys,
The story of Joel Gascoigne, who founded Buffer for Twitter.

In summary, he used a landing page with a good clean overview of his product and then gave the option of paying for it. But at that time the software did not yet exist! People would see a 'nice to see you're interested, please leave your mail addy and you will be the first to know when it's finished'.
And that easily he gained very good feedback if people would be buying!

You may find the story and screenshots to his approach here.
 

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Gepi

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Hi @Mercutio , thanks for mentioning this post, I already forgot about writing it.
Very glad you found it helpful.

@journeyman bookmarked your guide. Very good points if you don't know how to get going with an idea.
 

Jeff Noel

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I didn't even know about them actually. Have you? Is it like landing page-building software?
I've been looking at comments online and I'd stay away from them. Crappy customer support... limited Analytics & Google Ads integration... the amount you put for Google Ads is automatically taken on your credit card, but the balance is stuck on your QuickMVP account.

It's not too hard to create an MVP website alone, maybe a few hours to setup everything and more for the design and stuff... but at least you spend your money on Google's platform directly and you have access to everything in Analytics and Google Ads.
 

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