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Validation for Peer-to-Peer Marketplace

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HandcuffedLawyer

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Greetings from Fountain Hills, Arizona. I can confirm that both of MJ’s claims from Unscripted are true: (1) it is very sunny; and (2) the average age is 92.

I finally got my wife to read the books, we’ve come up with a business idea, and now we're trying to come up with a sensible way to validate it. I know there are a bunch of levers/variables that can be pulled/manipulated, but I’d like to get a general idea from you guys on what benchmarks you would set in order to move forward.

The business is an online peer to peer marketplace for used ultrasound equipment called The Ultrasound Marketplace (TUM). The website is www.theultrasoundmarketplace.com (right now just a cheap landing page created by someone on Fiverr). For background, my wife works in the industry.

Here are the steps I have taken so far:
  1. Sent surveys via Survey Monkey to approximately 4,000 buyers and 86 sellers (obtained over time through industry networking). If they took the survey, we rewarded them with a $5.00 amazon gift card. 46 responses x $5 = $230.
  2. Set up a landing page with call to action button (Join TUM today) that prompted potential customers to enter in the name and email to join. $95. on Fiverr. Automated email responses set up through Mail Chimp.
  3. Started a Google Ads campaign with a budget of $50/day and $1500/mo. Ad has been running for a total of 13 days. Spent $720 to date (see attached for screenshot).
  4. Used Mail Chimp (free platform) to invite all survey respondents to visit the landing page. $0.
Total = $1,045

Here are the results:
  1. Surveys: 44 of the 4,000 buyers responded; 2 of the sellers responded. Twenty-three (52%) of the buyers surveyed and both (100%) of the sellers said they would use a peer-to-peer marketplace to buy used ultrasound equipment.
  2. Google Ads: 27,137 impressions, 262 clicks, 13 subscribers.
  3. Targeted Emails Through Mail Chimp: I sent a mail chimp campaign email to all 86 sellers and the 44 buyers who responded to the survey. 24 sellers and 8 buyers opened the email, 2 buyers and 2 sellers clicked, 1 buyer and 1 seller subscribed.
Would you move forward with this idea? If not, what, in your opinion, would validation look like (e.g., conversion rate? Clicks? # of subscribers?)?

I know there are a ton of implicit assumptions, but the research we’ve done online about validation benchmarks hasn’t been particularly helpful (and is largely promotional/biased), so I would be grateful for any nudges in the right direction – even if it’s just more questions. Thanks!
 

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MJ DeMarco

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Greetings neighbor! (Although I don't live in FH any longer!)

I like the idea, and the landing page. My only concern is market size. It's niche (which is GREAT) but perhaps to niche?

Validation (IMO) would be people signing up to sell their equipment. If you have sellers, then you can attract buyers. Could also lead to other marketplaces for medical equipment.
 
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HandcuffedLawyer

HandcuffedLawyer

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Did you put any mock products to see if anyone would buy it?
That is a good question. The short answer is no. BUT we did get very encouraging survey responses indicating that they would be willing to buy on a site such as ours.

Since we don't have a physical product, we are just facilitating the connection and sale of other people's equipment I don't know how we would go about that. Our product is really the website/marketplace/interface that buyers and sellers would use to make transactions.

This is where the validation gets tricky because a minimum viable product (a functioning marketplace) costs a minimum of $30k to build. We are trying to validate before moving to that next level of investment.
 

Sebastya

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BUT we did get very encouraging survey responses indicating that they would be willing to buy on a site such as ours.
Everyone will say that. It's just not true.

This is a great way to go about it.
 
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HandcuffedLawyer

HandcuffedLawyer

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Greetings neighbor! (Although I don't live in FH any longer!)

I like the idea, and the landing page. My only concern is market size. It's niche (which is GREAT) but perhaps to niche?

Validation (IMO) would be people signing up to sell their equipment. If you have sellers, then you can attract buyers. Could also lead to other marketplaces for medical equipment.
Thank you for your input. My wife was ecstatic that the man himself responded!

On the niche size, revenue for the U.S. ultrasound market is approximately $1.7B, making the ultrasound industry one of the fastest-growing imaging modalities in healthcare with a growth rate between 4-5%. Although there is no publicly available data on the used market specifically, health care costs are rising at a rate faster than revenue is being generated for health care providers. Consequently, these trends have resulted in many health care providers considering used ultrasound machines as a low-cost way to keeping up with rising demand. This is something my wife is seeing firsthand in her work. About half of her customers now are buying used versus new.

The second point you make is very good. We believe that seller listings are the most critical element of a successful business launch for TUM, as without listings, the marketplace would be nothing more than a store with empty shelves. That is why we structured the business model to be 100% free to sellers so there should be nothing holding them back from listing with us. We will make our money by charging the buyer with a small transaction fee should they decide to buy a machine on our site. Also, we plan to expand to more medical equipment and/or an ultrasound rental program as well so we aren’t pigeonholed, but to start we thought it would be good to stick with a market and product we know very well.

That said, sounds like we need to:

1. Do some more research on the niche size and really dig into if the size is enough to start a sustainable business.

2. Personally recruit more buyers and/or target buyers specifically with our ads.

Thanks for the insights.
 
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HandcuffedLawyer

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Everyone will say that. It's just not true.

This is a great way to go about it.
I knew you would say that and you are absolutely right!

I LOVE this idea that Buffer used to validate. We already have the click and enter email on the landing page... just would need to add that third additional step.

It would be a cookie cutter fit if TUM was a subscription based website. We were planning on charging a 5% transaction fee to the buyers if they buy a machine from a seller on our site. The site would be free to the sellers.

-Any ideas how to translate how Buffer did it into something that would work for our slightly different business model?

-I know there is no training manual for entrepreneurs but we are struggling with the magic numbers a bit on what would be considered "validated".

For example, in this Buffer article after he did the three step click through he said:

"The result of this experiment was that people were still clicking through and giving me their email and a small number of people were clicking on paid plans. After this result, I didn’t hesitate to start building the first minimal version of the real, functioning product."

My question is: how many people where clicking through? How many is a "small amount" of people clicking on the paid plans? What was the ratio? Etc.
 

Jon L

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I write custom software for a living, and $30k is probably about right for a basic membership website like that, built from scratch.

However, why do you need something built from scratch? There's a ton of software out there that's already made that will do most of what you need. For a few hundred dollars in licensing costs, you could set something up.

For the things you need that aren't accomodated in off-the-shelf software, you can do manually. For example, creating a listing could include a web form on the user's screen that EMAILS all the information to you. You, unbeknownst to the user, would be the one to create the listing in your system, maybe even by typing stuff directly into a database. The user would be shown a 'thank you for your business. Your submission is being reviewed. It will go live shortly' message.

Clearly, this kind of thing won't scale, but its a lot cheaper to do things this way to start. Once your idea is validated, and you've run out of ways to pound your square website into a round hole, spending $30k (or whatever) will be easy to afford. It will also be a much lower risk investment.
 
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HandcuffedLawyer

HandcuffedLawyer

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I write custom software for a living, and $30k is probably about right for a basic membership website like that, built from scratch.

However, why do you need something built from scratch? There's a ton of software out there that's already made that will do most of what you need. For a few hundred dollars in licensing costs, you could set something up.

For the things you need that aren't accomodated in off-the-shelf software, you can do manually. For example, creating a listing could include a web form on the user's screen that EMAILS all the information to you. You, unbeknownst to the user, would be the one to create the listing in your system, maybe even by typing stuff directly into a database. The user would be shown a 'thank you for your business. Your submission is being reviewed. It will go live shortly' message.

Clearly, this kind of thing won't scale, but its a lot cheaper to do things this way to start. Once your idea is validated, and you've run out of ways to pound your square website into a round hole, spending $30k (or whatever) will be easy to afford. It will also be a much lower risk investment.
This is a great idea that could definitely work!

I am really glad you mentioned that the $30k mark is reasonable, thank you. I have spoke with several developers and they all came in around there. One thing though, all but one of them said they would use wordpress and woocommerce. I think (assuming I get this validated) that I would rather have it built from scratch because of my future business roadmap and expanded offerings. I don't want to limit myself by building this on wordpress. Do you agree?

Back to your validation idea, do you mean using something like sharetribe? I was considering trying that out before going all in. Have you heard of any that are better than others? I see a lot of products out there like sharetribe.
 

Jon L

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This is a great idea that could definitely work!

I am really glad you mentioned that the $30k mark is reasonable, thank you. I have spoke with several developers and they all came in around there. One thing though, all but one of them said they would use wordpress and woocommerce. I think (assuming I get this validated) that I would rather have it built from scratch because of my future business roadmap and expanded offerings. I don't want to limit myself by building this on wordpress. Do you agree?

Back to your validation idea, do you mean using something like sharetribe? I was considering trying that out before going all in. Have you heard of any that are better than others? I see a lot of products out there like sharetribe.
Unless you have $30k that you don't care about, I'd completely forget about developing anything from scratch, or using wordpress, or whatever, until you've validated your idea and can afford to put that kind of money into it. Once you do have it validated and you're ready to spend the money, you need to lay out all ideas in front of you - everything you need the system to do, and then ask a developer what to do. Wordpress is pretty complicated to work with, but, for some things, works quite well. For other things, its a pain in the butt, and its better to forget it and start from scratch.

On which software to use, do a bunch of research and find something on google. I don't have a recommendation for you. G2Crowd sometimes has software like this, with reviews and ratings. There are other similar ratings sites.
 

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