Four Tips For Validating A Business Idea

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As you consider starting a business, you should ask questions: Will strangers actually buy my product or service? Will consumers find value in it? What pain points does it solve? While these aren’t easy questions to answer, if they aren’t addressed, you can count on your business not lasting long.

Testing the validity of our idea was incredibly important. No one had ever heard of a peer-to-peer self-storage company, even though Airbnb and Uber had made the marketplace model more commonplace. While this may not be as critical to existing business models, proper validation will help you know if consumers will switch from their current solution.

As I detail four tips for how Neighbor received early business model validation, I hope you’ll generate ideas for how to test your product, model or idea.

Forget stranger danger.

One of the first things we did was go door to door. We targeted neighborhoods that matched our expected customer demographics. As college students at the time, we luckily had an easy time asking for feedback — it turns out that most people are willing to help out “starving” students. Whether or not you’re a student, going door to door (or to other places where you can talk to strangers) is still a great option.

We asked questions such as, “How likely would you be to use a service like Neighbor? How much would you pay to rent storage from your neighbor? How much would you have to make for it to be worth renting out your unused space?” We learned early on that trust was critical, and we built a brand around safety and community.

Additionally, we ended up finding many of our first users by knocking on doors. One man in particular turned into a power user and has earned thousands of dollars through our platform. Early business model and product validation kills two birds with one stone: validation and new users.

Test it.

Another way we validated our idea was through launching a single landing page, a popular method for testing business ideas. The page contained a two-sentence description of our company. Visitors were then prompted to enter an email address to indicate their interest in learning more.

We then created a Google Ads campaign to direct people to the page. This works for a few reasons. First, we were putting relevant ads in front of people who were already interested in storage. Second, it helped us determine what our cost of acquisition would be if we continued to use Google Ads. Finally, because of all the data, we could see the development of a funnel. We knew how many people searched for the term, were interested enough to click and then were compelled to enter their email.

Remember: cheaper, easier or better (at least two is good, and three’s a winner).

It wasn’t until we were ending our validation phase that we read the book Nail it Then Scale it by Nathan Furr and Paul Ahlstrom. The book provides a formal structure for evaluating and testing customer pain points. We needed to not only prove that we had a pain point, but that it was a large enough pain that customers would want to switch over to our solution.

A business jumping into any market needs to solve pain points by being cheaper, easier or better than the alternatives. If you aren’t at least two of those, your value propositions aren’t strong enough for users to switch over. To be a market winner, your solution has to be all three.

Launch an M-MVP.

We worked hard to make sure that this alternative to traditional self-storage was what consumers wanted. The best way to test this, however, is to actually launch an MVP. Doing that as a bootstrapped tech startup was difficult. We did eventually launch an MVP after purchasing and adapting a website template for $600 (which is what we used to raise our first $1 million in funding) that mimicked Airbnb.

Long before that, we launched our M-MVP (an even more minimum version of a minimum viable product) and manually paired our customers together. By printing off PDF versions of storage listings and user profiles, we handled everything manually. We literally emailed the PDFs to two users to pair them up. At the end of the day, it got the job done of validating our idea and testing our value proposition through actual purchasing behaviors before having to invest time and money into a custom-built product.

Thanks to the work we did to validate our business idea — talking to strangers, testing the idea, researching our value propositions and launching an M-MVP — we saved money, avoided wasting time and better understood what consumers valued. Properly validating any business model is vital to eventually finding product-market fit and then scaling the product.

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