How to test a business idea: My strategy I tell clients

How to Test a Business Idea


Here’s a horrifying statistic – 80-90% of new business startups fail. Entrepreneurs are everywhere (especially in this digital age, where the idea economy has emerged with staggering prevalence), and everyone wants to turn their aspirations into real, functional, profitable realities.


When you ask yourself how you’re going to test your business idea, you’ve already gone ahead of the curve. Most successful new product launches and novel entrepreneurial undertakings have one thing in common – they test their business idea before putting it into action. Starting a business is as much a science as it is a financial venture, and as such, it must go through a testing process with mathematical, statistical, and scientific backing.


Let’s Talk about Discovery and Validation


Let’s say you’ve got a million-dollar idea. You think you can take this simple, sheer idea, and turn it into a huge profit. That perfect line of sight (the one that exists with perfect clarity in your head) is one that you really can’t be sure exists in reality – you need to make sure that people will use your project or find value in it independently of your own vision. You have to understand whether or not it will work (validation) and how it will work (discovery). These are two modes of business testing that warrant serious understanding before you even begin to utilize them.


Discovery is the process by which you understand your target customers, understand what they want, and understand how you can be a resource that provides that to them (product delivery would be understanding how you can be the best resource – product discovery is simply focused on making sure your product is in-line with your target niche).


Here’s an example of product discovery: let’s say I’m selling a revolutionary, one-of-a-kind garden shovel. I’m not going to sell that garden shovel to a construction builder, I’m going to sell it to a gardener. The gardener is who I want to target, so I’m going to work really hard to understand the gardener and their needs. This illustrates the essence of product discovery.


Every year, people get better and better and understanding product discovery – it’s a relatively new concept in the realm of entrepreneurship. The strategies your business will develop for product discovery should largely be those of your own. After all, every business, product, and team is different. For the purpose of clarity, I’m going to walk you through some components of product discovery. They are:


  1. Problem definition. What problem is your product going to solve? The problem definition defines this problem (which is fairly self-explanatory given the name of the term), and helps you, the entrepreneur, to seriously understand and undertake this problem. Understanding your problem means internalizing the issue that your target niche faces.
  2. The amount of studying, researching, and data that you collect on your target niche, product vision, and competitive market are all instrumental in the success of your business. Double check, triple check, quadruple check. Make sure that you know your product and your niche backwards and forwards.
  3. You, and all who are involved in the project, need to have unanimity with your targeted customers. Identify with them and the problem that your product can fix – all people on board in product discovery should be thinking and working toward the same thing.


Now that we have those components squared away, I’m going to include some tips on how to utilize these components (along with your own team and common sense) to really start your journey on product discovery. They are:


  1. Develop an MVP. MVP, for all the basketball fans reading this, doesn’t stand for most valuable player. In business, MVP stands for minimum viable product. This basically refers to a product that will tell you the most about your customers with the least effort. MVPs are incredibly important in gaining an understanding of for anyone interested in testing their business idea. Going back to the garden shovel example, let’s say you develop a prototype with a short handle. Then, when you survey gardeners, they tell you that they didn’t like the short handle or the pointed end of the shovel. Now, you fix it by making the garden shovel with a longer handle and a dull end. In making different prototypes and modifying each prototype to resemble what your customer wants, the end result will be an MVP – you have made something that not only satisfies your customer’s need, but also tells you about the customer.
  2. Continue discovery well after you’ve already tested your business idea. Countless companies do well at first, and then progress to the point of alienating their customers once they get caught up in competition and branding. Make sure that you continue to prioritize product discovery and connection with your customer base.


Alright, let’s say you have completed all there is to complete in the realm of product discovery. You know well who your target is, and that what you sell them is what they need. It’s a viable hypothesis. An educated assumption based on a near-certain idea that your business will work with its target. Now, it’s time to validate that assumption.


Validation is the process by which you make sure that your product works in the way you want it to work – this process, for lack of a better term, validates your product. It’s basically an umbrella term for a set of techniques used to check whether or not your business does what it says it’s going to do (and that it does it well).


Here’s an example of product validation, going off the same garden shovel example as was used with product discovery. Let’s say you have clearly identified your target demographic, and you know exactly who you’re marketing to and who you want using your shovel. You have created an MVP that worked in the product discovery stage, and you’re ready to have it tested by a larger demographic of people. At this stage, you’re ready to start contemplating the logistics of producing and selling your product. This is the validation aspect of business idea testing.


Product validation can take some time. Many professionals and seasoned entrepreneurs will outline clear ways to carry out validation, but the reality is simple – validation takes, time, effort, and dedication to the success of your business. Unlike discovery, however, it’s a far less abstract step. There are clear, frequently utilized ways to validate your business. Here are some things to keep in mind:


  1. Run those logistics over and over and over again. Does your idea exist already? If so, who’s doing it? How can you be better than them? Can you be better than them? How much will it cost? How efficient will production be? Do you have a clear plan for the first year, and has it taken the competition and marketing into account? These are all examples of questions that you should be asking yourself. In order for your business to take off, it has to have all the moving parts working and up-to-speed.
  2. Get as much feedback as you can as many different ways as you can. There are many methods for collecting feedback. You want to figure out, with as many different target opinions as possible, what you want to throw away, and what you want to increase.
  3. Understand what your target outcomes are, and how you can respond to feedback and data in order to reach them. This is a fairly self-explanatory method, but arguably the most important one when it comes to allowing your business idea to take off.


I want to also clearly state a few of the numerous specific methods that entrepreneurs use to validate their new business ideas.


  1. Make a landing page. This is like a giant, digital billboard. You don’t need any product behind it, just an idea that people can get behind. For those who don’t know, a landing page refers to a de facto homepage for your soon-to-be website which tells the visitor of that website what is to come from your business and product.


If you choose to run ad campaigns, a bonus idea, you can validate your idea by directing the ads to your landing page. This is also a really good way to track engagement, because you can monitor who clicked on what ads and create data that zones in on your target demographic.

  1. Set up a focus group and conduct a survey. While this shouldn’t be the only method you take when validating your business (many businesses rely too heavily on surveys and data from focus groups), it’s still a huge and important step in getting your idea validated with your target demographic.
  2. Continue with different, more updated prototypes of your MVP. This is a truth present both during the testing process and after your business has launched. Updating your product or service to continuously meet the needs of your target demographic is essential.
  3. Social media is your best friend. We’ve gone over a landing page. We’ve gone over ad campaigns. We’ve gone over surveys. Social media can serve as every single one of these, as well as a medium for you to meaningfully connect with your target demographic. In this digital age, the creation of a social media platform is absolutely non-negotiable for so many different aspects of your business, validation and discovery included.


The validation process is really a set of tests and evaluations to determine what the best course of action is to achieve your goals better than anyone else. It’s the most crucial part of business development, and it’s impossible to test your business idea without going through these processes.


To give a recap of discovery and validation, I think it’s important to iterate that your testing of your new business idea should utilize as many tools stated in this article as possible, as well as some that were left out. Product discovery and validation both work hand in hand, and both are processes that evenly work together.


The Importance of Understanding the Competition


Before you undertake any new business venture, it would be negligible to overlook your competitors. But understanding the competition is more than just studying companies you hope to overcome or out-perform in the same market. You also have to look at strategies that have been worked through in the past by other companies, and assess which strategies worked and which ones didn’t. Here are some questions that you should be asking yourself, in the context of competition and your shared market:


Which companies are the most similar to yours? Going back to the garden shovel example, I’ll run through what this thought process would look like. I’d want to determine what made my garden shovel special, and see if there were any other companies that made garden shovels which looked like mine and operated like mine. I’d now want to keep track of three things:


  1. How popular is this company? If they’re a well-known company, the market might be difficult to establish myself in.
  2. How well-rated is the company? I’d want to check their Yelp and Google reviews to assess how well or poorly rated they are. If it’s a 1/5 star type of operation, I’m in luck – this way, I can easily offer an alternative to an otherwise disliked company. On the opposing end, if they’re a well-rated company, this could supply me with a good amount of marketing obstacles.
  3. Is there anything I can be doing that might one-up this company? Again, using the garden shovel example, I might be able to sell my garden shovel for slightly less while retaining the same quality. I might be able to add a feature to the shovel that makes it easier to use.


What sets your business apart from the competition? Business is much like life – often times, your uniqueness will be a huge advantage. Find things about your own company that bring new, creative elements to the market’s table. Developing a unique identity as a company not only helps you develop a brand and a mission statement – it will help you connect with your customer base and identify strongly with your niche.


Now, Here’s What You Shouldn’t Do


With so many different methods of testing your business idea and engaging in product development, I’m going to jot down a quick list of things that you need to be avoiding at all costs when it comes to establishing your business idea.


  1. Don’t get ahead of yourself. There are some clear questions that you should be asking yourself right from the get-go about your project, taking each question one step at a time. Have you fully discovered and validated your business? Is there market demand for your business? Can you produce your product in a financially competitive way? What goals do you have for your business? Before you work on developing your business and your product, you need to understand the logistics of functionally running it. Don’t run before you can walk – take things one step at a time.
  2. Don’t neglect discovering and validating your business. I know that after writing a long section about it, this point is like beating a dead horse – but it’s really your make-or-break necessity. Your business idea cannot be tested without versatile validation techniques. This process is a really effective, efficient way to both connect with your niche and develop and understanding of what your business is about. After all, your customers will always know what they want better than you know what they want – your job as an entrepreneur is to figure out how to be the best one to get it to them.
  3. Don’t overspend. Think about Jawbone, as an example. They had a fairly good product, but were competing in an unpredictable market with a minimalist design and ill-developed planning for the future (see the first item on this list). It raised close to a billion dollars as a venture-backed startup, and blew through all of it by artificially increasing their own value and throwing money into a company with no strategy for growth. Take their failure as a lesson: money will not necessarily buy more money. You need marketing, you need to compete, and you need to have a well-developed plan.
  4. Don’t neglect the competition. Remember Blockbuster? So do I. Gosh, time flies. Nothing will kill your business idea faster than somebody who carries out your idea better, faster, cheaper, and with more popularity (*cough cough* Netflix *cough cough*). Make sure you assess your competition, because you can be sure that your competition will be assessing you. When testing your idea, it’s really important to understand ways of staying on top of the market and making sure you don’t fall down before you even get off the ground.
  5. Don’t stick to plans that don’t work. If something worked in the discovery process but flops in the validation process, roll with the punches! If competition gets tough, get ready to compete! Your survival as a business is dependent on your ability to adapt. This ties in pretty easily with the aforementioned Blockbuster example – had Blockbuster adapted to Netflix, and adopted a similar online platform (or even implemented a similar DVD delivery service to the one that Netflix created to compete with Blockbuster), they might still be a flourishing company. Your brand, your idea, and your vision are all entirely possible, but the market around you is constantly changing, and you need to make sure that your business is ready to change with it.
  6. Don’t leave a marketing plan to the last minute. During the long process of testing, discovering, and cultivating your new business idea, you always want to be thinking of new and creative ways to market to your demographic. Marketing is the bread and butter of entrepreneurship – although you don’t want to go too far ahead in terms of planning and strategizing while at the early stage of testing your idea, it’s incredibly beneficial to keep the future in mind and understand the basis for your future marketing campaign. Testing via social media and landing pages are really great examples of how this can work logistically, and I really encourage these strategies be used.


The Takeaway, and How to Move Forward


Building a business is one of the most monumentally difficult tasks that you can undertake, particularly in the hugely saturated pool of prospective entrepreneurs that exist on the internet. It requires patience, faith in your vision, and a willingness to adapt to data and relevant feedback. This can make the testing process feel tedious and uncertain – all this work having to be done before the business has even been fully conceptualized serves for some intimidating preparative work. But there’s a huge upside to being complete in your assessment of the market and absolute in your business identity: you will be going into the market with a full and complete plan that is ready to adapt and prepared to grow.


Don’t only use surveys. Don’t only use social media. Don’t only run ad campaigns. The trick to successfully testing your new business idea is allowing many different methods to be used to cultivate a brand identity and a comprehensive understanding of your company’s niche.


If you possess the determination and coordination necessary to test your business idea, accept the feedback received from the test, and move forward constructively, profitably, and creatively, then you’re made for the business world. Just remember a universal truth – so much of the time, new entrepreneurs get caught up in the ego of their new project. This new business idea should never be about you and your own success, it should always be about the customer and how much they are able to benefit from your idea. If you keep this truth in mind the entire time you test and validate your business idea, you’ll wind up with a profitable, logistical, marketable idea.


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