How to validate your startup idea (or Lean Sales Basics)

September 1, 2014

This is a guest post from Yann Girard (entrepreneur, author, speaker & blogger at http://yanngirard.com)

One of the biggest problems these days is about being able to figure out whether or not the startup idea we have is really worth building.

Most people approach building a company from a wrong perspective. They build products and hope people will buy them. This might have worked in a supply driven company but we live in a demand driven economy where we customer decides what will be successful and what won’t.

Honestly speaking, there’s only one way to figure out whether or not customers love what we’re doing:

Sales!

That’s the only true indicator that we’re solving a problem that customers really have. It’s the only true validation.

What validation doesn’t mean are potential customers telling us that they love your product and that they would definitely buy it. Validation means that you will have real money transferred to your bank account at the end of the day. Everything else is just a waste of time and is not equal to validating your idea. It’s just some outside noise surrounding your business.

Building your product together with some early adopters is also not a validation of your concept. It’s just a few people willing to use your product. Nothing more, nothing less. It won’t help you when you try to find new customers and most importantly it won’t help you to find investors.

Below you’ll find a theoretical framework ready to validate your idea within just a few weeks without really having to build a product at all. It works for every business model out there.

It won’t take up a lot of energy, time and money to validate your idea and it can be done easily while you’re still working your 9 to 5 job. There’s no risk involved and you won’t be wasting any time or money.

But let’s get down to business and have a look at the steps you need to follow to validate your idea upfront:

#1 Start with marketing your idea

The first thing we need to do is to market our idea like crazy. We need to go out there, push our idea, MVP, landing page or whatsoever across all communication channels and see whether or not customers are pulling in.

As soon as we have people pulling in, signing up on our landing page and so on we have a first sign that we might be onto something. And the best thing about it: we won’t just attract early adopters. We will be able to attract a more diverse group of people.

We might be able to attract people from all sorts of parts of the technology adoption lifecycle, such as innovators, early adopters, early majority and so on. This means we will get a better idea about the real market size and potential of our idea instead of just focusing on early adopters.

What’s the problem if we only have early adopters? The problem with early adopters is that we won’t know whether or not they only represent a small niche and if their problems are experienced by the mass market as well. Hence it makes a lot more sense to market our idea to the broad public first.

#2 Build up a huge demand upfront

The problem about not having a solid demand already lined up once we launch our product becomes obvious when we look at Dave McClure’s framework which essentially tells us that for two products we want to sell we need to have at least 100 people that are generally interested in our product.

That means only 2/100 people interested in our product will end up buying it. Now you do the math how many potential customers you need to be able to attract to reach your projected amount of customers that you wrote down in your business plan…

#3 Educate potential customers into early adopters

A few months ago I wrote about the early adopter education process which says that there are basically no early adopters for our products. Even if there might be a few people having a certain kind of problem you are trying to tackle they are not your true early adopters yet.

They usually need to be educated first before they will become your early adopters. They don’t know you and they don’t trust you. Hence, they are only interested prospects and the probability that they will go ahead and start being your early adopters is quite slim. Another thing is that finding them is almost impossible to find them.

Even if you have the biggest network on this planet earth finding them is almost impossible. The only way to find people interested in your idea is going out there, marketing your idea all over the place (Ads, Forums, Blobs, Reddit, SEO, etc.) and then start educating them.

And the people that transfer real money to your bank account are your early adopters. All the others are just outside noise. These are mostly people telling you that they love your product but they would never pay a cent for it or the price you want them to pay.

#4 Build up trust trough interaction

The biggest advantage of educating potential customers into early adopters is the fact that the education process will enable trust building. The more we interact and engage with our prospects before we try to sell them our product, the higher the trust and the higher the probability of a successful sale.

If we look at company sales, about 2% of all sales come from customers a corporation interacted with only once. About 80% of a company’s sales come from customers they interacted with 7+ times.

This means that once we finished our product and we try to sell it we will usually have only 2% of people buying our products, which is clearly not enough for a cash strapped startup. This is an absolute startup killer. It’s nice to know and understand this upfront.

Now if we go and start the interaction and engagement as soon as possible we might have had more interactions, more trust and hence more successful sales. For me this approach resulted in a 7 times higher conversion (e.g. my book) of interested customers into paying customers.

#5 Validate your idea

This is where the magic happens. Before writing a single line of code it makes a lot more sense to validate the idea first (sell it!). The sooner we validate it the less we will fall for the trap of falling in love with our idea, ignoring feedback, feeling it is the greatest thing on planet earth and we won’t start tunneling.

Validating means that we try to sell it as soon as possible. We don’t necessarily need to have the final product yet. In many cases we usually don’t need the product at all. All we need is to be able to answer the following question:

“Do they trust me enough to transfer money to my bank account?”

If we can answer this question with a simple “Yes” then we can validate our idea and send over a sales pitch. If we can’t answer this question with a clear “Yes”, then we need to find out why we think people won’t trust us enough to buy our product.

That’s all you need to know about how to validate your idea on a theoretical level.

Now let’s get down to business and start validating your idea before you build it and stop wasting time and money working on something that the market might never ever need.

If you want to know more about how to validate your startup idea and starting your own business feel free to grab Yann’s book “The Perfectly Executed Startup“!

About The Author

Yann Girard is an entrepreneur, an author, a blogger and an agent of change. He has started, run and advised several startups. During the last years he lived and worked in Shanghai, Berlin, New York and is currently residing in Munich.