30 years ago, a young man was stuck in Puerto Rico.
His flight to British Virgin Islands (BVI) was cancelled because the airline “didn’t have enough passengers to warrant the flight”.
Annoyed at the incident, he borrowed a blackboard, hired a plane and went around selling a $39 one way ticket to BVI.
After approaching all the passengers who had been bumped from the flight, he filled his first plane.
The young man’s name was Richard Branson, and this marked the beginning of Virgin Airlines.
While that sounds inspirational, starting a business can still feel like a leap of faith.
You have a dream that you feel passionate about. Yet it is normal to feel anxious about whether it is going to work out fine.
Here are a few questions probably swirling in your head:
- Are people really going to buy what I’m going to sell?
- Am I doing the right thing by starting this business?
- Will my business still be up and running in six months?
While you don’t want to take unnecessary risks, all these doubts paralyses you from taking action towards your dream business.
Isn’t that frustrating?
Good new though - We have put together this comprehensive guide to help you create a business that your market ACTUALLY wants.
Understand Your Target Market
Sure that might seem like marketing 101 advice.
But it is frequently forgotten by inexperienced entrepreneurs who get obsessed with building the perfect product, rather than intimately getting to know the market.
1. DON’T TRUST FAMILY MEMBERS
Yes, you read this right.
While friends and relatives want you to succeed (we hope), they are likely to be biased towards your offering.
Attempting to appease you and preserve the relationship is a primary motivation.
Unless they are your target market or have a wealth of experience within that industry.
Otherwise, do steer clear of them and approach complete strangers.
Here’s some advice by Danny Maloney, co-founder of Pinterest Analytics tool called Tailwind.
“We 'validated' our first (failed) product by having friends and family tell us how wonderful it was. [It] felt great, but they didn’t use it. When we started Tailwind, we took a different approach -- asking complete strangers who didn’t care about us at all to [sign up] and pay before our product was even built.”
2. CONDUCT INTERVIEWS
The biggest mistakes product creators make is keeping the idea to themselves.
You must be willing to share it with others, so that you can refine it towards improvement or abandon it if it not a market fit.
"Ideas are meant to be attacked, torn apart, and put back together again. You may well want to shield your idea from the harsh sunlight at first, but by the time it’s ready to meet the world, it should also be ready for rain or shine." - David H.Hansson of 37 Signals
Hence you must proactively conduct interviews with your target market.
The lowest hanging fruit is reaching out to the subscribers of your email list. Simply secure 10 minutes of their time in person or over Skype.
By holding a natural back and forth conversation, you are able to sense their hesitation, excitement or a “wow” impression.
This gives you an insight into how specific features would be received by your target market.
3. SEARCH GOOGLE TRENDS
Here’s a useful tool by Google that you are probably unaware of.
Google Trends allows you to see keywords and events that is trending worldwide.
This is especially useful for extracting insights to growing trends that represent a hidden business opportunity.
For instance, I might enter in the term “yoga” to discover that the marketplace is currently expanding.
Based on “Related Searches”, I can suss out growing opportunities within the “Yoga” niche. For instance, “yoga pants” and “Bikram yoga”
But should you be worried of competition in a mature market?
No you shouldn't.
As pointed out wisely by our friends at Foundr, being first in the market does not immediately guarantee success
"Coca-Cola was the first cola producer, and yet Pepsi exists. Friendster and MySpace existed way before Facebook. Google’s founders were discouraged from developing their idea because ‘search’ already existed. Some readers will even remember a time when the iPod was scoffed at because the Zune already existed."
4. HOOTSUITE FOR SOCIAL LISTENING
Hootsuite is similar to Google Trends, but it analyses social networks instead of search results.
One of the huge advantages behind this tool is that you are able to identify relevant conversations and communicate with the people behind it.
The power of talking to customers in real time is cost-effective way to gather data about the market.
From there, you will be able to discern the sentiments of prospects towards your competitors while understanding the needs of the market better.
5. FACEBOOK ADS
One of the key aspects of market research is learning about the size of your audience.
After all, you need a certain volume in order to be profitable right?
One tool you should use is the Facebook Ad Tool.
For instance, I might want to investigate how many people in Sydney, aged 23-40 years old are interested in “Yoga”
By keying in the details into the ad tool, I see that there are 430,000 potential customers.
6. ASK YOURSELF
Apart from test macro-trends, zoom in and ask yourself instead.
Would you buy your own product?
As Matt Ackerson, founder of SaberBlast.com mentions “The easiest way to validate an idea is to survey a market of one - yourself.”
And that was also how Dropbox started.
Drew Houston was on a bus ride home and wanted to work on a project.
One problem though - He forgot his USB stick and couldn’t get to work.
Frustrated with the lack of online file storage platforms available, he wrote the first lines of code for Dropbox.
Build A Minimum Viable Product
Before investing lots of money and effort into building something, you need a prototype that your target market can engage and give you feedback.
As Eric Ries of the Lean Startup movement describes it as:
“A Minimum Viable Product is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.”
This is evident by the prominent social media platforms of today. They launched the raw version and iterated based on market feedback.
For instance, Twitter didn’t start up with a “retweet” button. But they noticed hat users were manually copying Tweets and prefixing them with “RT,” so they built the feature into their product.
Another example is Facebook. Despite their success as the top social media platform, they continue to push code change live - twice a day, every day!
1. DRIVE ADS TO A LEAD CAPTURE PAGE
This is one of the most effective methods for measuring market traction.
By selling the product before creating it, you mitigate the risk of building something that prospects aren’t interested in.
You can also tweak your sales copy to understand what truly resonates with the audience.
Here is some words of advice by Iex Brola, co-founder and president of CheckMaid.com
“We actually validated [the idea] without having any cleaners to do the cleanings. We threw up a site, a booking form, a phone number, and ran some [pay-per-click] ads through Google and Bing, and saw what the conversion rate would be had we actually had cleaners.”
Another example is Buffer, the social media scheduling app.
He limited his MVP into a two-page product to see if people wanted to automate their tweets.
2. EXPLAINER VIDEO
Rather than explaining what you do with long paragraphs of text, try condensing it into a simple 90 seconds animation.
This has helped software companies like Dropbox attract new users, even before their product was ready to launch.
3. CONCIERGE MVP
While its great to automate your services eventually, you might have to do it manually at the start.
But not just any service! The service should consist of exactly the same steps people would go through with your product.
This would help you document the exact process required for automation, while saving you from burning excessive cash at the start.
An example is Unsplash.
It is a photography website created by Crew for creative projects. It also allows people to support and fund project creators from all over the word.
Rather than spending weeks or months creating a website that might be a flop, we setup a free Tumblr blog with a $19 theme and uploaded 10 hi-resolution photos we took with a local photographer. Within three hours, the first version of Unsplash was built.
While looking for investor funding works, the alternative is to seek funds from the customers themselves.
This ensure that you validate and fund the concept at the same time.
There is a range of platforms such as Kickstart, IndieGoGo and RocketHubavailable to launch a crowdfunding campaign.
Identify Distribution Channels
When considering your business idea, it is not only important to think about whether your product is a market fit.
You need to factor in how to deliver the product into the hands of your customers.
“A product with better distribution will always win over a superior product with poor distribution.” - Stephen Davis, CXO Advisory Group
Here are five key factors you need to consider:
1. Size of the market: This include the volume metrics and whether you are dealing with several customer profiles
2. Cost of distribution channel: Weighting the profitability of acquiring a customer via each channel
3. Type of product: Is the product standardised or is customisation required?
4. Degree of control over distribution channel: Is there possibility of competition with distribution? Can you dictate terms in your favour?
5. Flexibility of channel: Length of market, time required to build a relationship
1. ORGANIC TRAFFIC
That refers to visitors getting directed to your site through search engine.
According to research, it has been shown to be very cost effective.
Inbound leads cost 61% less than outbound leads - Hubspot
SEO Leads have a 14.6% close rate, while outbound leads have a 1.7% close rate - SEJ
Acquiring customers via organic traffic is also advocated by Alex Turnbullof Groove.
His startup sells software for customer support. Rather than aiming for popular keywords like “help desk software”, he started targeting specific keywords such as “help desk for saas startup”.
While this did not yield as much search results, it resulted in more targeted leads.
Within each web page or blog posts, relevant keywords were inserted:
- Primary keywords into headers
- Secondary keywords into subheads
- Long-tail keywords into copy
2. GUEST BLOGGING
Start writing useful posts for other websites.
It’s an effective method to share your expertise with a new audience while giving your brand added exposure.
This is how Groove grew so quickly, with guest posts published at OnStartups, Shopify, KISSmetrics, Buffer, AngelHack and Copyblogger,
Want to learn how partnerships can grow your business exponentially?
Just look at Uber.
Without necessarily branching out to a whole new business, Uber grew its market through its partnership with Starwood Hotels, which allowed ground-transportation passengers to earn hotel points.
It even partnered up with potential rival - Google
Uber reached out to Google for a strategic partnership around Google’s maps, GPS and other resources. The partnership gave Uber much more than just strategy. In 2013, Google invested $258 million in the company.
“Yes, we know that referrals are the very best way to grow your business. And we know that asking for a referral is both scary but apparently the most effective technique.”
AirBnb’s referral program is a great example.
It offers $25 credit for both the sender and recipient when the invited friend completes their first trip.
Many consumers just aren’t interested in trying to make money off of their friends, it seems greedy and could sour relationships.
But this works because its a win-win for both parties.
This create a strong network effect that is highly scalable.
To Wrap It All Up…
While I’m aware that the list of tips is non-exhaustible, I hope this helps you get started if you are still trying to evaluate your business idea.
Remember that is boils down to the following steps:
1 - Know Your Target Market
2 - Create Your MVP (Minimum Viable Product)
3 - Identify Distribution Channels.
So don’t try to strain your mind trying to calculate the risk.
Clarity comes from taking action, not just from sitting still in contemplation ;)
Were these tips helpful? Are there other business idea evaluation tips that has worked for you?
Would love to hear your thoughts in the comments below.
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