Testing and validating your business idea
Establish that your idea is something that can make money, that there’s space in the market for you and that your finances are solid enough to get you through the first year.
Test your business idea
The best way to test and validate your idea is by understanding and researching your market. This helps you to understand:
- who your customers are, what they need and how they behave
- how the market is performing and whether it’s growing or declining
- who your competitors are and how much they charge
- how you will get your products and services to your market
- what potential customers think of your idea and what they’d be willing to pay
Who to test with
Don’t test with friends and family. You want honest responses from people who represent your future customers.
Don’t test with friends and family. You want honest responses from people who represent your future customers.
Understand your competition
Understanding your competition helps you to understand what’s unique or different about your product and how you can market that to customers.
Aim to find out:
- how much competitors charge
- how competitors advertise and promote their products or services
- how competitors make or provide their products and services
- what makes your business different and where you could fit in the market
Mix techniques - see what you can learn as a customer and what you can learn from desk research.
Role playing as a customer
- Visit their stores or websites and make a purchase
- Use their products or services
- Contact their customer service teams
What you’ve learned will help you identify your competitors’ strengths and weaknesses and spot gaps where your business could fit.
- Visit their stores or websites and make a purchase
- Use their products or services
- Contact their customer service teams
What you’ve learned will help you identify your competitors’ strengths and weaknesses and spot gaps where your business could fit.
Doing desk research
- Read annual reports to find out about revenue and profits
- Look at online reviews and social media posts
- Check press releases and media coverage
This helps you learn more about your competitors’ values and ways of working and can help you identify how your business is different.
- Read annual reports to find out about revenue and profits
- Look at online reviews and social media posts
- Check press releases and media coverage
This helps you learn more about your competitors’ values and ways of working and can help you identify how your business is different.
Build a minimum viable product (MVP)
An MVP is the most basic version of your business that you can bring to market. It has the essential features of what you plan to deliver but lacks polish and full functionality.
It’s a cost-effective way of testing the market for your business, getting feedback and improving your plans.
Benefits of an MVP
- You can develop your business part time while still keeping up other paid work
- Lets you start out with just one client or a basic version of your product
- Gives you something tangible to take to markets, pop-ups or trade shows to generate interest and make connections
- You can develop your business part time while still keeping up other paid work
- Lets you start out with just one client or a basic version of your product
- Gives you something tangible to take to markets, pop-ups or trade shows to generate interest and make connections
What to remember
- Your MVP should capture the core elements of your offer in a quick, cost-effective way
- Speak to the people who use the MVP to find out what worked and what did not
- Use this feedback to improve, or iterate, your business idea
- Set a budget for MVP development and do not exceed this
- Your MVP should capture the core elements of your offer in a quick, cost-effective way
- Speak to the people who use the MVP to find out what worked and what did not
- Use this feedback to improve, or iterate, your business idea
- Set a budget for MVP development and do not exceed this
Write a business plan
A business plan sets out your business objectives, and how you will achieve these. It explains to funders what your business does, who it serves and how it will grow.
Your business plan should explain:
- your business objectives, and how you will achieve them
- what you know about your customers, competitors and the market you’ll operate in
- how your business will make money, including your pricing strategy and sales forecasts
- your sales and marketing strategies, including how you’ll find and keep customers and where you’ll advertise your business
- how you’ll run your business, including whether you’ll need any licences, buildings, equipment or staff
- how you will identify, offset and manage any risks that could affect your business
- who will be involved in running the business, and what qualifications or experience they have
