Unvalidated Business Idea

Do you have a business idea that you’re not sure is worth pursuing?

It’s important to validate it before you spend too much time, energy, and money developing your idea.

This blog post will discuss how to validate your business idea and what to do if it’s successful.

So, whether you’re just starting out or you’ve been working on your business for a while, read on for helpful information on validating your business idea.

If you’re an entrepreneur, you know that having a great idea is only the first step in starting a successful business. The next step is putting that idea into practice, and that’s where things can get tricky.

Too often, entrepreneurs spend months or even years developing a business plan and product before realizing that their idea isn’t feasible.

That’s why it’s crucial to validate your business idea before you start investing too much time and energy into it.

Here are a few tips on how to do just that.

Contents

1. What is Idea Validation in Business?
2. Why Do You Need Idea Validation before Starting Up a Business?
3. What Happens If You Have Unvalidated Ideas?
4. What Can You Do to Avoid Failure from Unvalidated Ideas?
5. A Good Idea Isn’t Enough

1. What is Idea Validation in Business?  

Idea validation is the process of assessing whether your product or service will be viable to your target market.

Your target market is the potential customers or clients that will make your business idea come to life.

Validating your business idea before starting up is essential because it will help you decide if you should continue with your business or not.

According to some studies, 80% of startups fail during their first year due to their lack of idea validation.

During the process, you will ask for feedback or reviews from the actual people who will buy your product or avail of your service.

2. Why Do You Need Idea Validation before Starting Up a New Business?

Think about idea validation this way: You encountered a post about a trending movie on Facebook. You got curious, and you started scrolling down the comment section to read other people’s opinions about the movie.

Your curiosity grows, and you start thinking about watching the movie, too. Your plan of watching the movie is like your business idea.

To further assess if the movie is really good, you will now search for the movie trailer on YouTube. You will find more movie reviews in Rotten Tomatoes or IMDb. You will also find related articles and watch reaction videos about that movie.

During this process, you want to know if your time and money won’t be wasted on watching a popular movie that won’t really impress you. You don’t want to be disappointed and end up thinking like, “That was all?” after viewing it.

Many movie-goers end up being disappointed when the movie that they’ve watched doesn’t meet their expectations.

One of the reasons why they become frustrated is they watch the movie without assessing whether they will like it or not. Sometimes they just watch it out of boredom or out of a friend’s recommendation who might have a different movie taste or interest than them.

You wouldn’t want to feel this disappointment in your business startup, right?

Idea validation can be a huge life-saver. Curiosity and enthusiasm are great attitudes in brainstorming your business idea, but they can get you into trouble if you miss validating that idea in your target market.

I’ve experienced this many times, especially when I was a new entrepreneur. I’ve always wanted to dive in right away and execute the idea without validating it!

I believe some of you have felt the same, right?

After executing the idea based on the parameters that I had enough capital and a product or service to offer, I realized that I needed to exert more effort.

In the middle of the execution, I realized I needed more capital, the product/service was not working, and my skill set was not enough.

Long story short, I needed to close the shop.

Being a newbie at that time, I thought that having capital and a product or service to offer would be enough.

I thought I was good to go, but no. There were so many roads that I had to cross to get to where I am now.

3. What Happens If You Have Unvalidated Ideas?

a. No Market for Product or Service

Your main goal as an entrepreneur is to solve a problem. Business is about finding the pain points in people’s daily routines and activities and finding ways to make them easier and lighter.

So, you have to consider looking for a problem that a lot of people have.

If your idea can only relate to a few people in your target market, it becomes prone to failure.

Let’s say you live in a rural area where the mode of transportation is limited to small vehicles. The roads are not that wide, and the people rarely go to the city. Then, you have a passion for big trucks and their parts and accessories.

You put up a business related to truck repair and accessories, but you only get a few customers per week. Your capital and interest suit your idea, but the market doesn’t serve it well.

In this case, you need to validate the situation in your area. You need to survey as to how many residents own heavy vehicles in your area.

How many can drive and are knowledgeable with those parts and accessories? If your target market doesn’t know how and where to use your products, consider thinking twice.

b. Wasted Funds

Nothing can be more frustrating than losing a huge amount of money on something that didn’t work out. Even if we often say to “charge (it) to experience,” losing capital means a lot in business.

I’ve experienced it twice already. First, I closed my eatery because I wasn’t really into that business. Second, I closed my shop when I was a newbie entrepreneur because I was not aware of idea validation.

One way to avoid wasting funds is to have a financial goal upon starting up.

How much do you want to make in a business? Is $500 or $1000 monthly enough for you? Or do you want more?

You can choose a business idea that earns the income you want upon answering that. It should be in line with your financial goal to avoid disappointments in the long run.

If you know how much you want to make, you will strive harder to get it. Therefore, you will be more careful in managing your expenses and will likely allocate the funds to a more profitable business idea.

c. Oversupply of Unused Products

Have you seen grocery or convenience stores that accidentally sell items that are past their expiration date?

Some of the stores don’t mean it, but it may indicate one thing— they have an oversupply of products that buyers don’t often buy or are not interested in.

As a new entrepreneur, you need to assess if your business idea will have actual customers and not just mere supporters. When you’re starting your business, it’s common that your first-time buyers will be your family, friends, and acquaintances.

However, in order to grow, you need more organic customers to buy your product. You can conduct a feasibility study to check the demand for your product in your target market.

d. Debts May Pileup

This consequence is common among small entrepreneurs. They think of a business idea, get overwhelmed about it, borrow money from a bank, and start putting up the business out of excitement.

I have learned from Warren Buffet the two E’s to avoid or the most dangerous for entrepreneurs – expenses and excitement.

It’s natural to be excited about your ideas, right? But if you’re too excited about your business idea, it will hinder you from seeing things that you need to see. That’s where the issue occurs.

Go out and know your market size. Conduct interviews, test your product on actual buyers and run a promotion to attract them.

If you keep on starting up your business without validating your idea, you will end up in bankruptcy. You’ll tend to keep on borrowing money from the bank or even from your friends.

4. What Can You Do to Avoid Failure from Unvalidated Ideas?

a. Check Market Demand

Knowing your product’s demand is important because it’s the lifeline that will keep your business going.

I’d like to speak from my experience on this matter. Once, while walking on the street with my friend, we saw street vendors that had many buyers.

My friend said that he wanted to create a business like theirs because it was earning a lot.

I asked him, “How did you know it’s making a lot of money?” His reply was because there are a lot of customers.

Some people would judge a business with a simple glance and think that their judgment is correct!

I added that there are many factors to consider if a business is earning. My friend witnessed at that moment that the business owners seemed to sell a lot, but how about on some other days?

And how long have they been in the industry? Maybe they’ve been doing that for many years; they have already built their brands and got many repeat customers.

So, if you start a business like that, you might not get the same response or sales as them because you’re still new in the market, right?

b. Create a Business Plan

A business plan will let you see the whole picture of the business.

No matter how small or big your startup is, it would be best to create a business plan.

It depends on the business idea that you have, if possible, have a buffer for six months or until the business is earning.

c. Secure Your Capital

How to raise capital for your business? Ask these questions to yourself before jumping into your startup business:

● Can you afford the resources needed for your business?
● Do you have enough money to keep the business going for at least one year?
● Do you need to find a partner or an investor to sustain the needs of your business?

You need to learn here that, if possible, save enough capital for six months of expenses for your business.

Most businesses, side hustles, or SMEs (Small & Medium Enterprise) fail because of a lack of capital.

You need to sustain your business and your necessities for six months or until the company earns. The more buffers you have, the better.

d. Survive the Competition

Who are the competitors in your space? How many are they?

What are they offering, and how do they manage their business?

These are just some of the vital questions you need to answer to compete correctly.

Competitors will be a huge challenge to your success. Creative entrepreneurs always find ways to get an edge on their competitors, so you’ll have to keep up.

Before starting up, think of ways on how your product can be unique from the other ones in your industry.

Make your product remarkable from the first moment that your customers buy it so they will have a reason to come back.

Provide an efficient service, too, so your clients will get to remember you. Go the extra mile for them so they will think about and consider you first, before your competitors in your niche.

e. Trust the Timing

If you’re thinking of starting up a business that sells DVDs in a time when movies and TV shows are just a few clicks away from Netflix and HBO, you might consider tossing that idea.

Right timing in business is essential, and fortunately, it can be determined through simple common sense. Why?

You just need to feel the vibes around you. You just have to watch people closely and observe the trends and interests nowadays. Find their pain point in those interests and try to solve it for them.

Ask these questions to yourself:

● Is it the right time to enter this market?
● Is it the right time to sell a specific item in this niche market?
● How will I solve their problems during this time?

Some products or services are already out of trend, or the product life cycle is going downward already, and you don’t want to invest in the product/service that will not earn.

f. Start Small and Maximize Your Resources

When I say “start small,” I’m talking about inventories; buy inventories that are only necessary.

Instead of buying six months’ worth of inventories, why not buy for 1-3 months only? Of course, you need to consider the lead time for shipping and other factors.

The point is: you need to make a wise decision to stretch out your capital and resources.

Another example is, do you need to hire two persons to manage your website and SEO (Search Engine Optimization)?

Why not hire one that does both? Yes, you can do that! Some people can do web design, SEO, graphic design, etc., at the same time!

Hire a jack of all trades and master of some for you to save money.

g. Find Reliable Suppliers

Suppliers will be the backbone of your business, so you need to choose the right one. It would be best to double-check the suppliers on how reliable they are.

Not doing this will immediately wipe out most of your capital if you find an unreliable one! So, beware!

I had my fair share of this mistake when I was a newbie entrepreneur.

I trusted a guy who pretended to be our friend and who became our supplier. Unfortunately, during the time of the delivery of the mobile units, we couldn’t find him anymore.

Oh yes, we have been scammed!

Honestly, we asked the guy to provide us with some identifications and documents, but he still managed to scam us.

I have grown so much from that experience. But it’s much better to learn from others’ mistakes than our own mistakes, right? A personal mistake is costly and shuttering, so take my experience as a lesson.

Despite that experience, life must go on.

You can’t let that mistake define you or hold you back from your journey!

h. Build Your Skillset

Whether you will start an online side hustle or brick-and-mortar store, you need to determine whether you will manage it on your own or hire someone to do it for you.

It’s easy to say, “Of course, I will handle it.” But the question is, do you have the competency to do it? Aside from that, do you have the time to manage it? How many hours can you allot for this every day or per week?

If the answer to these questions will lead to a decision that you can’t manage your business due to many factors, then it’s better to hire an honest and capable person to do it for you.

5. A Good Idea Isn’t Enough.

Experts often say that you can have the brightest and most innovative business idea in the world, but it may be gone to waste if no one buys your product or avails your service.

Failure is inevitable in both life and business. Idea validation is one way that can save you from failure in the beginning.

Like that of the movie analogy, your excitement isn’t enough in starting up a business. You need to be strategic and practical, so you won’t be disappointed in the end.