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The $100 MBA Show
MBA2519 Q&A Wednesday - How Do I Validate My Business Idea?
00:20:48
Are you sitting on what you think could be the next million-dollar business idea, but you're unsure if it's really worth pursuing? Ever wondered why so many startups fail despite having great concepts? If these questions resonate with you, you’re in the right place!
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Omar Zenhom
Race the rudders. Raise the sails. Race the sails. Captain, an unidentified ship is approaching. Over. Roger, wait. Is that an enterprise sales solution? Reach sales professionals, not professional sailors. With LinkedIn ads, you can target the right people by industry, job title and more. We'll even give you a $100 credit on your next campaign. Get started today at LinkedIn.com results, terms and conditions apply. Ryan Reynolds here from Mint Mobile with a message for everyone paying big wireless way too much. Please, for the love of everything good in this world, stop with Mint. You can get premium wireless for just $15 a month. Of course, if you enjoy overpaying. No judgments. But that's weird. Okay, one judgment anyway. Give it a try@mintmobile.com Switch upfront payment of $45 for three month plan equivalent to $15 per month required intro rate first three months only, then full price plan options available, taxes and fees extra. See full terms@mintmobile.com hey, welcome back to the $100 MBA Show. I'm your host Omar Zenholm and welcome back to another episode. Today's episode is Q and A Wednesday where one of our listeners, one of our community members asked a question. If you have a question you want to ask, you are struggling with something. You want to figure something out, you need my help. Just head on over to 100mba.netq and you can ask a question there. Submit your question and we answer it right here on Q and A Wednesday. Today's question is from Sarah and Sarah asks how do I validate my business idea? How do I make sure my idea is cool and people like it? What are the steps I need to take? Thanks Sarah for asking this question because it's a crucial step in your entrepreneurial journey. We just covered a couple episodes ago how to create a million dollar product and I wanted to answer this question because it relates to that episode in a lot of ways because we talked about creating an mvp. But I want to take it from a different angle Today I want to talk about your mindse when it comes to validating your product. I'm going to go through the steps and give you some advice. Don't worry, I got your back. But the point here is I want to make sure you understand how to approach this properly so you're not wasting your time and your money. Speaking of which, did you know that 42% of startups fail because there's no need in the market for their product or service? This is according to CB Insights. They wrote this article about why startups fail and I thought it was really interesting because so many people spend so much time working and tinkering on their business idea and then they put it out in the world and they realize, oh, no one really wants it. I don't want you to be in this situation. So I'm going to give you everything I know when it comes to this topic. So let's get into it. Let's get down to business. First of all, I've validated so many business and products and concepts and solutions and services because I ran a lot of business in the last 20 years. And let me tell you that most the vast majority of the ideas I have are, are not good. Okay? It's not me, it's everybody. What I mean by not good is that they're not really great business ideas or concepts or products that need to be in the world, that need to exist. And I'll tell you why they might be, okay, it may make me a few dollars, but I'm not trying to have an okay business. It takes a lot of effort to build a business, a lot of money, a lot of energy. I don't want to do something on something mediocre. I want to exert that effort and exert all that stuff on something that's going to be a winner, that's going to be a game change that's really gonna change my life and the other people around me and my customers and everything. I wanted to be impactful. So let's make sure when we validate our business idea, we understand what makes a good idea. Right? What are we trying to shoot for here? Okay, because Sarah mentions it. I hope people like it, I hope it's cool and that's good and all. And I understand where she's coming from. But let's establish what makes a valid business, a business idea that actually you want to have. And it all boils down to this. Your business must be providing enough value for you to make it easy for other people to give you money in exchange. At the end of the day, a great business idea makes money, okay? That's what a business is. It's not a charity, right? It's not a hobby. But what we're trying to say here is, and it's great to make an impact, you want to make an impact because the more impact you make, the more money you're going to make. That's just how it works. And that's what value is all about. But what I'm trying to say here is that you want to create a high value product because the more value you offer, the easier it is for you to get the money in exchange, right? If you have something that's going to change somebody's life, let's say, for example, I gave you a pill that kept you young forever, right? You stayed your age right? Now forever, right? You would be willing to pay as much money as you had for that pill, right? Because it's such a high value thing, right? And it's so easy to consume and all that kind of stuff, right? But if I said to you, I'm going to give you a pill that is going to make you feel good and hopefully make you live a few extra years because you're being healthy, right? This is called vitamin C or vitamins, right? And that's an okay product. Supplements make good money, right? But it's highly competitive and there's a lot of roadblocks and there's a lot of challenges. So I'm not poo pooing the supplements industry, but I really wanted you to understand that you want to create a high value product. Now, a high value product doesn't have to be revolutionary. It doesn't have to be, wow, I can't believe this thing exists. This is going to change the world. No, Let me tell you a story, okay? I met this guy who is in the sugar packet business. Okay? What's a sugar packet business? Well, he provides the packets that you see, the actual paper packets that you see in restaurants and cafes that have the sugar in it, right? The sugar companies, you know, the sugar plantations and the people that produce sugar, they don't make the packets, right? He sends them the packets so they can pack their sugar in these little packets, put them in the boxes and then send them over to their customers, to those restaurants, to those diners so that they can make money, right? The farmer or the sugar factory, right? They're in the sugar business, they're not in the packet business. So he fulfills a really high value need because those, the sugar suppliers, they can't sell the sugar just by the bag. You know, they want to be able to send it to them ready to use, to those restaurants. So the sugar packet business is high value. It's not this crazy idea no one heard of before. And it's changing the world. People are probably don't even think about how these packets get made, right? But he found a real need in the market. He fulfilled a gap that was not being served. And he's a multimillionaire. So you don't need to be the next Uber, the next Airbnb. Or the next Tesla or whatever, right? You don't need to do any of that stuff, okay? You just need to fulfill a need in the market that's high value. That's what you're looking for when you're trying to validate a business idea. Is this idea valuable enough for people to say, give me this product, I will give you money in exchange, I'll happily do this. Where do I give you the money? Right? Where do I sign? Is really what you want to do? Make it easy. So if there's a spectrum here, the higher the value, right, the easier it is for you to make money with your business, easier for you to be able to sell your products and services because there's no convincing here. I don't need to teach them something, they don't need to learn something to figure this out. It's just really easy to do, really easy to buy. So how do you evaluate your business idea and identify if it is indeed a high value business or a high value product? Well, it starts with understanding what problem your product solves. Okay? Really get clear on what problem does it solve, how does it solve it, how much effort is required to solve it, all that kind of stuff. Okay? When you have that basis, when you know what problem you're solving, you need to understand who you're solving it for. Okay. Because that leads to the next part of this validation process is I know I have a solution to a problem. I know who I am solving this problem for. Now you got to speak to these people, okay? You need to speak to these people who you are trying to solve a problem for. Okay? So let me give you an example. When I became a full time entrepreneur, the first business I started was a business consulting firm. It was a service based business. I created websites and logos for other businesses. At the time I was living in New York City in the West Village and I built basically websites for small business owners for shops. I built logos for them and I would shoot videos for them. Actually, Nicole, my partner was the video expert and she's the one who shot these videos. And we would have these services that we offer. So we would go door to door, literally to the local shops that were on our street and beyond and ask them, hey, what do you think of this? We're not trying to sell anything. We're just trying to learn from you. If you would be interested in something like this at some point in the future, whether it's a website, whether it's a new video ad for your business, whether it's something you can put on Instagram or Facebook or whatever it might be. This is back in 2013 or something, so really early days on social media. But the point here is, is that we want to hear some initial feedback. Is it like, no, no, no, I'm not interested. No, thank you? Or are they curious? Are they. Do they want to learn more? Do they say, oh, that's cool about something I didn't even think about, oh, that's just something I thought was standard. Right. Or that is a given. So the point of the exercise is to learn. You're not selling anything. You're not trying to convince anybody of anything. You're trying to learn from your target audience, the people that you are serving, to see if there's interest, if there's even a chance they are going to be a customer in the future. I like to recommend that you should talk to your ideal customers that you would be solving this problem for in a slow time. Maybe it's morning, maybe you can schedule the time if it's a zoom call or something like that. The point here is you want to ask about 15 questions around your product or service and ask them what they like about it, what they don't like about it, why they like it. Right. What problem does it solve? Because it might be solving another problem that you didn't think about. Okay? And this is just market research. Right now we're just trying to get data so that we can figure out, does this thing have legs? And I'm telling you, you might be thinking, well, how do I do this? When do I do this? You do this as soon as possible. Like, as soon as you have this business concept in your head and you have something to present, like, I don't know, a few slides and maybe some drawings in your notebook or whatever. Go and talk to people and discuss it with them while it's still new. Okay? You don't have to wait months to have a perfect prototype yet. That's what comes next. Because you don't want to build something that people don't want. Before we move on to the next step, a key thing you should be asking your potential customers, your target audience, is, how are they solving this problem right now? What are they going through while they're solving this problem? Right. Or trying to solve this problem? Or are they even trying. Trying to solve this problem? Now, this is important because they might say, well, I don't even solve it, right? I just kind of ignore it. That's a sign that the problem that you're trying to solve is not Painful enough for them to figure out a solution. And it may not be a great idea to build a business around that, okay? Because if it is painful enough, it actually affects their life, their business, their whatever. Then they would have a workaround, some sort of painful solution right now, some really long winded way of doing this. You know, when we started Webinar Ninja, our webinar software company, when we asked this, this question to people, we realize, oh, people are spending so many hours, you know, Frankensteining all these pieces of software, Landing page software, video conferencing software, email marketing automations, time zone conversions. They're doing all this stuff and trying to, you know, put it all together. They don't always talk to each other properly. It's a big headache. Okay? That's the solution to their problem. That's how they're kind of pulling off a webinar. They're like, okay, what if we simplified it and made it one tool? That would be incredible, right? I know that they have this problem. They're trying to solve this problem in this really weird, hunky, junky way. Let's see if we can make their life a little easier. Are they willing to pay money for that? And that's where creating a simple MVP comes in. Minimal viable product. I'm not gonna go into too much detail with that because I covered it in detail two episodes ago. MBA 2517 on how to create a million dollar product. Check that episode out. We're gonna go through that, but basically you're gonna create a prototype. You're gonna create something very simple very quickly that will show what your product will do, right? So that your customers can say, oh, I see it, I see what you're doing here. Yeah, I'd like to do that. And you present it to people to see if they're willing to buy. I'm gonna give you a real, real example here. Okay? So when we started Webinar Ninja, I created a small prototype to use for myself. I started using it to run my webinars. My audience members asked me, hey, can we buy it? This is interesting. What is this thing you're using? I said, oh, something I put together for myself. They said, okay, great, can we buy it? That was great indication because they saw it from the, the, you know, the attendee side, but not from the creator side or from the host side. So I thought, hmm, how can I create a minimal viable product without investing so much money in development and all that kind of stuff to see if people actually want to buy this thing? If they're willing to part with their hard earned dollars for the solution. And what I did was like super minimal. What I did is I just created a landing page. I just created one page with my Photoshop mockups that I created that are h. I cringe at even thinking about it. But at the time, this is where I started. And I'm not a designer by trade, but I tried my best at the time and we got great designers to clean it up later on. But the point here is, is that I had some mockups of what the product is going to look like and what problem it's going to solve and how it's going to solve it. You know, this is Webinar Ninja, you know, don't you hate using all these tools? Well, what we're doing now is we're making all these tools, one tool with Webinar Ninja, and you can create a webinar in seconds. And I gave them some visuals, pictures of the software, the UI or the user experience. And basically the page just sold the product as is. And I ran a sales video, I did a sales video explaining what this product does. And we pre sold Webinar Ninja to our audience, to our email list, to the people that would be interested, and we opened it up to 150 beta users at the time. We sold out in 48 hours and then we opened up for another hundred users and we saw that sold out in 24 hours. So we got that validation really quickly that this is such a strong problem that people are willing to give us money, throw a deposit down on the hopes that we're going to solve the problem. That's how painful it is. It's like, oh, I'll try anything. This is horrible, you know, so take my money. I can't wait to see what you come up with. USAA knows dynamic duos can save the day. Like superheroes and Sidekicks or auto and home insurance. With usaa, you can bundle your auto and home and save up to 10%. Tap the banner to learn more and get a'@usaa.com Bundle restrict. Race the rudders. Race the sails. Race the sails. Captain, an unidentified ship is approaching. Over. Roger, wait. Is that an enterprise sales solution? Reach sales professionals, not professional sailors. With LinkedIn ads, you can target the right people by industry, job title and more. We'll even give you a $100 credit on your next campaign. Get started today at LinkedIn.com results. Terms and conditions apply. So that was a great way for us to validate without creating the tool itself. We sold the solution to the tool on the landing page. And then once we had the, you know, pre sold dollars and all the revenue we made from the presale, we took that money and then we hired some expert engineers to build the first beta version of WebInterninja. The next step is to test your MVP with real customers or real users. You want to make sure that you want to get as close as possible to the real so they know exactly what the product is and they get the result they're looking for. They get the win, they get the solution to the problem, right? You want to make sure this is as simple, as easy as possible because you want to get into their hands as fast as possible, okay, Whatever their product is software or a course or coaching or a physical product, right? So what we want to do here is get it into the hands of real customers. And in our case with Webinar Ninja, we gave it to the people that bought the product in the pre sale, right when we launched it. And we told them, hey, listen, you are going to have the ability to refund for 90 days, right? At the time, 90 days seems like a lot, right? Most people money back guarantee was 30 days. We said 90 days. Why 90 days? Because we wanted 90 days to win them over. So if somebody complained about something in day one, we say, hey, listen, we're going to fix that. We're going to make it better than you even imagined in 89 days. You have 89 days left to make sure it's what you want it to be. Give us 89 days. You can always refund before the 90 day window and in those 90 days. And the whole goal was to learn from our customers, improve the product, make sure it's actually solving the problem as much as possible, as completely as possible. And through that first 90 days is really when the rubber hits the road. It's really where your product gets validated because your customers are seeing your product in real life, in a real use case and they're actually getting wins from the product. They're actually seeing the problem being solved and they're going to give you feedback, they're going to give you testimonials, they're going to give you praise, but they're also going to say, hey, I don't love this thing, I don't love this thing. Fix this, change this. You know, this is annoying and you just gotta have a thick skin. It's okay, don't be romantic about it. You're trying to make the product as good as possible, as great as Possible. So this feedback is gold. And that's basically how you validate a business idea or product. My advice to anybody who's going through this, process these four steps. Again, let's go through them real quick. Number one is you identify a problem, really understand what you're solving, who you're solving it for, how you're solving it. You know, what, what other ways are they trying to solve this problem? Right. Right now, currently. Then you're gonna conduct your market research. You're gonna go and talk to people, you're gonna figure out who they are, and you're gonna get out there and show them what you got. You're just trying to gather information right now. You're trying to learn from them. You're gonna say, hey, this is how I'm trying to solve this problem. Would this be helpful? Would you pay for this? How much you pay for this? You know, all that kind of stuff. Right. Step three is you wanna create that MVP. Check out episode MBA 2517 for that full episode. And then four, you want to test your MVP with users, real users, real customers, and get that feedback to improve. If you get past these four levels, you have won the game of validating your product. But here's the kicker. This is what I learned in growing whether an agent for 10 years and eventually being acquired by Proprofs was with any business, you need product market fit, which means that your product fits perfectly in the market for your user. Right. They love it. This is great. Okay. A lot of people think that once you achieve product market fit, you're golden. It's amazing. You're, you know, going 100 miles per hour. Product market fit is something that you have to continually maintain. Why? Because the world changes, the market changes, your customers change, the, you know, the economy changes, you change the way that you can solve this problem. Competitors come up. So you got to constantly make sure you have product market fit fit. So once you've validated your product and you have product market fit, that's great, you have some traction now. You can get started. But keep in mind, you got to keep that fit alive. You got to keep that fit going regardless of what changes around you. Sarah, thanks so much for asking. Today's Q and A, Wednesday's question. Validating your business idea is so crucial. And as you can see with these steps, we're trying to maximize the amount of time in making sure that this is worth pursuing this product, this idea. But you want to get going quickly. Remember, remember in the beginning of the episode, I said that I Have had many ideas that just didn't pass this test, that were not great ideas that were not validated. Well, the reason why I had so many is because I want to just get things out and figure out if they're good or not, if they're good business ideas, if they're good product ideas or not. And I want to just knock them out. Okay, this is not good. Get rid of it if this is good. Let's see what's going on here. Maybe I can work on this one. Right? The point here is that the more reps you have, the more chances at bat you have, the better chance you are at winning at business. Right? But you don't want to have an idea and just sit on it and dwell and think and contemplate and talk about it, you know, over drinks with friends and never do anything. Okay. You want to validate as quickly as possible to find out, is this worth even the space in your brain you're thinking about about it, you know, day after day, night after night, keeping you up at night? No. Validate. Figure out if this is worth pursuing. No. Next thing, okay? And that's what business is all about. And by the way, you're going to be doing this within the successful business. You're running with your decisions in the business, with the product ideas, with the iterations of your products, with different promotions, with different marketing ideas, all that kind of stuff. You got to validate, validate, validate. Don't get, you know, romantic about your ideas. You want to be successful as an entrepreneur, you got to be willing to what they say, kill your darlings. Your ideas that you, you have, you think they're wonderful, but if the market doesn't want them, they're not really going to be worth much. So don't pursue them. Thanks for tuning in to the $100 NBA show. Hope you found this episode valuable. If you did and you want to say thanks. If you want to give us the biggest hug in the world to say thank you, just hit subscribe. Follow us on your favorite podcast app or on YouTube. We're on Spotify, Apple, Podcasts, Overcast, you name it. We're on all the different players. And if you're watching us on YouTube, hit subscribe if you found this valuable. If you didn't find this value, don't hit subscribe. I want to make sure that this is worth your while. Okay? Only hit subscribe if you think this is worth your while. You want more of this great content. Thanks so much for listening and watching and I'll check you in the next episode. Take care. And we're back, folks. It looks like Jim from sales just got in from his client lunch and he's got receipts. His next meeting is in two minutes. The team is at. Can he get through his expenses in that time? He's going for it. Is that his phone? He's snapping a pic. He's texting Ramp. Jim is fast, but this is unheard of. That's it. He's done it. It's unbelievable. On ramp, expenses are faster than ever. Just submit them with a text. Switch your business to ramp.com.