HOW TO TEST YOUR STARTUP BUSINESS IDEA

As part of the Lean Startup  – the methodology which helps entrepreneurs build successful startups – startup founders are required to validate or pivot their business ideas.

Business model validation is a stage in a product life cycle which requires the startup founder to prove an idea by running experiments before committing to getting it built. A task which is valuable for both entrepreneurs practising the Lean Startup method and those who aren’t alike.

We speak to Paul Smith from the Johannesburg-based accelerator, Ignitor, which combines the various methodologies – including the Lean Startup method, design thinking, agile thinking and rapid prototyping – to assist startups. He shares WHY every business needs to test their business model and WORKABLE ways every startup founder can complete the process today.

Tip #1: Meet with at least 5 customers every week for the first year of your business

1. What is the purpose of business model validation?

The purpose of business model validation is to turn all the unknowns in your business into knowns. When someone start ups an innovative business very little is know about how the business will operate. You don’t know which customers will buy the product. You are unsure of which marketing messaging will best attract customers. You don’t know which distribution channels will partner with you. The idea of business model validation is to quickly learn how the business will operate by running experiments and talking to people that know the answers to your questions.

With the traditional way of launching a business this could take many years of time. Using the lean startup process this process can be often be done in days or weeks by running many, small experiments to see how customers actually behave.

2. When should startup founders begin the process?

On day one. The sooner you start using an experiments to test your business model the faster you can get to a business model that will actually succeed.

3. What are practical ways that startup founders can complete the process?

 Get customer input

  • Meet with at least 5 customers every week for the first year of your business.
  • Ask customers what they like and don’t like about the product.
  • Use this feedback to improve your product.

Turn unknowns into known’s

  • Create a list of all the unknowns and assumptions in your business model.
  • Decide which assumptions are most important to your business succeeding.
  • Talk to people that know the answers to your business unknowns.

Start small 

  • Launch with the smallest version of the product that your customers will be happy to buy and use.
  • Marketing and sales campaigns should be testing in a small way before being expanded.

4. What insight or feedback should startup founders be looking out for during the process?

Key questions that founders need to answer include:

  • Who will buy your product?
  • What product should you sell?
  • What are the features that should be included in the first version of your product?
  • What marketing channels will work?
  • What marketing messaging will attract customers?
  • How will your acquire the necessary resources to grow your business?
  • How will you make money?
  • How will you attract the key partners to build the business?

Tip #2: Launch with the smallest version of the product that your customers will be happy to buy and use 

5. What is the next step? What do you do with the information once you have it? 

A: On a weekly or monthly basis get together with the team and answer the following questions:

  • Considering our new learnings can the business still succeed?
  • Considering our new learnings can we improve the business chances of success by changing the customer segment, product, marketing strategy or financial model?

6. What are some of the things that startup founders can do to continue the business model validation process even after they launch?

As the company grows new unknowns will arise. These unknown’s should be tested by running small experiments. Common questions that need to be answered include:

  • Which new markets need to be targeted?
  • Which marketing strategies will be able to scale?
  • Which what resources need to be attracted to scale the business?

ORIGINAL SOURCE: SMESOUTHAFRICA (PARTNER TO KASIBIZ)

 

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