A scenario we constantly see with fresh and young entrepreneurs is when they get an idea that seems amazing and decide to turn it into a business. Excitedly, they put together a 5 year business plan forecasting income, profits, and cash flow. They feel good about themselves – that is until they discover the business plan they developed will not survive.
More often than not, the reason behind that is that although their business plan may have been solid in theory, once they started developing their product and launched it, they received customer feedback and realized many of the features they included were actually futile, and/or customers utilize their solution in different ways than they had figured. This really shows you how crucial the process of market validation is.
So what is market validation?
To put it simply, market validation is the process of finding out if the idea is worth pursuing from your target market – before you spend your money and time on the business.
What are the benefits of market validation?
- If you’re seeking funding for your startup, investors would want proof of market validation before agreeing to invest in your startup.
- You will find out if you are solving a real problem. You need to truly understand the customer’s problem and behavior. For example, what might be a problem in your city, might not be a problem in another city.
- Chances are that you will discover that someone else attempted to solve a similar problem before. If they failed, find out how they failed and figure out what you would do differently. If they haven’t failed and still exist, identify what value your idea can add in comparison.
- You will get an understanding if people are willing to pay for your product/service and how much they are willing to pay. It’s also a good time to see if your competitors are monetizing and how so.
These are just a number of ways you could benefit from market validation. If you’re wondering how to proceed with market validation, we will share tips on ways to validate your startup idea next week. Stay tuned!