How To Validate Your Business Idea By Testing A Hypothesis!
We will show you how to form your hypothesis in 4 simple steps.
by Alex Kohlti
Having a good idea is great, but how do you know the problem you want to solve actually exists?
Many business founders start by building products without knowing if the problem they want to solve is something people actually need. After launching a solution to a non-existent problem, they wait for sweet sounds of the cash registers ringing, but all they hear are crickets chirping. Nobody cares!
Turning your idea into a testable hypothesis will help you to validate the problem before wasting time and money building a solution to a problem that might not exist. We will show you how to find out whether your idea is something that people will love, use and even better, pay for.
Fall in Love with the problem, not with the solution! ##
Many entrepreneurs focus on the solution rather than the problem. As soon as they have the first nugget of an idea, they start building it. In their mind’s eye, they’re already imagining their future lives as wealthy business owners, sipping champagne and cruising on the private yacht.
The truth is, the more thoughts, time and resources you invest in your idea, the harder it gets to detach from it if it doesn’t work out. Being completely focused on one item, one solution can cause you to base your decisions on emotions instead of cold, hard facts. If you are unwilling to budge on your solution, you’ll absolutely miss the right time where to change course and pivot.
Every problem has a solution, but not every solution solves a problem.
Solutions are replaceable, but the problem will stay the same. Focusing on the problem you want to solve will keep you from getting blinded by your enthusiasm for a single solution.
The following steps will help you how to create your hypothesis, find your potential customers, and validate your idea.
Step 1: Form Your Hypothesis
A hypothesis is a statement, the validity of which needs to be proven under certain conditions. To help you form your own hypothesis, we have divided the origination process into four small parts to give you more detailed information about the purpose and goal of each stage.
a) Who is your customer?
The creation of your hypothesis begins by describing your target audience. Your customers are a group of people with a common pain or need. Picture the people you think have the problem you want to solve. Break your target customers down as precise and focused as possible. Knowing your customer will help you to get a clear picture about what really matters.
"I believe target group…"
b) What is their problem or need?
After targeting your audience, the first part of your core hypotheses is the so-called customer problem hypothesis. Don’t take it too academically - the goal is to prove that the problem or need you assume really exists or not. What is the specific problem this customer group has? Describe it from their point of view. How are customers trying to solve the problem today?
"I believe target grouphas a problem/need achieving this goal because problem/need."
c) How do you want to fix it?
Once you’ve confirmed the existence of the problem you want to solve, it’s time to ascertain your value proposition or problem-solution hypothesis. How do you solve the problem and what is the core benefit for your customer? Remember that you have to validate the customer problem hypothesis first! If there is no problem to your solution, there is no need to take further steps.
"By creating solution we will help target group to benefit."
d) How feasible is it?
If your business idea is feasible or not depends on more factors than just the solution-problem fit. It’s also important to consider your business-model from the beginning. For example, solving the need that people want to get in shape by offering home gym equipment for $1 would definitely create some awareness, but practically you should query this idea.
"We will offer product for pricing. Are you interested?"
Putting it all together, we get a simple pitch for your idea:
"I believe entrepreneurs have the problem to validate their idea business idea because they don’t know how to form a business hypothesis. By sharing our experiences we will help entrepreneurs to avoid wasting time and money by building solutions to non-existing problems. We will offer this article on our blog for free. Are you interested in learning more?"
Step 2: Choose a Testing Method
There are several ways to get your hypothesis in front of your audience. Depending on your experiences and business or social networks, you can choose which one makes the most sense for you. We recommend starting with human dialogues, which give you a much better understanding of the first feedback than text-messages or landingpages. We also describe two more scaleable ways to pitch your idea.
Talk to your potential customers
It’s important to start testing if your problem really exists. The easiest way is to simply talk to the target group you described in Step 1. Start by creating a list of 10 people from your network, choosing persons whom you assume having the problem or need. Meet them in a nice, informal setting - over lunch, tea or coffee - while introducing your idea.
Put together a landing page
To get feedback from a broader audience you could set up a landing page. Potential customers who are willing to go through a sign-up process or even pay for your service before there is one, show you exactly how interested they are. Tools like unbounce.com or launchrock.co will help you to create landing pages without any programming skills. You could create ads using Google AdWords or Facebook Advertising to drive targeted traffic to your page. Remember: Your goal is not to get as many sign-ups and email addresses as possible, your goal is to learn more about your customers and the problems they have.
Build a Minimum Viable Product
The final and most important step is to offer your audience the solution they expected. Built a MVP without getting too complex. Find a simple and easy way to deliver your service to your customers. The goal is to find out how good your solution really is. Are they happy with it? Would they use it again or even refer friends to it? Get as much insight as possible. Read more on how to do MVPs right.
Step 3: Set a Goal
Before you can start testing your hypothesis, you have to set goals on whether your idea succeeded or not. KISS - which stands for, Keep it Simple, Stupid - should be your guideline here. Let’s say you created a list of 10 people; at least seven of them should prove your hypothesis to be right.
"I expect x number out of y numberof people in the test will behave this way."
Once you have validated the hypothesis with a small group of potential customers, you can scale up the experiments to test it with a broader audience.
Step 4: Run the Test & Analyze The Results
If you've completed the set-up, you are ready to run the test. Don’t forget that every element of your hypothesis has to have the potential of failing. Every element needs to be validated.
After you have collected data from potential customers, it’s time to decide if you’ve reached your goals and if your assumptions were right. More often than not, your first idea on how to solve the problem is not correct. Don’t let it get you down, though; after all, it took Thomas Edison hundreds of attempts before he invented the light bulb, and that turned out OK for everyone in the end.
Pivoting your idea is a common element on your way finding market fit. Get back to your interviewees, start asking more questions in detail, and try to figure out how to adapt the feedback to your idea.
If your idea got taken apart and you don’t see how to fix it - keep on going!
The next big opportunity will come!
Starting your business by testing your idea first will not only show how valid it is. You’ll also get a solid ground for your further decisions: You now know your customers and what they really want. You are on a good path creating a product that people will love!
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