5 Ways to Know If Your Business Idea Is Brilliant or a Bust
Fifteen years in the home-improvement business taught Matt Fineberg that no one pulls the trigger on a big-ticket project—such as a new roof or windows—without first getting a handful of estimates.
When he began building his Philadelphia-based estimate marketplace, Bestimators, in 2013, Fineberg thought he knew what his potential customers needed, and how to deliver it. “I heard ‘I need to get a few more estimates’ daily for the better part of a decade, so I hired a contractor to build out a product to help homeowners do just that,” he says.
A former design-build “aquascaper” (a landscaper with a focus on water features) who charged a consultation fee for his services, he assumed his new business would work on the same model. But feedback from homeowners showed him otherwise.
“A few people said they’d pay for that service, but most said, ‘Why would I pay for something I can do myself for free?’” he recalls. “We took that feedback and made a very significant change to the structure of the company, eliminating the fee and making it free for homeowners.”
After launching its redesigned product and graduating from Philadelphia’s DreamIt Ventures startup accelerator last fall, Bestimators is seeing steady growth in users, consultations and customers. Under the new business model, the company receives a small commission from each project’s bid-winning contractor.
Assessing and challenging initial assumptions is one of the most important tasks of a startup. But focus groups are expensive, surveys have low response rates, and attempts to poll people you know will likely give you answers they think you want to hear.
So how can a cash-strapped entrepreneur get feedback on a new concept? From confirming whether there truly is demand for the offering to determining how end-users want to receive it and how much they’ll pay for it, here are ways to validate your concept and business model—and help define your direction going forward.
Hit the pavement
For Fineberg, a boots-on-the-ground approach made financial sense. He spent a few weekends going door-to-door around Philly neighborhoods, explaining to homeowners what he was doing and asking for their thoughts about the service.
“If I can spend 16 hours walking around, and my biggest expense is a second cup of coffee and a pair of shoes, that’s a lot less expensive than a couple thousand dollars for a market research survey that may or may not be effective,” he says.
The feedback Fineberg received proved instrumental in his company’s pivot. “I just assumed people would pay for me to save them 10 to 15 hours and eliminate the risk of not knowing who to hire,” he says. “Finding out that they wouldn’t was invaluable and truly changed our direction. By eliminating the fee for homeowners, we boosted our signup rate by 50 percent.”
Join a program
With accelerators, incubators and other such programs continuing to grow in popularity, practically every entrepreneur should be able to find a nearby small-business development initiative that can help assess and validate startup assumptions.
“Nearly every city has one associated with the SBA,” says Ken Jones, associate director for the Wolff Center for Entrepreneurship at the University of Houston. “You don’t need to apply to and enroll in a big-name accelerator to get good benefits and feedback.”
To refine his business idea in 2011, Jake Weatherly—co-founder and CEO of Eugene, Ore.-based eligibility-verification software provider SheerID—joined a 90-day incubator boot-camp program funded by the city of Beaverton, Ore., to promote entrepreneurship in the region.
Weatherly appreciated the feedback he got from participating corporate executives and other entrepreneurs—a hard-to-impress group with extensive experience.
“Being in that program and getting that feedback allowed us to go from merely solving a problem and having a value proposition to determining if there were companies who would actually pay to solve this problem and how much they would pay to do it,” he says.
Since launching in 2012, SheerID has grown to 27 employees and received more than $6.5 million in financing.
Find a mentor
Jones urges founders to find an outside mentor to provide unbiased feedback and guidance.
“It’s easy to find people who will tell you what you want to hear, but it’s very challenging to find people with experience who you respect and will be straight with you,” he says.
He suggests networking at business organization and chamber of commerce events—“Those tables are full of people looking to get involved,” he points out—or contacting a local chapter of the Service Corps of Retired Executives.
“With the aging of America, there are so many people with great experience who are looking for ways to help counsel or be a mentor,” he says. “You don’t have to pay them, and as advisors they’re free to give you the feedback you need.”
Mine your industry contacts
Eric Tong, founder of Los Angeles-based Tech Armor, a manufacturer of screen protectors, says aspiring startups should not be afraid to seek input from past or present industry colleagues. Building on their experience in the industry, he and his co-founder, Joseph Jaconi, tapped their network of former bosses, colleagues and customers for transparent feedback that helped shape their startup’s assumptions and strategy, including getting valuable opinions about manufacturing and selling.
“We all have friends who will say ‘That’s awesome,’ but we really value folks who understand the ins and outs of the industry and use that to challenge our thinking,” Tong says.
He and Jaconi also spoke to potential consumers. Visiting electronics retailers such as Best Buy, they asked shoppers about the most important factors influencing their mobile-accessories purchasing decisions. “The resounding feedback we got was that people purchasing on e-commerce sites really want a company that will be there for them,” Tong says. “So that’s why customer service became a key area for us.”
It appears to be working. Since launching in 2012, Tech Armor has sold more than 5 million units.
Fly it up the flagpole
Mike Bott, general manager of Cincinnati-based accelerator The Brandery, says several participants in his program have pushed out unfinished versions of their offerings for potential users to test. One popular tactic is to put up a landing page without building out the entire product, and run Google AdWords tests to monitor click-through rates.
“Those numbers can help you see whether your value proposition resonates with people enough to take that next step,” he says. “You can run it for two or three weeks and decide where to go from there.”
Bott suggests building a bare-bones offering that highlights crucial components in order to get user feedback. “I’m a big proponent of building something and pushing it out as fast as you can to get real feedback, so you can rethink your product based on what people are doing with it,” he says.
Sites like Product Hunt and reddit are good places to try out such a test. “You don’t need tens of thousands of people on your platform. It could be 500 to 1,000, and you can really get a sense of what’s working and what’s not,” Bott explains.
In another testing strategy used at The Brandery, an accounting startup built a rudimentary offering using Keynote presentation software, which allowed them to get responses to proposed product benefits from prospective customers.
“They built out their minimum viable product in Keynote and gave people the experience of flipping through, and got lots of great feedback that way,” Bott says.
An added bonus to this type of interaction is early traction, says SheerID’s Weatherly. He approached prospective customers, including executives at Amazon and Detroit-based Fathead, with nothing but proof-of-concept software to learn about their challenges in the area of eligibility verification.
While SheerID’s initial B2B sales cycle at the enterprise level was about seven months from engagement to close, Weatherly gained enough traction from those first calls to shorten the cycle once the product was ready to go.
“We were able to continue to work through the process and had a very mature suite of services and a solid team and funding before those opportunities were ready to go live,” he says. “That led us to a faster start.”
No matter how much runway you have to build your startup, you should resist the urge to perfect too many details before seeking feedback, because the sooner you can start getting it, the more time you have to pivot.
“Instead of building out the entire experience, build out the one thing that’s very important,” Bott advises. “Because if you figure out it’s not as important as you thought, or the market is smaller or bigger than you thought, you could quickly build on or adjust your direction accordingly.”
Lay It On Me
A few targeted questions to the right people can provide invaluable feedback. Try asking colleagues, mentors and prospective customers:
1. Would you pay for this product or service? If so, how much? If not, why not?
2. What other products or services currently fill this need for you?
3. How would you tweak or improve this idea?