How to Validate Your Business Ideas Without Spending a Dime

Here are two extremely cheap (read: free) ways to test ideas.
How to Validate Your Business Ideas Without Spending a Dime
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Last night in the shower, you had an ingenious idea for a new business. You rushed to the desk to write it down, with water still dripping down your back. Your [insert the brilliant thing] is going to change the universe! It’s time to call up investors, assemble a team and . . . stop! Stop right there!

Before plunging into execution, you should confirm you’re solving a problem and/or meeting a need that people want to pay for. (Unless you’re Beyoncé. Then you can make money selling the air you breathe.)

Idea validation should be done on both macro and micro levels. And if you do it right, you won’t need to spend your PayPal balance on any of that. Here are some extremely cheap (read: free) ways that I and other entrepreneurs I know have used to test ideas.

Related: How to Find and Start Your Next Entrepreneurial Venture

The macro test

Before testing the specifics of your new venture, validate the big picture first. How large is the market? Who are your potential competitors? Are you differentiated enough? Google will answer all of those questions for you.

Start by searching the keywords related to your idea in both Google search and Google Trends. For example, when I had the idea for starting Soundwise, a mobile platform for audio courses, I researched around keywords such as podcast, audiobook and e-learning. Need more keyword ideas? Sign up for Google AdWords and use the Keyword Planner tool for inspiration.

You should also Google “XYZ industry report” or “XYZ market analysis” to get stats and data about your market. Pay attention to the related search terms Google shows you at the bottom of your search result page. For more updated information, filter the search to only include results from the past year.

Think of at least one company that offers a similar product to yours. Do research on that company and on its competitors. How do you know who its competitors are? Just Google “product X versus.” The competitors’ names will pop up, as there are legions of articles written online comparing every minute detail of every product: Pepsi vs. Coke, Target vs. Amazon, chihuahua vs. chow chow . . . . How do people find time to write those? I don’t know. Ask Google.

Related: Top 10 Ways to Make Money Online

What you want to find at this stage is not necessarily a large market size, which often comes with the side effect of competitors galore. Ideally, what you want is to be able to say yes to all of the following: 

  1. Is there an upward trend in search volume and industry growth related to your idea?

  2. Can you find existing players in your market that are already doing well to demonstrate there’s indeed market demand?

  3. Are there meaningful differences between what’s in the market and what you’re thinking of offering? (We don’t know that for sure yet. “Seem to be” is good enough for now).

The micro test

Once you familiarize yourself with the macro picture, it’s time to, as Steve Blank put it, “get out of the building.”

Go to a few Starbucks in your area (or any other coffee shop, except an empty one) and talk to 20 people about your idea. I’d open with “Hi, I’m a researcher doing a project on XYZ. Can I ask you a few questions?” Don’t mention you’re in marketing or business. Most folks close up faster than you can say Jack Robinson once they have the remote suspicion that a stranger wants to sell something.

Related: How to Find a Profitable Idea

If they say yes, the next question you ask is their consumption habit in your product category. Do they use XYZ product (your competitor)? Why or why not? When do they use XYZ? Is there anything frustrating about using XYZ? Their answers will tell you what kind of consumer you are talking to, whether they’d be your target customer and if there is anything missing in the market that you can offer.

When V. Orban, a guest on my podcast, started Goûter, an organic tonic brand, she did the Starbucks test wherever she went. She asked strangers what they drank throughout the day, where they bought their beverages from, what they disliked about juices or green smoothies and whether they knew what alkaline water (an ingredient in her tonic) was. That helped her realize there was indeed room for a new product like hers and what the message of her brand should be.

Once you understand who you are talking to, explain your idea to them succinctly, ask “what do you think of this” and then shut up and listen.

Be very suspicious when people tell you “that’s a great idea” -- most likely their mama taught them good manners. What you really want to get to is why and how people see your product fit into their daily life. If they give you the “sandwich compliment,” i.e. “Oh, that’s a great idea! It’s not for me though. But I can see lots of other people using it . . . ,” you just got thumb-downed. Find out why. But keep in mind that at this stage you shouldn’t be hard selling your idea. As soon as you find yourself doing that, move on.

Related: Need a Business Idea? Here are 55

If the person likes your idea and says they’d use your product themselves, don’t be too excited yet. Your idea is not validated until people are willing to invest some resources to demonstrate their interest. Ask if they’d be willing to sign up as a beta user, or give you their email address so that you can let them know when the product comes out in three months. If they say yes, congratulations! You’ve just validated your idea on one person, and got a hot customer lead as well.

If your idea targets a specific group of people -- e.g. cat owners, Javascript developers, zombie impersonators -- find them online on Facebook groups, Meetup.com, Reddit and Craigslist forums. There’s always a way you can find your future customers and talk to them using the Starbucks test.

Idea validation is iterative. The workflow of your project should be: idea, validation, modified idea, execution, repeat. A similar process applies whenever you’re thinking of adding a new feature to an existing product or pivoting your offering to something else. The bottom line: Do your research and never stop taking feedback on your ideas.

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