How To Validate A Business Idea

June 30


How To Validate A Business Idea

By Hanson Cheng

June 30, 2023

  • minute read
  • While many have had many business ideas over the years, not all of them are good and worth pursuing. In order to ensure that your business idea is worth your time, effort, and money, it is important to validate it first.

    In this article, I will discuss what validation is, the different methods of validating a business idea, and the steps to follow to get the best results.

    Let's get right into it.

    Why Validating A Business Idea Is Key To Any Business

    There are various reasons why validating your business idea is essential. For one, it can help reduce the risk of failure. Validation allows you to assess whether there is a market for your product or service and whether your idea is feasible.

    Getting feedback from potential customers can give you valuable insights into what they want and how to position your product or service better. It can also help refine your business idea. Testing your marketing strategy can also help you fine-tune your approach before launching your business.

    The Validation Process Steps

    When it comes to how to validate a product idea, a few steps should be followed to ensure successful validation. They are as follows.

    Research Your Industry

    Research is the foundation of idea validation. Whether talking to people in your target market or reading industry reports, you need to understand the space you're entering. This will allow you to identify any potential problems with your business idea and give you insights into how to solve them.

    Identify Your Target Market

    Who are you going to be selling your product or service to? It's essential to clearly understand your target market, as this will dictate your marketing strategy and help you assess the viability of your business idea.

    Some questions that you should ask yourself include:

    • Who is my target market?
    • What are their needs and wants?
    • How can I reach them?
    • What are they willing to pay for my product or service?

    Define Your Business Model

    Your business model is how you plan on making money. There are various models that you can choose from, so it's essential to select the one that best fits your business idea. Some standard models include subscription, freemium, advertising, and e-commerce.

    The pros and cons of each model should be considered before making a decision. For example, subscription models are great for generating recurring revenue but can be challenging to scale. Alternatively, advertising models might be easier to scale but can be unpredictable.

    Develop Your Value Proposition

    Your value proposition makes your product or service unique and appealing to your target market. It's essential to have a strong value proposition, as it will be the cornerstone of your marketing strategy.

    Also known as the USP (unique selling proposition), a value proposition should answer the following questions:

    • What need does my product or service satisfy?
    • How is my product or service better than the competition?
    • What are the unique features and benefits of my product or service?

    Said differently, going into a market that is already established, it is essential that your product or service has a unique angle. This will help you stand out from the competition and increase your chances of success.

    Create A Marketing Plan

    Now that you have a good understanding of your target market and what makes your product or service unique, it's time to start thinking about how you will market it. This includes developing a branding strategy, creating marketing collateral, and planning for advertising and PR.

    It's essential to have a well-thought-out marketing plan, as it will be vital to driving awareness and interest in your business. Additionally, it will help you track your progress and make necessary adjustments.

    This plan should be part of a step by step guide to building a business online; otherwise, it's impossible to know if you're heading in the right direction if you don't have a plan to follow.

    Build A Prototype

    Once you've validated your business idea and created a marketing plan, it's time to start working on a prototype. This early version of your product or service allows you to test it out with potential customers.

    Building a prototype doesn't have to be complicated or expensive. It can be as simple as a wireframe or mockup of your product. The important thing is that it can capture the essence of your idea and give people a general sense of what you're planning to create.

    Launch Your MVP

    After testing your prototype with potential customers, it's time to launch your MVP (minimum viable product). This is a stripped-down version of your product or service that allows you to get it out to market quickly and start generating feedback.

    Launching an MVP is a great way to validate the next stage of your business idea as it allows you to gather data and feedback from real users. Additionally, it helps reduce the risk of failure as you're not investing too much time or money into something that may not work out.

    That said, knowing the budget you can dedicate to an MVP is essential. It will help you determine the scope of your MVP and what you can realistically achieve with the resources available.

    Get Feedback And Iterate

    Once your MVP is launched, it's crucial to start gathering user feedback. This will help you understand what's working well and what needs improvement. Additionally, it will give you insights into new features or products that could be developed.

    Tracking your progress and KPIs (key performance indicators) is also essential. This data will help you understand if you're on track to achieving your goals. If not, adjusting your product or business model may be necessary.

    The goal is to continuously improve your product or service based on feedback and data. This will help increase your chances of success and ensure that you deliver the best possible experience to your customers.

    Can You Add Extra Steps In The Validation Process?

    While the above steps of validation are crucial, there are a few extra steps you can take to increase your chances of success further.

    Test Pricing And Packaging

    After you've launched your MVP, it's essential to test different pricing and packaging options. This will help you find the sweet spot regarding what customers are willing to pay. Additionally, it will allow you to optimize your revenue model.

    It's essential to run these tests on a small scale at first. Once you've gathered data and feedback, you can then roll out the changes to your entire customer base.

    Conduct A SWOT Analysis

    A SWOT analysis is an excellent tool for understanding various aspects of your potential business model. This data can be beneficial in the validation process as it can help you identify areas that need improvement.

    The various stages of the SWOT analysis are as follows:

    • Strengths: identify the unique selling points of your business
    • Weaknesses: identify areas that need improvement
    • Opportunities: identify potential growth areas for your business
    • Threats: identify external factors that could impact your business negatively

    Deeply Evaluate Your Competition

    It's also essential to evaluate your competition when validating a business idea. This will help you understand the landscape and what other businesses are doing well. It will also give you insights into differentiating your product or service.

    Performing in-depth competition analysis typically involves buying and using their products or services. Additionally, it will include research into their marketing materials and website.

    There are a few key things you should look for when evaluating your competition:

    • Their pricing strategy
    • Their target market
    • Their marketing approach
    • Their unique selling points
    • Their weaknesses

    By understanding your competition, you can develop a strategic plan to best position your own business. This will help increase your chances of success in the long run.

    How The Right Business Ideas Leads Into The Proper Workflow

    A validated business idea is a great start, but a clear workflow is also important. This will ensure that your business is running smoothly and efficiently.

    A well-designed workflow should consider the various tasks that need to be completed daily. Additionally, it should consider the dependencies between these tasks. For example, if task A needs to be completed before task B can begin, this should be reflected in the workflow.

    Creating a detailed workflow can be helpful in several ways:

    • It can help you optimize your business processes
    • It can help you identify bottlenecks and potential areas of improvement
    • It can help you better allocate resources
    • It can help you develop more efficient processes

    Following a workflow analysis guide when creating your workflow can be very helpful. This guide should include a list of best practices, tips, and tricks for designing an effective workflow.

    Validating Business Ideas When Scaling

    While many think about the need for validation when creating a new business, it's also essential to consider validation when scaling an existing business.

    Scaling a business can be challenging, as there are many moving parts. Additionally, there is typically more risk involved in scaling than in starting a new business. As such, it's essential to take the time to validate your plans before moving forward.

    Business scaling often involves one or more of the following:
    • Adding new products or services
    • Expanding into new markets
    • Hiring new employees
    • Investing in new technology

    With all these steps, it's critical to validate that each change will have the desired effect. For example, if you're adding a new product, you'll want to validate that there is demand for this product in the market.

    Additionally, you'll want to consider how this new product will impact your existing products and services. Will it cannibalize sales? Will it require additional investment in other areas of the business? These are all critical questions to answer before making any changes.

    Common Mistakes Made During The Validation Process

    Let's finally consider some of the most common mistakes made during the validation process:

    • Not doing enough research: It's essential to take the time to research your idea thoroughly. This includes understanding your target market, competition, and the potential demand for your product or service.
    • Relying too much on assumptions: When validating your idea, you must base your decisions on data and facts rather than assumptions. Otherwise, you could be setting yourself up for failure.
    • Moving too quickly: Making decisions too quickly can often lead to problems. It's essential to take the time to consider the various angles of your idea before moving forward. 
    • Moving too slowly: On the other hand, trying to be perfect can lead to problems. You'll need to take a leap of faith and move forward with your idea at some point.
    • Not being flexible: The validation process is often iterative, so you may need to make changes along the way. As such, it's essential to be flexible and open to change. 

    By avoiding these mistakes, you can set yourself up for success in the long term.


    The validation process is an essential step in launching a new business. You can increase your chances of success by taking the time to do so. Additionally, it's crucial to consider validation when scaling an existing business.

    While the culmination of all the steps might seem like a lot of work, once you have a plan that's been vetted and is good to go, it can be relatively easy to execute.

    Last Updated on June 30, 2023 by Hanson Cheng

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    Hanson Cheng

    About the author

    Living in Portugal with my wife and puppies.
    Scaling online businesses and sharing lessons learned on this website and in our email newsletter.

    Always happy to hear from you, so find me on Instagram if you want to say hi!

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