How Do You Validate New Business Ideas?
Entrepreneurs know that validating a new business idea is a critical step before diving into the market. We've gathered insights from CEOs and founders, distilling their experiences into five key strategies. From running pilot programs for user feedback to leveraging networks for insight, discover how seasoned entrepreneurs ensure their ideas hold water.
- Run Pilot Programs for User Feedback
- Interview Potential Customers
- Conduct Market Research and Feasibility Studies
- Apply Jobs-to-be-Done Framework
- Leverage Network for Insight
Run Pilot Programs for User Feedback
Before fully launching a new product, we often run pilot programs or beta tests with a select group of users. This allows us to collect valuable insights into how the product is used in real-world scenarios and what improvements are necessary. It also helps build early adopters and advocates who can provide testimonials and case studies, which are crucial for the broader market rollout.
A specific instance where this validation process was crucial was the launch of Toggl Hire. We identified a gap in the market for a tool that could streamline the hiring process by testing candidates' skills efficiently. Before fully developing the tool, we released a beta version to a limited audience. The feedback was overwhelmingly positive, confirming the demand for such a tool, which informed our decision to proceed with a full-scale launch. This approach not only confirmed the product’s market fit but also allowed us to refine features based on actual user needs, ensuring the success of Toggl Hire post-launch.
Interview Potential Customers
One of the most successful strategies I've used to validate a business idea is to talk to 10 to 15 people in a market that I think have a problem and spend 15 minutes interviewing them, diving deep into their actual problems.
My goal is to understand what problem they face (specifically, what is most painful), what context they are in when facing the problem, and the greatest obstacles to solving the problem.
I start off the process for developing every business and evaluating every opportunity with that core information. It does three important things.
First, it identifies the most valuable problem within the space and within the area that I want to innovate.
Second, it gives me really good language and understanding for how the potential prospect thinks about their problem and the different ways that they talk about it and phrase it in their mind.
Third, it validates what I think and what I assume is the problem versus what they actually perceive it is.
A lot of times, that validation is the most valuable insight. Most of the time, I think I've identified a problem, and really, it's tangentially related to the truly most valuable problem that they need to solve. It completely changes the roadmap and how I think about going to build out the first iteration and prototype of the innovation that I want to launch in the new business.
Conduct Market Research and Feasibility Studies
As an entrepreneur, our team validates new business ideas by conducting thorough market research and feasibility studies through cost analysis. A specific instance where this was crucial was when we shifted from competitive city markets to purchasing properties in rural markets. We started by analyzing market trends, assessing property values, and surveying seller and buyer lead interests in rural areas. This research helped confirm that there was a growing demand for rural properties, driven by changing lifestyle preferences and the rise of remote work. By validating this shift through data and feedback, we were able to confidently redirect our investment strategies and tap into a new, lucrative market segment. This approach ensured that our move into rural real estate was well-informed and strategically sound.
Apply Jobs-to-be-Done Framework
As an entrepreneur focused on building products for web developers, my approach to validating a new business idea is rooted in the first-principles thinking of the Jobs-to-be-Done (JTBD) framework.
I believe that every successful product stems from a deep understanding of the underlying "jobs" that customers are trying to accomplish, which puts you in the mindset of understanding the problem space as opposed to the solution space. Quoting Harvard Business School Professor Theodore Levitt: "People don't want to buy a quarter-inch drill. They want a quarter-inch hole!"
This shifts you from the damaging idea that permeates the startup ecosystem that you should "iterate and fail fast." This would be like asking a sniper to hit a target he doesn't know where it is while blindfolded.
I start by breaking down the problem into its most fundamental components, asking: What job is the customer trying to get done? What are my customers hiring my product or service for? What other products or services might it replace? For web developers, this might be saving time integrating services, writing boilerplate code, and keeping technical debt low.
I'm currently launching https://launchfast.pro, a boilerplate, and, to my surprise, it doesn't only compete with other starter apps or boilerplates but with college degrees, online courses, YouTube videos, and blog posts, because a huge customer segment are people switching into a tech career that have no previous coding knowledge!
My product, being somewhat complex and meant for experienced full-stack developers, I would never have guessed this without following the JTBD framework and conducting the proper interviews.
One of the realizations is that documentation needs not only to be clear and beginner-friendly but as much descriptive as it is prescriptive, providing clear mental models for aspiring web developers.
Validating a business idea through the lens of Jobs-to-be-Done ensures that you’re not just building products—you’re solving real problems that matter to your customers. By using first-principles thinking to understand these jobs at a fundamental level, you can understand what your product or service is being hired to do and what current solutions it will replace. This approach has been crucial to my success as a tech entrepreneur, and it’s a mindset I believe every innovator should adopt.
Leverage Network for Insight
Validation is the bridge between a fleeting idea and a thriving business.
A few years ago, I was buzzing with excitement over a new service concept that I believed would revolutionize how entrepreneurs grow, scale, and sell their business. I envisioned 20 coaching clients a month, 40 clients in a 10-week Fast-Track program, and three 12-month mastermind groups. However, before I started my marketing, I knew I had to validate my ideas.
I reached out to entrepreneurs within my network, and leaders of small business associations, to gather their thoughts and feedback through short surveys, brief Zoom interviews, and small focus groups. I presented my concept and watched as they interacted with draft exercises and tutorial videos.
Instead of the enthusiastic nods I expected, I was met with a barrage of questions and concerns. Each question was a valuable insight, revealing gaps in my understanding of my target audience’s needs.
Armed with this feedback, I addressed the concerns raised, redefined my target market, and focused more on the benefits for my ideal client. The validation process saved me time and resources and led to my current services.
The lesson? Don't just fall in love with your idea—test it, challenge it, and be open to change. Validation is not just a step; it’s an ongoing journey that can make or break your entrepreneurial dreams.
