5 Steps To Validate Your Business Idea Before Getting Started
February 13, 2017
When I was twenty-three I had an idea to start a yoga retreats business.
I spent weeks building a website, finding business partners, and getting business cards made. I was sure it was going to be a big hit. The day we went live I expected the bookings to start flooding in immediately… but nothing did.
Thousands of dollars on advertising later I still hadn’t made even one sale. It wasn’t until talking to a yogi and asking for feedback that I realized my offer wasn’t what she wanted.
My story is all too common—so many entrepreneurs go all-in on an idea they thought would work, but ends up being a huge bust in the market. After putting so much time and money into their idea, they feel defeated.
The good news is, if you’re considering starting a business, this doesn’t have to be your story.
You don’t have to go into business blindly. In fact, the most successful entrepreneurs never do.
“The most dangerous word in business is to guess. The most important word is predictability,” says Dane Maxwell, a serial entrepreneur who’s founded multiple 7-figure companies, primarily in the world of software.
At age 32, Maxwell has over a decade of experience in business, and he swears by one thing: predicting the success of a product in advance. He’s developed a methodology around idea validation that has proven to sell products with no guessing involved.
Maxwell has recently shifted gears to the music industry as a singer and songwriter, but the entrepreneur at heart is still applying the same methodology to sell albums. No matter your industry, the applications are endless.
This week on the Unconventional Life Podcast, Maxwell shares the five-step methodology to validate business ideas that has earned him millions.
1. Identify Who You Want To Serve.
Choose to serve somebody who you believe is doing real good in the world, somebody who you want to support and see succeed. In helping them, you align with their cause and become a force for that same cause to take flight in the world. A good way to decide who you want to serve is to look to your core values. For example, if you value health and personal empowerment, you might serve yoga studios.
2. Speak To Real People Within The Scope Of Who You Want To Serve.
Once you’ve figured out who you want to help, get in touch with them. This will take your business idea from abstract to concrete, by putting it to the test and actually seeing if your client finds it valuable and would be willing to pay for it.
Maxwell says the quickest way to do this is to call them. For example, if you’re serving yoga studios, you might select a specific yoga studio chain and call one hundred studios within that chain.
3. Get Your Foot In The Door.
When someone answers the phone, you might say, ‘I’ve got this idea I’m working on. I’m not sure if it’s any good, but I wanted to pitch it to you to see if it’s good.’ “I use that opener ever time,” Maxwell says. “I’ve never gotten a no from that.”
This line is powerful because it sets the other person up to listen from a place of gratitude and appreciation. They immediately shift gears into being open to receive value, willing to work with you to develop an idea that they would benefit from.
4. Find Their Biggest Pain.
Pitch your initial idea to the person you’re speaking with, but don’t be attached to it being the product or service that’s the most needed by your client (and thus the most profitable). After you propose your idea, listen to what the other person says—does your idea solve their biggest problem, or is there another problem they’d really like help with? Your goal is to identify your client’s deepest source of pain and to develop a product idea that will remove it for them.
“Here’s the truth about real businesses,” Maxwell says. “The common thing is that they all solve a painful problem. If you’re not solving a painful problem, you’re coming up with this nice-to-have idea. As soon as you come up with something painful you’re in business.”
In Maxwell’s new music venture, he’s still solving pain with his music. His newest album, The Vow, is designed to help people discover their life purpose.
5. Price Your Product.
While you’ve still got your potential client on the phone, ask them what they’d be willing to pay for your product. Does this price seem fair to you? If not, have a conversation to negotiate a fair price.
“You want to charge based on the end result you deliver,” Maxwell says. “You generally want to charge about 10% of the value. Say that you want to gravitate towards what feels fair for the both of you. With that you build so much trust. If the person says a price you don’t like, say you’d feel taken advantage of at that price. Be honest. You can literally just say that.”
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