18.06.2024

Why and how to test business ideas

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Aleksey Odin

Why and how to test business ideas

Alexey Odin Founder and CEO of the Skipp automated recruitment platform for product teams, co-founder of Lingualeo.

It happens that a potential entrepreneur immediately starts implementing an idea: looking for premises, suppliers, hiring developers, renting an office. A few months later, the product is ready, and here comes the meeting with reality: users are not happy, there is no marketing budget left, the flow of new registrations or sales is not expected. The entrepreneur gives up, thinks that the market has not yet matured, and returns to office affairs.

In order not to find yourself in such a situation, the project must be started not with code, but with testing the idea: study the market and competitors, communicate with customers, assess commercial potential. And only after that proceed to the launch. Let's see why this is important and how to test ideas in general.

What can go wrong with an idea

Not all ideas are doomed to success – some will not make a profitable business. Let's say you think that busy managers don't have enough time to take care of their health. To help them, you decide to launch a telemedicine marketplace. Here's what can go wrong:

  • The problem you think doesn't exist. Let's say you think that busy managers don't get to see the doctor all the time. But you only judge by yourself and a few close friends. It may turn out that you are an exception to the rule, and others do not have such difficulties.
  • There is a problem, but the solution does not fit. Suppose it turned out that managers really do not have time to monitor their health. But is telemedicine right for them? Maybe they are not ready to trust “doctors on the Internet” and a service with a call to a specialist at home will be much more in demand?
  • The market is too narrow.If there is a problem and your solution is suitable, this still does not mean that the idea will help you make good money. Maybe there are only a few hundred such managers in Russia and they go to the doctors once every six months. A thousand not very high checks a year is hardly what you are chasing.
  • Acquiring customers is too expensive. Okay, even if there are a lot of potential customers. Will you be able to attract them to your service and earn? It may turn out that acquiring a new consumer of services will cost you 5,000 rubles, and you will earn only 3,000 rubles on it. As a result, you will only lose 2,000 rubles on each client.

Why test the idea

As you can see, there are many pitfalls, and a preliminary check will help to partially avoid them. This is why before launching a product or service, you must first make sure that the idea works:

  • To eliminate the influence of your own cognitive biases.It happens that managers want to start a business in an area in which they are well versed. They are approached for advice, they conduct training, they are followed in social networks. Under such conditions, it may seem that it is not necessary to test the idea: “I know the industry very well.” Unfortunately, even many years of experience does not always save. The market may still be too small, and the economy still negative.
  • In order not to waste time and money. If you immediately make a full-fledged service, then you can easily spend several months and hundreds of thousands of rubles . At the same time, the output is to get something that users do not need at all.
  • To make a product that is in demand.It can also be the other way around: while testing the idea, you will understand where to focus resources in order to launch a useful service faster and start earning.

How to test an idea

For this task, it is worth laying two weeks in full-time mode. If you can only allocate half a day, then the check will take about a month. If a couple of hours a day – two months. During this time, it will be possible to go through all the steps and decide whether to develop the idea or not. But you shouldn't rush – premature conclusions can be statistically incorrect and dangerous.

Step 1. Formulate the problem you want to solve

Start from the problem you plan to work with. In the example above with the telemedicine marketplace, it can be formulated as follows: “Top managers do not have enough time to visit doctors, because of this they have health problems.” Then describe the solution you are proposing: “Telemedicine Marketplace”.

An idea consists of a bundle of a problem and a solution. And if the problem is static, then the solution can change.

The problem of congestion can be solved by developing public transport, building new roads, or changing working hours to avoid rush hour. The problem of poor project management – new software or educational project for managers. The problem of poor knowledge of English – online classes with a teacher, a mobile application or a trip abroad to immerse yourself in the environment. One problem – many solutions.

Your first decision will probably not be viable. But this is not a reason to abandon the project: the idea can always be improved. Such a conclusion may well be the result of the verification phase – to continue working on the same problem, but to look for a different approach. Therefore, I recommend choosing a problem that will be interesting for you to deal with for a long time.

Step 2. Get to know the audience better

The product will be used by specific people: teachers, developers, builders, managers, analysts or manicurists. Your solution should help them meet their challenges and meet their needs.

In order to create a sought-after product, you need to get to know your users as closely as possible. What problems do they face? What difficulties are they experiencing? How are they solved now? What satisfies or does not satisfy them in the current conditions?

Let's say you want to fix the problem of slow document flow within companies. To do this, you want to create a system in which you can assign responsible persons and add statuses to tasks. You think that this feature will help you process documents faster. But after talking with accountants and buyers, it turns out, for example, that there are too many tasks for one employee – they physically do not have time to complete them. Therefore, your solution will not help them in any way.

Interview a few people who are expected to use your product. Find out their pains and needs.

Consider whether your potential product will help them? If not, then you should take a break at this step. Perhaps you will immediately realize that your idea is simply not needed by people.

It is worth looking for respondents for surveys and interviews in places where customers are congested. If you are planning to sell a physical product, provide services or open a public catering, communicate with visitors to stores, salons or cafes. If you intend to make a service for performers (for example, plumbers or copywriters), collect information on specialized sites like YouDo and FL.ru. If you want to create a B2B tool for a specific niche, then talk to participants in specialized forums and face-to-face events. But you can also start with social networks: ask friends and subscribers who can benefit from your offer, and discuss the idea.

Step 3. Study your competitors

Everyone has competitors. Direct are other products and services that solve the same problem. Indirect – those that claim the same resource, but offer different solutions. For example, for an educational platform, the direct competitor is another educational platform, and the indirect competitor is Netflix, which also wants to occupy the user's free time. Competitors can be unexpected: even a paper notebook or simply unwillingness to solve a problem.

It is often possible to calculate competitors already at the second step – while getting to know the audience. Take an interest in how your potential customers solve the problem now: what services and tools they use. Alternative ways to cope with the task are your competitors.

Assess their strengths and weaknesses: functionality, interface, audience size, reviews. What audience problems are competitors not solving? Think about what could be an advantage that will allow you to stand out.

If you can not find any competitors, this is more of a warning sign. The chance of stumbling into a completely empty niche today is small, but the chance that no one needs your solution is much higher.

Step 4. Define success metrics

If at the very beginning you do not fix how to determine the success of testing an idea, then it will be difficult to make an informed decision whether to develop it further. For example, we received 30 leads – is that not enough? Landing page conversion is 7%, the idea will definitely take off? In both cases, it is not clear.

Select the metric for which you will work within the framework of the test. This can be, for example, the number of calls, the cost of a lead or a click. And define the goal you want to achieve – let's say “Get 20 applications no more than 500 rubles.” If there are fewer applications or they will cost you more, then you should admit that the test was unsuccessful.

In my practice, there was such a case: in a B2B startup, as part of an experiment, the conversion to an application on a landing page was 15%. The founders decided to check what would happen if they made an offer with a price right on the page. The conversion fell three times, to 5%. Does this mean the idea is a failure? Is not a fact. From the first version of the page, only 5% of requests reached the deal, the final conversion was 0.75%. From the second version, 50% of applications turned into signed contracts, the final conversion was 2.5%. It turns out that the funnel began to work three times more efficiently. The founders of the startup knew that they were focusing on the final conversion, so they did not abandon the experiment when the first conversion fell.

If you do not define the metric by which you will evaluate success, and its target value, then it may be tempting to interpret the result in your favor. And this is fraught: in fact, it turns out that the idea will remain unconfirmed, and you will already decide on the next step.

Step 5. Prepare a point of contact

Create a platform on which potential customers will be able to get acquainted with the product and perform a targeted action: order, pay, leave a request.

The platform can be quite simple: an Instagram page*, a Facebook group* or a Google form. But I recommend investing a little more time and making a landing page. This solution has several advantages:

  • You can set up an analytics system and retargeting. This way you will get more information about your customers and remember them for future advertising campaigns.
  • Landing gives more scope for conveying meanings and design. You can surprise customers from the first contact with an unusual design (although this is not necessary at the test stage).
  • You can implement more mechanics on the landing page: just specify a contact number, add a form, or immediately link a payment module.
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You can assemble a landing page in an evening on the designer – there are quite a lot of such services.

Don't spend too many resources on the site. Most likely, you will have to change and refine it several more times in order to test new hypotheses. The more flexible it is and the easier it is for you to work with, the better.

Step 6. Tell users about the product

The platform for contact is ready, now you need to make sure that potential customers know about it. Send the link to thematic chats, post it on social networks, ask your friends to share on their pages. Run targeted ads to reach as many people as possible.

Evaluate advertising at two levels at once: how actively a user clicks on a banner or link, and how many of them eventually complete the target action. If people actively go to the page, but then leave it, then you probably formulated the advertising message unsuccessfully: you promised them something that they could not find. And vice versa, if the ad is poorly clicked, and the page conversion is good, then it makes sense to refine the ad.

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Poor ad click Good ad click
Poor page conversion Users are not interested in the solution at all, or you are not presenting it well The ad promises something the user doesn't find on the page
Good page conversion Interesting offer but weak ad Good ad and offer — users are interested

In advertising, you need to convey the essence of your offer: who will benefit from the product and with what tasks it will help. No need to say that you will solve all problems and promise mountains of gold. Just be honest about what your benefits are.

Step 7. Chat with leads

Get in touch with people who will leave applications. Not necessarily all of them, but try to talk in person or on the phone with at least 8-10 of them. It is important to understand what exactly attracted them and why they found your offer useful. Discuss the product with customers: what interested them, why they left a request or paid for an order, what they expect. This way you will be able to understand your tasks and the needs of your audience even deeper.

At this stage, it is already possible to preliminarily assess the commercial potential of the idea. You can see how much you spent on advertising and how many applications you received. You can guess how much money you can earn from these applications, and understand whether it is profitable to develop such a business.

Do not forget that in most cases, a business does not earn on the first transaction, but on the following ones. If the first sale brought you 500 rubles, and you spent 1,000 rubles on it, this does not mean that the idea is unpromising. If you can make one more sale, then the numbers will even out. Two – get out. And so on.

Step 8. Examine the results

After all the steps, it remains to evaluate the accumulated information and conclude how successfully the idea was tested. Here's what you need to understand:

  1. Is there a problem in the market that you want to solve? How important is it to potential customers?
  2. Is the solution you offer suitable for customers? Does it meet their needs?
  3. Is the need widespread enough? How many people can you potentially attract?
  4. How are the economics of the project? Can you make money on it?

According to the results of the check, you will have to make one of three decisions: start developing the product; abandon the idea or change it; finalize the proposal and launch a new test.

*Meta Platforms Inc. activities. and the social networks Facebook and Instagram belonging to her are banned in the Russian Federation.

Cover: Anna Guridova/LifehackerEdited by: Alexey Odin