When do you truly know you have a good idea?
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Today’s question comes from Christopher. I have a product I want to import and sell in my country. I setup a pre-launch page with an email signup and have done some paid ads. How do I know when my idea is valid?
In Christopher’s case, he’s spent $20 in Google Ads per day for a week and in that time he had 57 click-throughs and 22 people signed up with their email. Let’s talk about what sign up means — since you haven’t launched your product, chances are people signed up for your launch notification list, which is not all that telling as far as buyer intent is concerned.
Idea validation that works
The best thing you can do, which we’ve outlined extensively, is to fake the sale. The problem with email signups is that you don’t know who they are and most of them never opt-in for the product at all. You can also do one-on-one conversations (however, people tend to lie) and you can do letters of intent (usually for B2B startups), but they are not as effective as faking the sale because that means that they are truly ready to buy your product.
Let’s say you spend $20 a day in Google Ads to get 57 click-throughs and 22 people actually ‘buy’ the product. That is a 38 percent conversion rate, which means your product idea is valid and you can move forward with it. Also, it’s important to understand your cost per conversion so that you exactly what your benchmarks should be for everything you do after this validation. Without having any additional information, you know you would be spending about $4.50, in this case, to acquire a new user. And that information enables you to be able to make pricing decisions and many other decisions and you know exactly what you need to be profitable.
“Understanding your cost per acquisition in the validation stage allows you to have benchmarks for everything you do moving forward with minimal output.”
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