Have a Business Idea? Here are the Next Steps

How to Refine and Validate your Idea

Photo by Hunters Race on Unsplash

Business ideas are great. They make us feel like we are onto something.

Something big.

Our adrenaline spikes and we want to get started right away.

But what does “getting started” even mean? Printing your business card? Making a website? Hiring a co-founder? Incorporate the business?

Not exactly.

Here are the exact steps you should take to refine and validate your idea before you do any of these things!

Step 0: Get clear on WHY you Want to Start a Business

Starting a business is on the bucket list of almost anyone I know that has previously worked for other startups. It just seems like the logical next step. The end destination. The ultimate goal.

But it’s not. At least not for everyone!

Before you do anything else, get crystal clear about your reasons, intentions, and motivations behind starting a company. Why do you really want to start a business? Are your reasons strong enough to endure hardships and compelling enough to survive a major drop in quality of life in other areas? Will these reasons still be there when you have pivoted twice, broken up with your girlfriend and not seen daylight in 3 months?

Don’t lie to yourself. Starting a business is not a light decision. It will change your life. For the better, if you do it for the right reasons. For the worse, if you rush into this trying to fill a void that has a different source.


Step 1: Organize your Idea with a Mind Map

Mind mapping is one of the most powerful techniques to brainstorm, record and organize your ideas. You can think of it like visualizing all your thoughts in the form of a tree: your main idea is the tree trunk and all connecting thoughts represent the branches which can further branch out as well.

This helps you group together single ideas and create hierarchies so you can put a structure around all the noise in your head.
Source: usingmindmaps.com

There are two mind mapping ways that are most effective for getting the full picture on your business idea, as they allow you to move single ideas around and re-organize as you go:

  1. Mindmapping Software: Tools like Mindmeister, XMind, and MindMup allow you to easily drag and drop your single nodes around, create hierarchic relationships and add notes.
  2. Post-It Notes: Brainstorming with Post-It notes is super simple and super fun. Just write every single thought on a separate Post-It and organize them all on a big whiteboard, a window or your wall. Once you are done, snap a picture of your mind map to save it for later reference.

No matter which method you go with, here is the best way to explore and structure your business idea with mind mapping:

  • Step 1: Dump all your thoughts: For 10–15 min, write down all your thoughts and ideas related to your business idea as single branches or Post-Its. Don’t overthink it — no idea is too unrealistic, stupid or irrelevant in this stage — editing, organising and removing comes later! This will get messy, but it’s okay. The most important thing is that you capture ALL your thoughts about your business idea in an unfiltered way.
  • Step 2: Organize your thoughts: Now it’s time to clean up the mess! Group together related ideas, find overarching categories and create hierarchies and relationships. Add ideas if you find they are missing, eliminate duplicates and edit where necessary. The goal is to create a complete and structured picture of your business idea.

Step 2: Simplify & Clarify

After you have organized all your thoughts in a mind map, it’s time to get to the very core of your business idea. The goal here is to get so clear on your business idea that you can describe it in one single sentence.

One sentence? You might think I am crazy — your business idea is so much more than that!

Of course it is! But this exercise helps you to get really, really specific and forces you to clearly articulate how you are creating value and for whom.

You can use this template: (“My company, _(insert name of company)_, is developing _(a defined offering)_ to help _(a defined audience)_ _(solve a problem)_ with _(secret sauce)_”).

If you are struggling to create a single sentence right away, try writing one page about your business idea, then shortening it to one paragraph and from there describing it in one single sentence.

If this exercise is entirely impossible, you might need to go back to the drawing board to achieve the necessary clarity to move forward with your business idea.


Step 3: Refine your Idea with Feedback

Take your one sentence business idea and talk about it to as many people as you can! Though this might sound counter-intuitive at first (people could steal your idea!), it is one of the best strategies to get direct feedback and refine your idea. Also, remember: ideas are worthless — it’s the execution that matters!

There is two ways in which getting such diverse feedback can be extremely helpful:

1. Take a good look at the people that love the idea vs. the ones that think it is stupid — this can be a great indicator for finding your target audience! What do the people that love the idea have in common?
2. Listen closely to the objections (for example: “This is a great idea. But have you thought about…?”) and use them to refine your idea. Use the feedback to think through all possible challenges and difficulties and make a plan to address them before going forward with your idea.

Talking to people and getting good feedback also fuels your motivation to start executing!

To get the most out of this exercise, listen attentively without interrupting so you can get the person’s unfiltered and uninfluenced opinion!


Step 4: Define your Target Market

If you are a first-time founder, you might think that everyone can be your customer. But this is usually not true!

Most successful business solve a specific problem for a very specific target group aka niche.

Yes, there are other examples, but the chances that are you are gonna be the next Zuckerberg are very small. Like in the 0.0000001% range.

So you better make sure your business idea is solving a problem for a very specific group of people. This will make finding customers and marketing to them so much easier.

The Riches are in the Niches.

One of the best exercises to get clear on your target market is to create a customer avatar. To do that, ask yourself these questions:

  • Where does your ideal customer live?
  • Who old is he/she?
  • Who does a normal day look like for this person?
  • What is his job?
  • What does he do in his free time?
  • What are his biggest problems and frustrations?

For B2B businesses, define the following points: business type, industry, business size, role you are targeting (e.g. head of sales if you are offering a SAAS sales tool).

Source: DigitalMarketer.com

Once you have your ideal customer, you are also able to analyse the size of your market and evaluate if it is big enough.


Step 5: Survey your Target Market

Set up a simple questionnaire to get a better understanding of your target customers, their needs, wants and willingness to pay. You can use an online tool like Survey Monkey or even easier, work with Google Forms.

You can download my free template with 23 Questions to Survey your Target Market here.

Download here: http://bit.ly/survey-target-market

After analysing your results you should be able to answer the following questions:

  • Are you really solving a problem for your target group with your product or service?
  • Would your target group be willing to buy your product/service at a price point that makes sense for you economically?
  • What are existing competitors, similar products and services in the market and how happy is the target group with them?
  • What should be core features of your product/service? What is most important for your target customer?
  • What could be potential marketing channels for your product/service?

Step 6: Analyse the Competitive Landscape

You might be thinking: “I can skip this step, I have no competition! My idea is unique!” I hate to break it to you but more likely than not, you are wrong!

One of the most common mistakes of starting a new business is failing to analyse the competition properly. So make sure you have a clear understanding of:

  1. WHO you are competing with directly: Start with collecting all players that offer a similar product or service. Through your customer survey and simple Google searches you should be able to come up with the main competitors. Tools like Crunchbase, SimilarWeb and Wonder as well as analysing forum discussions on Reddit or Quora (search for terms like “how can I solve problem x?” and “what is the best way/tool to do x?”) can give you further insights.
A great way to visualize your competitive landscape for yourself or an investor’s pitchdeck is the “Magic Quadrant” that analysis your position in regards to the competition along two main metrics. Here is an example:
Magic Quadrant (Source: PitchDeckCoach.com)

2. WHO you are competing with indirectly: Companies that offer similar products or services as you are your obvious competitors. But it’s not the only ones you are competing with!

Think of it this way: you are basically competing with anyone and anything that can be used to solve the customer’s problem.

Here’s an example: Coca Cola does not only compete with other soft drink brands but also with tea and coffee brands, energy drinks and other stimulants — if the customer’s want is to be more awake and get an energy boost. The Petal Diagram is a great way to visualize all your indirect competitors based on common features or solved problems:

Petal Diagram by Steve Blank

Step 6: Define your USP

Once you know who you are competing with and have a good picture of all existing products and services in the market, it is time to ask yourself two questions:

  • What makes my product/service special? How is your solution better than existing ones? Is your product/service faster, cheaper or more convenient? And is this advantage good enough for people to choose your product over another one?
  • Why am I uniquely capable to bring this idea to market? Why are you (and your team) better than your competitors? Is your technology, expertise, experience or team superior? What gives you an unfair advantage over the competition?

Step 7: Test your Prototype with a Select Group of People

Develop a first, basic version of your product or service. This is your MVP (Minimum Viable Product). Depending on the complexity of your product this could mean you are manually simulating a process that technology will do later on. If it is a food product, you can get people to try the first recipe. If it is a service like consulting or coaching, do practice sessions for free.

Basically, think of the simplest version of your product and service that possesses its core features and start getting real feedback from potential customers.

This process is integral to refine your Product-Market Fit. Furthermore, it allows you to build up a small group of supporters than can help push your business once its launched.

Another option is to build a landing page or list your product on a crowd-funding website to collect pre-orders that will help you proof demand and fund your product development.


Step 8: Define your Revenue Model

The big question of all new entrepreneurs: how will you make money? If you can’t, you might have a nice idea, but not a business.

Here are some of the most common business models:

  • Sell your own product or service (single purchase, pay-as-you-go, subscription business, licensing fees)
  • Sell someone else’s product or service (affiliate marketing, commission sales, franchising)
  • Brokering/Matchmaking/Marketplace Model: take commission or get paid for premium listings.
  • Ad revenue (especially for media businesses like apps, blogs etc.)
  • Freemium Model: give part of your product or service for free and make money through ad-ons or premium versions

Step 9: Create your Go-to-Market Plan

Once you have successfully refined and validated your idea, it’s time to finally get down to business, literally! Even though things never go to plan and everything will most likely take twice as long and cost twice as much as you expect, it is still crucial to make a proper project plan for bringing your business idea to life.

This will help you to understand the estimated scope and cost of the project and make key decisions about who to hire and how to pay for everything.

Your Go-to-Market Plan should at least include the following points (and more, depending on your business):

Product:

  • How will the product be developed?
  • What are the milestones?
  • How much will it cost?
  • Who will be involved? Who is responsible for what?
  • Will there be a beta version before it is officially launched?

Marketing:

  • How will you acquire customers? Which channels and strategies will you use?
  • How much will it cost you to acquire one customer? Calculate the CAC (cost per acquisition) to see if

People:

  • Do you need one or more co-founders? If yes, with what background?
  • Who do you need to hire to develop and market the product?
  • What do you need to do to get the key hires on board?

Finance:

  • How much will it cost to launch and market your product?
  • How much will you spend on human resources?
  • How much will you spend on other things like software, office and
  • How will you finance your endeavour? Will you pay for it yourself, take a loan, get a partner on board or reach out to investors?
  • How will you sustain yourself financially while building your business? Will you keep your day job and build the business on the side or are you able to go all-in from the beginning?

TAKE-AWAY

As a business coach for entrepreneurs, I have come across two major types of people who struggle to build successful businesses:

  • Type 1 has lots and lots of great business ideas but never gets beyond the ideation stage. They seem to be paralysed by either not knowing what to do next or fear of missing out on a better idea.
  • Type 2 gets so excited by the idea that they jump right to Step 9, or even worse print their business cards and hire all their friends as co-founders and thereby leave out the essential steps of refining and validating their idea.

If you see yourself in type 1 or 2, I hope this article will help you to take the necessary action steps for making your business idea reality! Even if you don’t follow the exact steps or order — whenever you are stuck in the startup phase, reading this article will help you identify why you struggle to move forward and what you need to do to resolve your obstacles!



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