How to turn ideas into businesses, and test your market
If you’re a student thinking of starting a business or side hustle you’re probably pretty confused right now. Apart from the endless articles about “lean methodology” or “design thinking”, none of the advice on launching your idea is catered for students.
So to cut the crap and give you simple and palatable advice we brought in an expert — James Alexander, the founder of Australia’s first student-focused startup accelerator Incubate. Since 2012 James has been boosting student entrepreneurs from startups like WipeHero to Earth AI — helping students launch their ideas is his game. Read on for his advice on all things idea validation, user testing, and market validation!
What is ‘User Testing’ and ‘Market Validation’ and what is the importance of it? Why should student entrepreneurs care?
User Testing (UT) and Market Validation (MV) are two things every entrepreneur needs to do before they spend money and time building stuff. Students often think that ‘entrepreneurship’ is about building something innovative behind closed doors and then launching the product to a big fan fair. The best entrepreneurs actually do the opposite.
Students should speak to people first, focusing on the lean startup methodology.
When conducting user tests, take a customer-centric approach and find out:
Step 1: What is the (core) problem that customers have?
A lot of aspiring entrepreneurs get this wrong. They begin building out a product without looking into the core problem they’re solving. To answer this, you’ll need to talk to potential customers and users. This initial process is known as ‘problem discovery’ interviews.
There’s a nifty rule when conducting these interviews — the ‘15-minute rule’. If a customer vents to you for 15 minutes or longer on a problem (longer the better), then it’s probably a good one to solve!
Step 2: Develop a Minimum Viable Product (MVP) and user-test
After talking to potential customers and users, use this early information to build a mock-up or MVP to address the problem at hand (it can be super simple!). Launch it, showcase it and get people to use it. At this stage, you’ll be able to user-test and collect valuable feedback/data on the product that you’ve showcased. Use this feedback and keep improving your product.
Good founders should be talking to their customers at least weekly (if not daily). You should ideally know more about the customer than they now about themselves.
Step 3: Validate the market
Market Validation is understanding how much customers would pay (if they would pay anything). This can be done during the first set of customer interviews.
Keep in mind the user and customer may not be the same.
For example, on an ed-tech platform for student internships, the students may be your users, but employers are customers as they are paying to post the jobs. Thus, a question to ask employers would be: “What problems do you encounter when hiring students?” and “how much money are you comfortable with paying to solve this?”.
What are some good practices when conducting these early interviews with customers?
Read my blog post about launching a startup (pre-funding)!
- Who? Identify who the customers are and organise a time to meet them or call in person to talk about their problems. Don’t conduct a survey, they’re impersonal and don’t give you proper HUMAN insights.
- Open-Ended. Keep the questions open-ended — ask them what problems they have and start broad.
- Silence! The third tip is to learn to love the silence. Let the customers/users do the talking — the things they say when the interview shifts to silence are very invaluable in building a business and understanding how your potential customers think. Sometimes the best nuggets of info come at this point.
What happens if your market validation wasn’t successful or showed something about the market you hadn’t planned for?
There are 3 possible situations as you attempt to validate the market:
- Situation 1 (Rare): You start talking to customers and realise you’ve hit the nail on the head. They can’t stop talking about the problem and other people share similar pain points.
- Situation 2 (Fairly Common): There might be times when you can’t get anyone to talk (in-person) or over the phone. People may hardly talk because there is no real problem.
- Situation 3 (Common): The third outcome is that the ‘problem’ is very unclear. While some believe it’s a problem, others may not and it’s hard to judge.
For those last two situations, you may need to dive deeper. A change in strategy or framing of the problem may be required. For the third outcome (unclear problem), you may also need to talk to more customers.
What happens after you have validated the idea with the market, you’ve launched your product, and customers love it. Should you validate or conduct UT again in 6 months?
You should be talking to customers all the time! This process is known as ‘customer interactions’ — you always want to get feedback from them, even on the little things.
In the student internships business example, let’s say employers pay to use your platform and become your first customers. and business is going well. As a founder, you still need to keep in contact, in a co-development process, to find out what could be improved after using your platform for a month or so. However, you should equally focus on talking to new customers and pinpoint their initial queries and feedback for the product.
The best founders are constantly speaking to their customers. Increased customer interaction can also result in greater sales — develop a rapport with your customers!
Can you provide an example of a start-up you’ve worked with that has successfully conducted UT and MV testing?
One example is WipeHero. They initially believed that regular consumers had a problem with their unclean cars.
Although unclean, it didn’t stop the majority of regular consumers from driving it. However, fleet owners (owners and renters of lots of cars) had a far greater issue — they rented these cars out every day but they were all badly washed!
On their second call, they got their first customer. In the first week, they had revenue flow. By the second week, they built a customer base and have now gone to greater heights!
This piece was written by Visakhan Vythilingam — Textbook Ventures organises startup events, writes newsletters, and shares tech jobs for student entrepreneurs across NSW.
Sign up to our weekly newsletter and check out our Facebook to stay in the loop!
If you’ve got a STARTUP OF YOUR OWN, be sure to apply to our Student Startup Festival for 2019.
