Market validation is one of the most important steps when trying to build a business, but it's something that most people don't do well, or don't do at all.
Validating your idea significantly increases your chance of success and makes the process of starting a whole lot easier! Here's our Mum's Garage take on market validation, why it's important, and some straightforward tips on how to make a start. We're still developing this guide - have something to add? Let us know.
What's market validation, and why is it important?
A successful business consists of a number of variables, and when combined creates something of value which people are prepared to pay for. These variables include:
- Business model
- Etc etc
Your success will be determined by your ability to distill and combine the right set of variables. The fewer variables there are, the easier it is to get it right.
When we’re hit with a great idea or a problem that we want to solve, our imagination runs wild with all the possibilities and potential features, benefits, which could make the idea a big success. There are a lot of variables.
At this stage, before you’ve spoken to anyone else about the idea in a meaningful way (i.e. not just your friends over a beer), these ideas are based on assumptions from your experiences alone. They are based on your reality, not necessarily that of a larger audience.
To build a successful business you need to find the combination of variables that stand true for a large enough audience to make the business viable. That's the science behind starting a business, in simple terms.
When you're are in startup phase, you’re trying to find the variables that will create a highly successful business and solve the problem you care about, in a unique and superior way. The fast way to do this is through a process called market validation.
Market validation is really just a fancy term for the process of making sure that you are creating something that enough people actually want.
This is done by testing assumptions and collecting evidence to support the variables that go into creating a viable business.
Getting started with market validation
The first key variables that you want to get clear on are:
1) The problem you're solving
It's a lot easier to market and sell something that solves a significant problem. You will significantly increase your chances of success by taking time to find the problem that people will pay to have solved, before you invest time and money into building the product.
2) Your early adopters
This is the specific customer group who have the problem, and will care the most about what you're doing to solve it. The more types of people you try to solve problems for, the harder it is to do pretty much everything in your business. Building a startup is hard enough as is - building a startup that targets everyone from the beginning with minimal resources is very difficult.
3) An understanding of what this group really cares about (values, beliefs, behaviour patterns, their current, undesired and desired reality) so you have a good understanding of what they want in a solution.
The easiest and most effective first step for getting certainty around these variables is to talk to the people who may be your potential customers. By doing this you will be able to identify a common problem for a specific group of people, which will help you to narrow down the problem you are solving and who needs it solved the most. This provides a larger degree of certainty that you are on the right track.
You can do this through customer interviews.
There's an art to conducting a good customer interview, which you’ll master with practice.
The objective of a customer interview is to get a deep understanding of the person, and really understand their fears, frustrations, wants, desires, values etc. when it comes to the topic that you’re exploring.
To get the gold, you should aim to build a good rapport with the person you’re interviewing and keep the conversation open and free flowing. At the same time, you need to keep the conversation on track and get the information you need, so it needs to be somewhat structured.
With an interview you are trying to understand the real problems of your customers; you are not trying to validate your solution. You need to forget about the solution (product/service) and go in with a clean slate & open mind.
Here's an approach we find highly effective for conducting interviews:
Before you start interviewing, have a think about the assumptions you have when it comes to your idea.
a) Who are your target customers?
b) What problem(s) do they have that are significant enough that they will pay to have them solved?
c) What do they care about in a solution?
d) Any other assumptions you have that you think are important to explore
2) Target customers
Write a list of all the people you know who fit the description of your target customers, or places you could find others who fit the description. The more specific you can be about who you think your initial target market (early adopters) might be, the better.
3) Question guideline for the interview
It’s good to have a number of questions written down to guide the conversations and provide prompts if needed. These questions should be designed to test your assumptions and uncover your customer’s problems. You can group them into topics you would like to explore, in relation to your idea.
The first question should be something easy, just to get them talking about the topic.
The rest of the questions should be designed to explore the interviewee’s current state, desired state, undesired state, and the roadblock or problem when it comes to the topic you’re exploring.
Good questions should pass the mum test:
Example: “when’s the last time you did this...”, "tell me about how you....."
If you get people to tell stories that describe their behaviours, their answers will better reflect reality.
Example Customer Interview Script for Mum's Garage
Tell me a little bit about your story and how your idea came about?
Next Questions We Could Ask - Their Current Reality:
- How long have you been working on your idea?
- What stage are you at – have you launched the business yet?
- Have you got anyone helping you to get it off the ground?
- Tell me about a time when you went to an event or training in relation to starting a business
- Have you got any prior experience when it comes to business?
- What are the priorities in your business? Rank them from highest to lowest priority
- What are the things you’re struggling most with right now? Out of the things you mentioned, which one is the biggest struggle?
- Are you happy with your productivity and focus levels?
- Do you have a mentor to help you out?
Their Undesired Reality:
- If this business doesn’t work out, what happens?
- How do you feel about that?
Their Desired Reality:
- Why did you set out to start this business?
- What’s the long term vision for you?
- Where would you like to be in one years time?
What The Problems Are:
- So what’s stopping you from... [getting to desired reality]?
- Do you know what you need to be doing in your business now to grow?
- If you could design an idea solution to help you fast track your business or get your idea off the ground, what would it look like?
Think of your script as a guideline - you don’t have to go through every question as a process.
Often what happens is someone will say something that you can tell has more to it, which you will delve into and explore. If that comes up, you can say things like “can you tell me more about that?” or ask a series of why questions to draw out more information.
Remember: The interview isn’t about validating your solution. It’s about understanding the customer’s problem.
Try to talk to interviewees for at least half an hour. It takes a while to get the good information out.
Record the conversation so you can refer to it. It also makes for great training material when you bring others into your business, so they can have a good understanding of who your customer is, and what problem you're solving.
Ask each interviewee if they know anyone else you can talk to - try to get at least one referral from each person.
Processing The Learnings
It’s important that you have a good process for storing and processing the learning’s you get from the interviews.
In our experience, a great way to do this is to write down any key quotes or learning’s on post-it notes (include the name of the person who said it for context). Group the post-it notes into common themes as a way to help you identify trends. You can also group them under the headings ‘Customer’, ‘Problem’, ‘Current Reality’, ‘Desired Reality’ and ‘Undesired Reality’.
You will have a feel for what the problems and important takeaways are from the interviews, but it is important to have the hard evidence in front of you (put the post-it notes on the wall or somewhere you can see them) to keep you on track and avoid biases.