A Simple Formula to Find Winning Ideas

6 Simple Steps to Follow to Validate Your Idea

So you’ve got an idea for a business. This one’s stuck in your head. It’s an exciting feeling – your new business is starting to take shape and you don’t see any major roadblocks that you can’t envisage being able to overcome. So what next?

One thing should take priority at this point: validating the commercial viability of the idea. Or in short, find out if it’s a winner.

“But wouldn’t it be faster to just not bother?”

To do this, I try to answer these questions:

  1. What problem is being solved? Looking at it from the buyers perspective, what problem do they have that your offering will fix?
  2. Who, specifically, would pay money to have this problem solved? People and organisations have lots of problems, but is the one your proposing to solve big enough to make them need/want to spend money to fix it? Do those people have the money?
  3. How urgent a problem is it for those people? If it’s a problem that’s way down their list of priorities you may have trouble getting and keeping their attention long enough to make a sale.
  4. Who else solves this problem, or similar problems? Who are your competitors, or who could easily become a competitor when they see the opportunity you’re exploiting? What indirect competition is there for the budget you hope is spent with you?
  5. Why would somebody choose this solution over the alternatives or what they use currently? What is truly unique about your idea that also gives a compelling reason for your target client to buy from you? This is usually the hardest question to answer. What unique advantage do you have that someone else couldn’t easily replicate?
  6. Where are those people located and how can they be accessed? If you can’t connect with your target customers, it’s pretty difficult to make a sale.
7 billion people and all I need is for each of them to give me a penny: not a commercially viable idea.

7 billion people and all I need is for each of them to send me a dollar: not a commercially viable idea.

After answering all these questions carefully, with some research to back up your assumptions, you should have good initial insight into the scale of the opportunity. The trick is to minimise the risk of starting up and chasing that opportunity, while not over-researching and becoming paralysed by a fear of getting it wrong. Risk is inherent to startups – it’s an essential and exciting part of any new venture that you need to embrace and accept, but you also want to be reasonably sure you have good odds of putting together a sustainable business that can thrive and grow.

It should become fairly obvious if the idea you’re looking at is truly great, or just OK, or worth assigning to the ‘Maybe Not’ pile. This approach isn’t just for startups – I use it to validate almost all new ideas. It’s also important to revalidate the idea constantly over time using the same formula as you move into the startup phase, learn more about your market, target clients, competition, etc.

Gordon eventually realised his idea for Stay Wet Paint wasn't a runner.

Gordon eventually realised his idea for Stay Wet Paint wasn’t a runner.

This approach also gives you confidence that your idea is worth hearing about. When you speak to potential partners, clients and funders you’ll have the ability to answer the questions they’ll inevitably ask, while managing to sound relatively clued-in and intelligent!

Not another startup advice blog!

You’re right. There’s a lot of them out there – I’ve checked. So why am I adding to the pile?

Over the last 15 years or so a lot has changed – my first big contract in my first startup was with Ryanair for the development of their website. I was still in school at the time, which caught the attention of the media and served as a great big break, for which I’ll always be thankful. This was back in the day when most companies didn’t have a website. It was before the dot com crash. The vast majority of people connected to the internet on 56.6 kbps modems at best. Dark days indeed!

Nobody pick up the phone, I'm downloading a file!

Nobody pick up the phone, I’m downloading a file!

Since then the world has changed completely – the vast majority of travel is now booked online, social media is endemic, we use apps and connected devices all the time, we stream our entertainment content. And most people don’t have time to boil the kettle while waiting for an email to download. What’s also changed is what’s involved in building a startup business. It costs a fraction of what it did even five years ago to build a software product, web tool or app, and the cloud combined with infrastructure such as the app stores, enables innovative startups to bring their idea to the masses and scale relatively cheaply and easily. The flip side of this is that those who provide funding to enable these startups to scale are now demanding significant market traction before agreeing to part with their cash, which is understandable when looking at it from their perspective.

This is where I’ve seen the problem. And this is why I decided to start this blog.

This all looks to be in order Mr Ponzi.

This all looks to be in order Mr Ponzi.

Most startups are so focused on the development of their technology and product that the fundamental commercial viability of the idea isn’t considered in enough detail until later on, or is paid only lip service. They may have built what they consider to be their minimum viable product (MVP), gone to market and even had some traction. Everything looks rosy. That is until the V.C. or other funding partner starts pulling the idea apart and everyone realises that you’ll require a Facebook-esque number of users before seeing a penny of profit. It’s potentially months/years of your time and money wasted, and it was so easily avoidable.

smtm

Commercialisation strategy and execution is by far the most important thing to consider for the overwhelming majority of startups. It doesn’t matter how innovative and cutting-edge the technology is if nobody is going to pay for it, they won’t pay enough, the budget you need is assigned to something else more important, you can’t afford to tell them about it, or you require such enormous scale before you hit profitability that most funders will consider you too risky and opt to put their cash into another startup team.

I think a lot of the problem actually goes back to the education system – particularly in Ireland, where little or no focus is given to the art of selling. Learning to sell, negotiate, define a value proposition from the perspective of the target client, present and pitch – all of these things are ignored, usually in favour of learning how to prepare a business plan that nobody is ever going to read, or a profit and loss account that you’ll need a professional to re-prepare and validate for you in any case. What a waste of time and resources!

Forget that app idea, have you done your Greek homework?

Forget that app idea, have you done your Greek homework?

I’m hoping to address this by providing tools, processes and general advice on how to package and sell an idea, product or service, how to create demand, how to pitch to potential funding partners, and how to get to a stage where commercial validation of a concept is the default setting when evaluating whether it’s worth you investing your time and energy into the creation of a new product or business. At the very least, I hope to spark a discussion.