Validating your startup idea is perhaps the most important step in your entrepreneurial journey. Many founders take the leap without doing the required due diligence and pay dearly later.
Here are 12 questions you need to ask yourself before you start building your startup.
1. What problem is your startup solving?
Try to clearly describe the problem that your startup idea solves for its potential customers, on a piece of paper, in 1-2 lines. If you can’t describe the problem clearly, it means you need to put some more thought into it. If your product or service doesn’t solve a pain point, then it’s unlikely people will pay for it.
2. Has anyone else attempted it before? Why did they succeed or fail?
Find out who else has tried solving this problem before and why they succeeded or failed at it. You may be able to discover crucial barriers to entry, such as lack of technology or a small market, that thwarted others from going further. This will also help you refine your idea and make it work.
3. What are the benefits of using your product or service?
People pay for benefits, not features. Think about how your product or service will improve the lives of your potential customers. The more benefits you can list the better it is. In fact, this will also give you good points that you can include in your website, pitch decks and emails.
4. Are there any similar services or products available?
It’s important to find out if there are similar products & services in the market. In that case, how is your idea different? Or how will you differentiate it? For example, there were so many cab services in US, before Uber arrived. Uber differentiated itself by allowing people to book a cab using an app. If you’re unable to differentiate your idea, then you’ll need to come up with a new idea.
5. Who are your potential competitors?
Unless you’re really lucky, it’s very likely that your idea already has a few competitors, which is totally fine. It shows that a market exists for your startup. However, if there are way too many competitors (e.g the market for email marketing tools), or if it is monopolized by a single competitor (e.g Google in search), then it’s advisable to wait for your next idea. Even if you launch your startup, you’ll simply have a hard time convincing people that your solution is better.
6. What are the features of your product or service?
List at least 4-5 features of your product or service. This will tell you what it needs to do and the various functionalities that it needs to provide. Just like benefits, you can also list these features on your startup website and other marketing material. If you’re not sure about the features of your product or service, look at what your competitors are doing, to get an idea. If you have a unique idea and you can’t list its features, it means you need to think through the idea some more. Otherwise, you may end up creating a half-baked solution that doesn’t gain traction.
7. Does your startup have any competitive advantage?
Does your startup have anything that cannot be copied easily, like a special algorithm, patented technology or custom hardware? If so, then you should definitely launch your startup. Otherwise, pretty soon your market will get crowded and you’ll have to engage in price wars, just to survive.
8. Do you have the required resources to launch your business?
Every idea requires a minimum amount of skills, time & money to get off the ground. You need to make a list of all the things required to launch your business, and find out if you have them, or are able to procure them, one way or the other. For example, can you build your product? If not, then do you know someone who can do it for you? How much will it cost? How soon can you build the minimum viable product?
If you’re not able to arrange some of the things you need to launch your business, then it’s better to wait till your situation is different.
9. Who is your potential customer?
You need to have a clear idea of who will be using your product or service, what will they use it for, how will they use it, and what are they willing to pay for it. Create buyer personas about your target customer – their age, location, gender, demographics, behavior, and more. Be as detailed as possible. Look at who your competitors are targeting on their website, blogs, and other marketing channels.
10. What is the market size for your product or service?
It’s not enough to define a single potential customer for your startup. You need to also find out how many more such people exist, that you can target. Otherwise, you won’t be able to figure out whether your idea is financially feasible or not. If you have competitors, check out which market they are targeting – are they small businesses, enterprises, marketers, developers, anyone else? Also, look at trade journals and industry reports from established institutions like McKinsey, Deloitte, etc who regularly publish informative stats about various markets and industries. This will give you a fair estimate of the potential market size for your idea.
11. How soon can you break even, or start creating profit?
Some businesses take a lot of capital investment to get started. If you have such an idea, then you may want to think how you’ll manage your expenses till your startup gains traction, and how long you can wait before you run out of funds.
12. Can you get prospects, or even paying customers before launch?
It’s great if you have a waiting list of people ready to sign up for your product or service when it launches. The easiest way to do that is to simply create a landing page with a signup form that allows you to collect email addresses of interested people. In fact, I highly recommend creating a landing page before you even begin building your product or service. Start working on your idea only if you get at least a minimum number of sign ups, like say, 25 people. That’s a good indication that your idea is worth pursuing.
In fact, you can even add a pre-order form on your landing page. If people are willing to pay for your product or service even before it is launched, then it means you are truly onto something.
Spending a few days, or even a few weeks, on these questions will help you get a clear idea of how to proceed, and uncover any deal breakers early on. Also, it’s a good idea to reach out to your family, friends and colleagues, if you need advice about some of these questions.
Set yourself a time limit, like say 2-3 months, to research these questions. If your idea is able to pass these tests, then you should definitely go for it. If you run out of time, see if you can make your idea work with a few modifications. Else, be patient and keep thinking – your next idea might do the trick.