Knowing how to validate your new business idea is vital to the success of your business. How can you make sure that starting this business is a good idea and will deliver products and services that people are willing to spend money on? In this video, Daniel helps you validate your new business idea using a quick and easy tool.
I know you would like to start that new business, but will it work?
How can you be sure that your business idea is something people actually want to pay money for?
When starting any new business, you first need to validate your business idea. A successful business provides value to customers for a profit. You need customers which are prepared to pay you for products and services which provide solutions to their problems. If you are just starting out, the easiest and fastest way to do this is by using a Lean Business Canvas. The concept was initially created by Ash Maurya, and helps you break down your idea into its key factors which are vital to your business’ success.
It’s kind of like a business plan, but it’s much faster to create, extremely concise, and lets you focus on the points that really matter in the early stages of business.
How to validate your business idea with a Lean Business Canvas
- Start by listing all your potential customers and users. Remember customers buy your product and users use your product. These can be the same, but sometimes can be different. For example, if you sell cat food.
- Next list your early adopters, which are the ones who will make use of your products and services first. Like a test group, family and friends, existing customers from another business, or even yourself.
- What is the problem that you are solving for? List your customers’ top 3 or 4 problems here.
- List any existing alternatives which your customers could currently make use of. This is essentially your competition.
3. Revenue Streams
- How are you going to make money from your new business? List all your income streams here in the early stage of your business lifecycle. Try to be specific about your commission structures, margins, fees and rates, or any other way you plan to make money.
- You could possibly unlock more streams in the future but these are the income streams you will be starting with initially.
- Now list your possible solutions to each problem. Be brief but concise. These are the products and services that you plan to market to your customers.
- Your solutions should be of high value and high quality to your customers.
5. Unique Value Proposition
- Consider your unique value proposition as your elevator pitch. It describes the unique value you offer, and the solution you are providing your customer in a short, easily digestible phrase.
- The unique value proposition focuses on all or each of your solutions but the high-level concept is an overall explanation of your entire business concept in a way that is easy for anyone to understand.
- Communication and marketing of your business idea are vital to the success of your new venture.
- Here you should list all the ways in which you plan to communicate your products, services and solutions to your potential customer. Include all the communication platforms and strategies you will make use of in the early stages of your business’ lifecycle.
7. Key Metrics
As my dad likes to say, “You cannot control what you do not measure”.
- What are the key numbers you need to monitor to ensure success?
- These could include the numbers of customers required to pay off your initial capital investment, then later how many customers are needed to break even and then achieve a sustainable, profitable business. You could have others, but these are a good place to start.
8. Cost Structure
- List all the startup costs as well as your fixed and variable running costs. Things like startup development costs, rent, marketing, salaries, etc.
9. Unfair Advantage
- To separate yourself from the others and give yourself that extra edge, your business could benefit from an unfair advantage. If you don’t feel you have one in the beginning, don’t worry, you might find or develop yours in time.
- Essentially your unfair or competitive advantage is something that cannot be easily bought or copied by others. These can include any trademarks and patents, brand reputation, key stakeholders, etc.
How do you plan on using the lean business canvas? Drop your thoughts in the comments.