With the invention of startup culture, everyone is now dreaming to be an entrepreneur. You will find more CEOs around than ever before in the history of mankind. While that sounds amazing for the world economy, it is not always the case. We appreciate the entrepreneurship movement and we also know that brilliant companies have been formed in recent years which people could not even think about ten years ago. The world is now dominated by the small and medium sized enterprises which is amazing.
Coming up with the business plan is possibly the most hardest thing for an entrepreneur. However, the hard work doesn’t stop after you have created an idea. Before you can set about bringing the idea to life, you must be able to test its potential. Before you plunge thousands of dollars into a business, here are a few ways you can test your business idea to see if there is a need for it.
Without testing your business idea, you can never understand whether it is going to be a profitable business or not.
Testing does not mean that you will go ahead and form a business plan. You will have to form a business plan at the beginning anyway to keep things on track. A business plan is important and therefore should not be neglected. But a business plan is not a testing method.
There are several internationally recognized methods to test your business idea. We are going to talk about the most important and the most effective ones in this article. Let’s start.
Prototype or Test Service
Before you get started with manufacturing your product by the hundreds, you need to see if there is a demand for your product or services. For example, if you are going to build an innovative cat feeder. Your own cat might love it, but you have to see if the hundreds and thousands of cats that you are targeting as your client base will also love the product. This is why you will need to design a prototype. It is necessary to make a prototype when you are selling tangible assets and create a test service when you are selling intangible assets.
No good venture capitalist will pay you any money for your company if you do not create a prototype of your business. Put yourself in their shoes. Would you have done that?
After you create a prototype, it is time to test the service. That brings us to the focus group.
Focus group is a group of people that will help you understand the benefits and limitations behind your product or service. They will represent a small amount of your targeted audience. Now, it might seem like something simple but it is a very difficult thing to do and definitely never include your friends and family in your focus group. There are companies who do this professionally. You can hire a focus group from them and then pitch or present your product/service to that group.
The best part about using a focus group is the ability to receive unbiased comments. This may sound simple, but this is extremely crucial when you go ahead and launch your business. The last thing you want as a business owner is to receive fake appraisals at the beginning of your venture.
Now, if you are building something new and out of the box, there is a chance that the focus group won’t get it which is alright. If you have faith in something, you should take the chances. For example, when Facebook was first taken to the focus group, a huge percentage of people did not understand what is the plan and how it is going to make profit.
The same thing happened with almost all major inventions and companies. That is alright. But it is still important to take help from focus groups as you will know the actual customer perspective from them.
Have you ever heard the saying that if you are not ashamed of the first version of your product, you have launched it very late. That is true. You have to launch your product to the market as soon as you can. Perfection is not the way to go for when you are building a business.
What you will do is collect data and tweak your product based on the data. That is where the version philosophy comes into play. You have to make sure that you are collecting raw data based on the likings and disliking of those data, you will modify the next versions of your product.
This is the reason that why companies go for 2nd version and 3rd version of their product. There are companies who have even released the 20th version of their product as they kept on going and improving.
Take Help from Crowdfunding
Crowdfunding is a great way to go about when it comes to business idea testing. Now, crowd funding websites are primarily built so that you can go ahead and collect money for your business idea, but you can use it for your own way too if you are careful about it.
Crowfunding websites such as Kickstarter are also a great way to understand how the public might react to your product during launch. It’s a great way to gouge the requirement of your product within the market. If people pay or donate to your cause, then your product is creating a requirement in the market. That is a clear indication that you are doing things right. If you see that your product is getting attention and sales on these platforms, that will tell you that whatever you are doing is going on the right direction. Obviously the opposite is also true and you have to admit that and move on.
Now, we cannot stress the importance of testing your business idea enough. It is very important that you understand what you are getting into before you completely dive in. Make sure that you are not wasting or investing a lot of money in your business before the test stage.
Though there are different school of thoughts of what to do and what not to do, we still believe that testing is one of the finest methods to understand whether your business will be profitable in real life or not. There will always be those variations but those cannot be considered as examples.