An entrepreneur coming up with an idea for a business is like a scientist forming a hypothesis. While a scientist’s idea might sound great on paper, the only way to see if it works is to test it in a lab. The hypothesis might be confirmed — or it could flop. The luxury is that testing something in a lab, where conditions can be tightly controlled, can be less demanding than putting your heart (and money) into a business idea that you’re not completely sure will work.
There’s no magical lab that can test the viability of business ideas, but there are ways to better determine if they will succeed. Like many things, it’s not 100 percent accurate or completely foolproof. These strategies, however, are the best ways to determine how a business will fare.
Do the Research
Market research is the key step in launching a successful business. All ideas need information about customers and potential competitors before they’re put into action. As Jessica Mah of inDinero advised in a recent Smart Hustle interview, you must complete market research before you quit your day job to launch your new business.
How do you conduct research on your intended audience? One entrepreneur suggests the “Starbucks test.” Go into a coffee shop and strike up a conversation with someone who looks like he or she could be your target customer. Offer to buy them a coffee and pitch them your business idea to gather some honest feedback. Informal conversations can give you insight that you otherwise wouldn’t receive.
Similarly, sites like PickFu can help you gather feedback on everything from business ideas to marketing copy.
Crunch the Numbers
Sometimes, the failure of a business has nothing at all to do with the quality of the idea and everything to do with financial realities.
To put it more succinctly, you need a budget — and a way to test whether your intended company structure and business model have staying power, or if you’ll run out of money on the launch pad. Take the time you need to plot out every possible expense, and adjust profit expectations and price points based on the industry research you’ve done. If the numbers simply don’t add up, go back to the drawing board.
Run a Pilot Test (or a Beta)
If you want to test your business idea in a more concrete way than just soliciting written feedback, you might want to consider running some sort of small pilot test before you ramp up into full production mode. This will help you iron out any major problems and plan for bottlenecks that could cripple full-scale production.
Depending on the type of product or service you want to offer, there are a number of ways to go about this. Kickstarter is an obvious one — it lets you essentially pitch a raw idea and offer an amount to prototypes to folks with specific interests who love trying out new products before the rest of the world. If your trade is software, give Apple’s TestFlight a shot to offer open betas for new apps or digital services.
Find a Mentor
One of the most unfortunate mistakes a fledgling business owner can make is assuming you can do everything on your own. The truth is, nobody ever took on the world by themselves. Nine-tenths of leadership is surrounding yourself with people who know more than you do and aren’t afraid to challenge your beliefs.
With that in mind, take the time to find somebody who’s been where you are now, and who knows how to walk the walk and talk the talk. If nobody comes to mind, the internet is full of coaching groups and other opportunities to help you build a supportive network of like-minded folks who can show you the way.
Following these steps will help give you a much better idea of whether your business will succeed, or if it needs to be retooled.
Perhaps most importantly, don’t be afraid to go back to the drawing board. You want to get this right, after all, before you’ve sunk too much time or money into your idea. Killing what felt like a great idea can be incredibly challenging, but it could be the best thing for you. If all the research says that what you’re about to do is a bad idea, treat it as a learning experience and go back to the drawing board.