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  • #987563
    GD
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    Hi All,
    I’m after some advice / previous experiences, both positive and negative, that people have had with early stage startup validation.

    I started an ecommerce site myself some time ago, needless to say it didn’t go well. Looking back I think I can contribute most of the failure to a lack of early customer engagement.

    I’m conscious of not making the same mistake twice, so I’d like to know what tools / techniques others used to validate problems/ideas before spending too much time and money starting up a business.

    Thanks for the help
    Rob

    #1163352
    Greg_M
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    I sought out people with experience in areas I didn’t have a grip on.

    Marketing and sales potential mainly.

    I was surprised by the quality of feedback I received and what I learnt.

    I used to subscribe to the theory “build it and they will come”, now I think this is a high risk strategy unless you’ve crash tested your ideas elsewhere.

    Meet ups worked well for me in finding the right people.

    #1163353
    CAP
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    Hi Rob,

    Valuing start ups are hard to do, some say its and art rather than a science. Many factors to consider, market size, are you first to market, scalability, delivery to the market place, and your past experience to name but a few factors to consider.

    Your idea should be to dominate and create a niche that is new, first market advantage. “Me too’s” can also succeed, they just require some added effort.

    I’m currently doing some valuations, pre money, on a couple of start ups in the technology area, founders see one value and the market sees another.

    Steven

    #1163354
    MissSassy
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    Hi Rob

    So many people build the most amazing website/business and forget that customers are required to make it work.

    As Greg said the “If I build it they will come” strategy doesn’t work in any notable way.

    The most important part of any business is working out how you are going to get people to buy what you have. This can be done through a feasibility study for example.

    #1163355
    Chris H
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    GD, post: 188942 wrote:
    Hi All,
    I’m after some advice / previous experiences, both positive and negative, that people have had with early stage startup validation.

    I started an ecommerce site myself some time ago, needless to say it didn’t go well. Looking back I think I can contribute most of the failure to a lack of early customer engagement.

    I’m conscious of not making the same mistake twice, so I’d like to know what tools / techniques others used to validate problems/ideas before spending too much time and money starting up a business.

    Thanks for the help
    Rob

    Hello Rob,

    The best way to test your business idea is to critically analyze it.
    It’s important to do this dispassionately, you shouldn’t try to talk yourself into or out of the business but rationally look at the pros and cons.
    Where a lot of people get into trouble is with “vertical thinking” they are unchallenged assumptions stacked up rather than challenged.
    My business is going pretty well, but as it matures I have to see if my product mix is still correct or if I’m using my time effectively.

    The actual thought processes are pretty simple but summed up nicely in a book called: Six thinking hats by Edward DeBono, you probably don’t need the book and can get the idea by googling it.

    Good luck!

    Chris

    #1163356
    GD
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    MissSassy, post: 188955 wrote:
    Hi Rob

    So many people build the most amazing website/business and forget that customers are required to make it work.

    As Greg said the “If I build it they will come” strategy doesn’t work in any notable way.

    The most important part of any business is working out how you are going to get people to buy what you have. This can be done through a feasibility study for example. Here is a recent blog post that I wrote about, this is the most affordable way to decide before you spend any money. [link removed]

    Thanks Kelly, you raise some good points in your blog re feasibility testing. I’m wondering if you have any examples of how people have gone about this. I find that a lot of Entrepreneurs, including myself initially, operated under stealth in fear of someone copying the idea. Do you find this to be an issue?

    #1163357
    GD
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    Chris H, post: 188956 wrote:
    Hello Rob,

    The best way to test your business idea is to critically analyze it.
    It’s important to do this dispassionately, you shouldn’t try to talk yourself into or out of the business but rationally look at the pros and cons.
    Where a lot of people get into trouble is with “vertical thinking” they are unchallenged assumptions stacked up rather than challenged.
    My business is going pretty well, but as it matures I have to see if my product mix is still correct or if I’m using my time effectively.

    The actual thought processes are pretty simple but summed up nicely in a book called: Six thinking hats by Edward DeBono, you probably don’t need the book and can get the idea by googling it.

    Good luck!

    Chris

    Thanks for the tip Chris. Yep, picked up the gist from the net. Do you involve customers in this processes or other ‘industry experts.’? Or is this more of an internal inward facing exercise?

    Thanks again
    Rob

    #1163358
    MissSassy
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    Hi Rob

    In reality there are no new ideas just new ways of perceiving them. Yes a lot do operate under stealth.

    The best way is always to include a third and impartial party – meaning who ever you choose can not be affected by their relationship to you. The reason for this is that they are not able to provide true and honest feedback for fear of hurt.

    Naturally I recommend myself but the choice is yours find someone who you can get along with easily and you feel that they are able to provide you with honest and knowledgeable feedback. They can play the devils advocate for example.

    Make sure they have hands on experience in small business not the corporate world alone etc. All these things make a difference when you are testing the feasibility of your business.

    #1163359
    Chris H
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    GD, post: 188961 wrote:
    Thanks for the tip Chris. Yep, picked up the gist from the net. Do you involve customers in this processes or other ‘industry experts.’? Or is this more of an internal inward facing exercise?

    Thanks again
    Rob

    Hi Rob,

    I do it myself, it’s more of a mindset than anything else.
    For example: I sat down with a friend in the past month who wanted to start a business. He had sold himself on the idea, but it was based on a set of faulty premises that didn’t work. (i.e. the available disposable income his prospective clients made etc.)

    I deal mostly with B2B sales, but have done some basic consulting work with people selling to the consumer market.
    It is really helpful to frame the discussion, for example: If your service costs $x per month, what else costs similar money and what is the take-up rate.
    I often use the example of Foxtel which is $49 per month and has a share of 29% of the households in Australia.
    Sure there are a large number of factors that play into this number, but it is an interesting number when it comes to disposable income and entertainment. The key is to find numbers comparable to what your proposed service.

    It all comes down to the fundamentals. The size of your market, the share of the market you think you could secure, the cost to you of your product or service and the difference in the middle.

    I quite often see threads here from people looking to start either an e-business or a bricks and mortar business where they’re complaining about the costs of freight or customs etc. “If i could get the freight or customs cheaper I could make good money” and they are filled with outrage. You can’t create a car that runs perfectly in zero gravity then bemoan the fact we have gravity on Earth and seek to change it. It’s often not possible to beat the price of other players in the market, especially with a start-up.

    the real questions are WHY should someone should use your product or service instead of another service of similar values?

    #1163360
    Harvey L
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    GD, post: 188942 wrote:
    Hi All,
    I’m after some advice / previous experiences, both positive and negative, that people have had with early stage startup validation.

    I started an ecommerce site myself some time ago, needless to say it didn’t go well. Looking back I think I can contribute most of the failure to a lack of early customer engagement.

    I’m conscious of not making the same mistake twice, so I’d like to know what tools / techniques others used to validate problems/ideas before spending too much time and money starting up a business.

    Thanks for the help
    Rob

    Hi Rob,

    I think you’ve hit on the key part yourself. At the end of the day, the only validation that really matters is that of your customers. If your potential customers aren’t interested in the product, it doesn’t matter what your friends, family, mentors, third party advisors etc tell you about your business idea as they won’t be the ones with skin in the game.

    Based on your concerns around secrecy, I’m assuming that your startup idea is a new business model and not simply replicating a proven business model in a new market. In which case, you must be thinking it can help solve a problem/need for your target market.

    The first validation you should do is see whether this is an actual big enough problem/need that your potential customers will be willing to invest time and money to fix.

    The quickest way would be just to call up potential customers and do a quick survey on whether this is a problem/need for them. If it is, tell them you’re working on a solution and whether they’d be interested in registering their interest to test your solution. This should help validate that it is a big enough problem for them to invest time into looking for a solution.

    Depending on what kind of startup you’re thinking, maybe you can come up with a manual method of helping the customer solve the problem without spending time and money building a complete product first. Again call and see if your potential customers are willing to pay a small amount of money for your solution. This will help validate whether people are willing to pay for your product.

    In regards to your concern about people copying your idea, most people will be too busy pursuing their own ideas, jobs, businesses to copy yours. Execution is the difference. If it’s literally a million dollar idea and copying it is that easy, you’ll have the same concerns with competitors copying you anyway once you go public.

    Cheers
    Harvey

    #1163361
    GD
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    Chris H, post: 188974 wrote:
    Hi Rob,

    I do it myself, it’s more of a mindset than anything else.
    For example: I sat down with a friend in the past month who wanted to start a business. He had sold himself on the idea, but it was based on a set of faulty premises that didn’t work. (i.e. the available disposable income his prospective clients made etc.)

    I deal mostly with B2B sales, but have done some basic consulting work with people selling to the consumer market.
    It is really helpful to frame the discussion, for example: If your service costs $x per month, what else costs similar money and what is the take-up rate.
    I often use the example of Foxtel which is $49 per month and has a share of 29% of the households in Australia.
    Sure there are a large number of factors that play into this number, but it is an interesting number when it comes to disposable income and entertainment. The key is to find numbers comparable to what your proposed service.

    It all comes down to the fundamentals. The size of your market, the share of the market you think you could secure, the cost to you of your product or service and the difference in the middle.

    I quite often see threads here from people looking to start either an e-business or a bricks and mortar business where they’re complaining about the costs of freight or customs etc. “If i could get the freight or customs cheaper I could make good money” and they are filled with outrage. You can’t create a car that runs perfectly in zero gravity then bemoan the fact we have gravity on Earth and seek to change it. It’s often not possible to beat the price of other players in the market, especially with a start-up.

    the real questions are WHY should someone should use your product or service instead of another service of similar values?

    Thanks again Chris. I like the Foxtel example, you’re right, people are usually pretty tight with their money and if they had the choice of spending $49 month on your product or $49 on foxtel which one would they choose and why. Down to value your offering I guess

    Testing the Why is an interesting one. Have you ever used surveys to try and do this to ensure your thinking aligns with customers? Or have you always just trusted your thinking and back yourself

    Rob

    #1163362
    Chris H
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    GD, post: 189021 wrote:
    Thanks again Chris. I like the Foxtel example, you’re right, people are usually pretty tight with their money and if they had the choice of spending $49 month on your product or $49 on foxtel which one would they choose and why. Down to value your offering I guess

    Testing the Why is an interesting one. Have you ever used surveys to try and do this to ensure your thinking aligns with customers? Or have you always just trusted your thinking and back yourself

    Rob

    Hi Rob,

    I personally find surveys problematic as getting people to engage in surveys is not easy and paying for results (in my opinion) warps the outcomes.

    Usually, I would evaluate the product myself from a ROI perspective and also look at how the product compares to those in the market.
    Following this, I will normally bring it up with a customer during an unrelated discussion and say something like “Would such and such service or product interest you if it could solve these problems and cost around $x”. This tends to get the most unbiased feedback as you haven’t rung them out of the blue with them on the defence against you selling them something. If I do this with a couple of typical customers that I trust, and get positive feedback I will move forward. It’s up to each person, but if the feedback is shaky I will likely drop it as I don’t want to invest time in an area where the customer isn’t positive before I have even asked for money. Of course I already have items the customer is interested in so I am a little more picky than a start up.

    The WHY question is not that hard to address, as long as you also cover the WHY NOT. It’s often as important to evaluate why a customer may not choose to purchase as they may.

    I approach every opportunity with a problem solving mindset. this being:

    1. Identify the issue, problem or opportunity
    2. Calculate the cost or missed revenue of the above to the customer
    3. Find a product or service to solve it.
    4. Calculate the margin you can place on the solution.
    5. Frame the solution (x, per week or the cost of inaction etc)

    If I can give you a real-world scenario, there was a thread yesterday about a couple looking to start a wheelie bin cleaning business. (Good on them by the way) This, to my mind, is one of those fraught ideas. The reason I say that, is that I wouldn’t think that people were overly concerned with the state of the their wheelie bins. It adds a whole other issue of complexity when you first have to sell the customer on the need before you can sell them on the solution. It’s completely different selling gutter guarding to someone who has had to clean their gutters in the rain, or a car service to someone who has broken down in the middle of nowhere.

    The other consideration is price, it’s up to each person but I wouldn’t pursue anything that returned less than 20% on my time, effort and capital.

    Happy to talk further if you have more specific details of your product and/or service. Feel free to PM me as well.

    #1163363
    GD
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    Harvey L, post: 189010 wrote:
    Hi Rob,

    I think you’ve hit on the key part yourself. At the end of the day, the only validation that really matters is that of your customers. If your potential customers aren’t interested in the product, it doesn’t matter what your friends, family, mentors, third party advisors etc tell you about your business idea as they won’t be the ones with skin in the game.

    Based on your concerns around secrecy, I’m assuming that your startup idea is a new business model and not simply replicating a proven business model in a new market. In which case, you must be thinking it can help solve a problem/need for your target market.

    The first validation you should do is see whether this is an actual big enough problem/need that your potential customers will be willing to invest time and money to fix.

    The quickest way would be just to call up potential customers and do a quick survey on whether this is a problem/need for them. If it is, tell them you’re working on a solution and whether they’d be interested in registering their interest to test your solution. This should help validate that it is a big enough problem for them to invest time into looking for a solution.

    Depending on what kind of startup you’re thinking, maybe you can come up with a manual method of helping the customer solve the problem without spending time and money building a complete product first. Again call and see if your potential customers are willing to pay a small amount of money for your solution. This will help validate whether people are willing to pay for your product.

    In regards to your concern about people copying your idea, most people will be too busy pursuing their own ideas, jobs, businesses to copy yours. Execution is the difference. If it’s literally a million dollar idea and copying it is that easy, you’ll have the same concerns with competitors copying you anyway once you go public.

    Cheers
    Harvey

    Thanks for the response Harvey. I find, and I’ve been guilty of this, that a lot of ‘new’ entrepreneurs operate in ‘stealth mode’, because they’re worry about someone copying there million dollar idea. Well that’s what they say. I attend a number of Tech Startup events and find that people always hesitate to tell you there idea before they really get to know you. Maybe that’s why most people only tell family and friends?

    I agree that most people won’t or can’t copy your idea and it really is about the execution, however it took me sometime to realise this so I don’t expect other to grasp it straight away. May be it just takes time and failures before people eventually realise that ‘stealth’ often equals risk of creating something that people don’t need. A couple of people have mentioned to me that you should ask people to sign NDAs before sharing details, but I think that’s really impractical and I doubt many people would actually sign them.

    Anyway thanks again for the response
    Rob

    #1163364
    Harvey L
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    GD, post: 189110 wrote:
    Thanks for the response Harvey. I find, and I’ve been guilty of this, that a lot of ‘new’ entrepreneurs operate in ‘stealth mode’, because they’re worry about someone copying there million dollar idea. Well that’s what they say. I attend a number of Tech Startup events and find that people always hesitate to tell you there idea before they really get to know you. Maybe that’s why most people only tell family and friends?

    I agree that most people won’t or can’t copy your idea and it really is about the execution, however it took me sometime to realise this so I don’t expect other to grasp it straight away. May be it just takes time and failures before people eventually realise that ‘stealth’ often equals risk of creating something that people don’t need. A couple of people have mentioned to me that you should ask people to sign NDAs before sharing details, but I think that’s really impractical and I doubt many people would actually sign them.

    Anyway thanks again for the response
    Rob

    Agreed, there should be some element of stealth in building your tech startup and if you think it really is a novel idea, you probably shouldn’t go around telling everyone you meet at a Tech Startup event about your idea. The guys there, especially developers are probably the people with the best capability/capacity to copy your idea. But even then the chances are pretty low as they would most likely have their own pet ideas.

    My comments around not operating in stealth mode is in reference to talking to your target market customers as early as possible and telling them about product you’re planning to build to see if it’s something that they think will actually be useful to them. Unless your target market is the startup tech community, I don’t think there should be any worries about trying to engage your potential client base as early as possible to avoid building a product they don’t want.

    You said it yourself that you got burnt previously without early customer engagement so this time just go out there and talk to your target market as soon as you can. Their feedback will be priceless. It’s the process I’m going through at the moment as well. If the problem is that you’re finding it hard to get in contact with your target market to get feedback, you’re going to encounter the same problems when you have a product and you want to get in contact with them to sell it so may as well start early.

    Agree NDAs are impractical. They should really be reserved for when you have investors conducting due diligence on your company and you’ve got proprietary technology or processes.

    Cheers
    Harvey

    #1163365
    GD
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    Harvey L, post: 189151 wrote:
    Agreed, there should be some element of stealth in building your tech startup and if you think it really is a novel idea, you probably shouldn’t go around telling everyone you meet at a Tech Startup event about your idea. The guys there, especially developers are probably the people with the best capability/capacity to copy your idea. But even then the chances are pretty low as they would most likely have their own pet ideas.

    My comments around not operating in stealth mode is in reference to talking to your target market customers as early as possible and telling them about product you’re planning to build to see if it’s something that they think will actually be useful to them. Unless your target market is the startup tech community, I don’t think there should be any worries about trying to engage your potential client base as early as possible to avoid building a product they don’t want.

    You said it yourself that you got burnt previously without early customer engagement so this time just go out there and talk to your target market as soon as you can. Their feedback will be priceless. It’s the process I’m going through at the moment as well. If the problem is that you’re finding it hard to get in contact with your target market to get feedback, you’re going to encounter the same problems when you have a product and you want to get in contact with them to sell it so may as well start early.

    Agree NDAs are impractical. They should really be reserved for when you have investors conducting due diligence on your company and you’ve got proprietary technology or processes.

    Cheers
    Harvey

    Harvey, I’d be interested to know what you’re working on and how you’re going about your validation. By the way, have you ever used survey tools to validate problems, solutions, assumptions.. with a potential target market?

    Rob

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