In 2021, a record 5.4 million startups started, which is greater than the 4.4. million start-ups that opened in 2020 globally. Surprised, right?
We were too.
But, you know what’s even more surprising? The rate of failures.
Roughly 90% of the startups fail globally, and not-so-surprisingly, most of them have a similar reason for not making it – no market validation.
To make sure you don’t fall in the same segment, in this blog we address the 7 ‘hard’ questions one by one in order for you to accelerate and get to the point of scaling ASAP.
Yes, it’s a bit of a time consuming process but remember as Brian Balfour, one of the most seasoned growth marketers once said, ‘You need to start by building a deep foundation for growth at your company’.
Questions to validate your start-up idea
When you’re starting your own venture, there are hundreds of ideas that come to mind. But not every idea is slated to succeed in the market!
To know where your idea really stands, we recommend asking yourself these seven questions, which are also a part of the Traction Tracker we have built.
1. Which problem are you solving?
Not all of us have great ideas like Jeff Bezos, Elon Musk, or Bill Gates. But, we do have eyes to observe, and observations can help us spot a problem in no time. Think about the last time you didn’t feel the coffee was strong enough and instantly chose to go with the solution of swapping it with another.
Honestly, that’s how leading startups were founded.
- Jeff Bezos started Amazon with the idea of delivering goods at people’s doorsteps because moving to stores for day-to-day essentials was time-consuming.
- Elon Musk started Tesla, Neurolink, SpaceX, etc, all for improving the quality of life of people by leveraging technology available around us.
- Steve Jobs started Apple to make computers personal and small enough to have them available at home.
There are so many more ideas out there that are scaling rapidly like Zomato, Uber, BlinkIt (previously known as Groffers), and many others.
What’s common between them all? The problem statement that they defined, and here’s how you can do it too:
- Be absolutely specific about the problem.
- Define a target audience at the risk of facing the problem.
- Follow up with the market research.
- State the present solution (The Bad One!).
- Remove assumptions, and make the solution about them.
Don’t worry, we’ll explain it further later in this article. Remember, the problem was never about just “You”. The faster you understand the problem is about the market, and people, the better and clear the solution you’ll be able to come up with.
2. How urgent is this problem?
The next step is validating your problem statement and how ‘urgent’ the problem is for your target market.
Just like everything in a meeting doesn’t need to be worked upon immediately, not every part of the problem statement (or the whole of it) you’re going after, needs to be addressed in the NOW for your target audience.
It’s also important to note that simply because you’re facing a problem, it’s not necessary that others are as well. But running a business is not just about solving a problem for yourself; it’s more about the problems of the target market you’re taking the solution to.
Here are a few ways to gauge whether the problem statement you’re going after is worth building for:
- Use the Google Keyword planner to look for searches made around the problem you’re planning to solve.
- Take note of the search volume across different demographics.
- Run a survey within your target market network and ask them what it means if the respective problem is not solved asap.
- Collate numbers before you take any call.
3. How big is the market for this problem?
“If you don’t know how big the market is and the possibilities that lie ahead, you’re leaving not just opportunities, but also money on the table”.
In the same breath, we’d also say that if you don’t know how big the market is and overestimate the demand, you might just end up running out of your resources.
Market research is the foundation of your startup, but it is easier said than done considering the different parts of your idea that you need to research on.
Let’s understand it through an example: you’ve got a brand or want to start a brand that sells toothbrushes. Now, your main focus is collecting data, but not just every data; something specific. Here are some of the factors that you should look into:
- How many toothbrush transactions are made every year?
- How many times does an average person buy a toothbrush?
- What is the percentage of your industry in the market?
- What is the market value of that product?
- What might hinder your growth (The Problem Factors)?
While some startups rush through the process, there are those that spend an average of six months to a year to understand the smallest nuances of their target market.
4. How is it solved right now?
You’ve gathered all the required data to lay the foundation of your target market. Now the next step is to look into what is already available to that target market – solutions that may or may not be solving the problem that you’re trying to address in entirety.
Here are a couple of things you need to look into at this step:
- What are the current solutions available to the problem?
- How satisfied is the target market with the solution?
- What are the loopholes/ opportunities you see?
- What are your weaknesses?
- What are your strengths?
With these checkpoints, work ahead will become easier for analyzing what you might be missing or could’ve missed while researching the problem.
5. How is your proposed solution valued so far?
This is where you need to get down to doing the hard talk.
Based on your market research, opportunity gaps, weakness and strength analysis, and the demand for your solution, you need to evaluate how valued your offer is.
By valued we mean how your target audience is going to respond to the value proposition you’re taking to the market. A couple of things to answer at this stage include the following:
- What exactly is your value proposition?
- How does your value proposition compare to existing solutions?
- How does your proposed solution compare financially to the available ones?
- How much value does your target audience see in solving the problem you’re addressing?
A good way of validating your value proposition is based on the value hypothesis. This concept was introduced by Eric Reis in his book The Lean Startup and proposes an assumption on how a product or service is valuable to potential customers. Once validated you can move forward to defining its uniqueness and how you can drive revenue.
6. How unique is your proposed solution?
You know what’s available in the market, how comfortable your target audience is with the solution being offered and what you can either do better (or not). This is the stage where you identify how unique your proposed solution is.
There are only two takeaways from this analysis – either you’re going to be offering something similar to what exists in the market, or you’re going to have a clear list of what makes you unique and hence, more appealing to the target audience.
A few ways to evaluate how unique your proposed solution is:
- Draw up a feature by feature, or offer by offer comparison sheet
- Take note of the similarities between the two
- Identify where you can offer an added benefit or advantage
- Note how that added advantage adds value to the prospect
7. How are you going to generate money out of it?
You could have the best solution or the best offer to make to entice your target audience away from the existing solutions. But you need to also take note that your offer isn’t eating into the revenue you’d need to generate to fuel your startup’s growth. This will eventually impact how you price your solution while taking it to the market, the variables you keep for increasing or decreasing the pricing while running offers in campaigns and the profits you’d be able to make.
A couple of things you need to calculate here include:
- What are your total costs of running the startup (development, marketing, sales and other operations)?
- How much value does the offer you’re making on the solution come to?
- What is your revenue model?
- Does it take into account one-time acquisition or repeat sales?
- Does your revenue model help attract the right investors?
- How and what are your financial projections?
- What are the critical variables that drive your business and their estimated value?
How to make sure you have all the answers to validate your startup idea?
Navigating through the steps and answering each of the questions above may seem like a daunting task. In fact, we have seen many startups leave the exercise mid-way owing to the number of variables and the depth that each question nudges them to dive into.
That’s why we built the Traction Tracker. It walks you through a series of questions that are based around the ones above, to help you not just validate your startup idea, but also create a plan to grow it.
Ready to see how your business idea is placed in the market? Get your growth report today.