Is there a market for your product? And how can you find this out? It’s essential for all businesses to understand this, and can be make or break for startups.
In this second episode of The BizWisdom show, Sam talks about how to find the market for your startup. As part of this, Sam shares a story about a friend who came to him with questions about launching a new business idea and unpacks a strategy that saved her almost $100,000 in unnecessary set-up costs.
Is there a Market for Your Products or Services?
How to Evaluate Your Business Idea
This story illustrates a good way of thinking about your business.
A few weeks ago, a good friend of mine came to me with a new business idea. It was a unique idea, and she was excited about it.
I can’t divulge what the idea was, but it involved renovating a holiday rental and solving a lot of challenges through a hybrid product-service that she conceived. She had been thinking about it for a long time and wanted to discuss how to bring this idea to market.
She listed the idea for the business and had specific questions about certain web platforms that would enable a very custom user interaction. She spent about 10-15 minutes explaining the idea and her vision for a big, beautiful, bold website.
When she asked about the potential cost, I told her that the website she described might cost between $100,000 to $200,000 to build, maybe even more. She didn’t flinch at that and said she and her husband were prepared to invest about $100,000 as they thought it was a cool idea.
But while she was listing all these things, I counted about 35 different ways that the business idea could fail. I told her that if she took that $100,000 from her savings and put it into this website, and it failed, it would be hard to pinpoint which of the 35 potential failures caused it. The idea was based on her imagination of a customer that may not even exist. The product was new and not known in the market.
The risk was that she would build this based on assumptions and find out too late that it was not what the market wanted or needed.
Finding Your Audience & Testing the Market
So, we spent about an hour and a half to two hours working through this. We landed on the realisation that she didn’t even know if there was an audience for this product.
The first step was to find out if there was an audience. You don’t need a $100,000 website or even a product for that. All you need is to put an ad in front of the target audience and see if someone clicks on it. If they do, that’s a start. If not, you can iterate the ad until someone does.
Then, if they click on an ad, serve them a simple page with one product and a big buy now button. If they click buy, you don’t even need to sell it yet. Just put a message saying it’s out of stock and ask for their email.
This way, you test the market’s interest without a huge investment. If 200 people click on an ad and 20 of them click buy, you’ve got an audience. If you can’t get anyone to click, you know there’s no interest without spending a fortune.
From there, you can start with a small batch of products. Test selling them at cost price, then experiment with the price. See how high you can set it before people stop buying. Once you’ve established there’s a market, you can then build your custom website with confidence, knowing you have a product people want at a price they’re willing to pay.
This approach saves you from investing a huge sum into an untested idea. It’s about solving one problem at a time. This methodology works across different scenarios, not just startups. We’ve seen people invest in complex marketing automation systems without testing the market first, leading to potential failure points.
Focusing on Achievable Targets
In summary, when starting a business, it’s crucial to focus on small, achievable targets, secure a win, and then build upon that. Don’t try to replicate sophisticated businesses with complex marketing programs right away. Start simple, test, confirm, iterate, and then build upon that one win at a time. This approach helps ensure your startup survives and thrives.
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