Note: this post was inspired by lean methodology books like Lean Startup, Running Lean, 4 Steps to the Epiphany, and Lean Analytics. Enjoy!
So you’ve got a great business idea.
You hate your boss, your skills are wasted in your current job, and people younger than you are getting richer than you with ideas that you thought of first.
I get it, I’ve been there too.
Two years ago I quit my job and started Ladder. Things are going pretty well; our team is now 15 people strong and we’re hiring another person every month. I’ve even helped over 70 other people launch and scale their business ideas.
So now it’s your turn. What’s your big idea?
AirBnB for pets? Uber for backrubs? Yelp for people?
OK, so assuming it hasn’t been done yet and it doesn’t defy the laws of physics… what are you waiting for? Quit your job and start a startup!
As soon as you quit your job, the clock is ticking.
It’s a race to get customers before you run out of savings or hit your credit card limit. Not to mention the opportunity cost of what you could be doing with your time instead.
Is your idea really good enough to bet $10s of thousands of dollars of your own money on? Are you really ready to commit to working 80 hours a week for 7 years on this thing?
What makes you think you can overcome the 1 in 10 odds?
Wouldn’t it be smarter to test the idea first?
You wouldn’t buy a car before taking it for a test drive. Why would you waste so much more money (and time) without ‘test driving’ your business idea first?
Well that’s what I’m going to show you how to do.
You don’t need to raise thousands of dollars in funding or take out a loan. You don’t have to miss paychecks or worry where rent money will come from. You don’t have to find that technical co-founder or spend hours learning how to code.
I’m going to teach you how to validate your business idea before doing any of those things.
In 5 easy to follow steps.
Backstory
We originally created this content as part of a course business we were launching codenamed “Z21”. We actually followed these exact steps and had 5 people sign up for the $2,500 course and place deposits… but we refunded their money. Why? Because this wasn’t the only idea we were testing and we found something that was even more promising.
The great news for you is that we didn’t want that content to just go to waste, so we’re putting everything into this post… for free. Don’t say we never give you anything. ?
Note: even if your business is already established, you should still find this a useful exercise.
Step 1: Sales
Yes, that’s right. Sales.
You’re asking “How can I sell a product that doesn’t exist?”
Exactly. It’s tough to sell a product that doesn’t exist.
…and that’s precisely the point.
If you CAN pre-sell this product before it even exists, you’ll KNOW that your idea is good.
When I started Ladder I had already closed $20k in recurring revenue before I quit my job.
Did I have a product? No.
Did I have a website? No.
Did I even have a pitch deck? No.
What I did have was a problem worth solving, and a vision of what the solution could be.
The startup founders I talked to were working with 5-6 different marketing specialists, consultants, and agencies each, all of whom weren’t talking to each other and some of whom were ripping them off.
They were desperate for someone to come in and clean up the mess.
I offered to do everything their current consultants were doing, but with one point of contact and a 20% money back guarantee if I didn’t hit their targets.
The way you do it doesn’t matter. What matters is that you actually find out what people are willing to pay up front for.
If people are feeling so much pain from the problem you’re solving, that they’ll stump up their cash ahead of time, you’re on to a winner.
You can offer a money-back guarantee like I did, but It’s important that you actually get people to fork over their cash.
The reason? People lie.
Your Mom doesn’t want to hurt your feelings, so of course she’ll say your idea is the best idea in the World. Your friends also don’t want to hurt your feelings, so they tell you to go for it. Your colleagues don’t even like you, so they tell you what you want to hear so you’ll go away.
Well actions speak louder than words; if people aren’t forking over cold, hard cash, you don’t yet have an idea worth working on yet.
I know – it’s uncomfortable to ask people to take a risk on you. It feels dishonest to take someone’s money before giving them a tangible product in return.
Well you’d better get comfortable asking.
You’re also going to have to sell your vision to:
- your first employees (who by all rights should be working elsewhere for more money and better hours)
- early investors (who’ve seen thousands of overly-optimistic companies fail and have plenty of other great ideas to choose from)
- your friends and family (who I guarantee will be concerned about your mental health and finances).
Besides, people pay for products that don’t exist yet all the time. Heard of Kickstarter? Bought airline or concert tickets? Booked a hotel? Pre-ordered a hot new video game?
If there’s enough demand for the product, there will be at least a couple of early adopters who will buy it before it exists. If there isn’t, that’s the invisible hand telling you to try something else.
Still need convincing? Lack of “market need” is the #1 reason startups fail.
So protect yourself from this risk early on, by doing the following:
Write an email to your network
There will be people you know that have the exact problem you’re trying to solve with your business. Brainstorm a list of those people and email each one with something similar to this:
Subject: Working on a new business: Doggie Treats.
Hey Dave,
I’m selling premium dog biscuits on a subscription for $50 per month. Taking 20 pre-orders at that price.
PayPal me $50 at example@email.com if you want in.
Know anyone else that would be interested? Feel free to forward this email.
Any questions, just hit reply.
Sure it feels uncomfortable writing that email.
Nobody likes to ask your friends and family for money. But if you are providing genuine value, it won’t feel uncomfortable for them. They’ll be happy that you’re solving a problem for them.
But if people who already like you react negatively to your idea… then why would people who’ve never met you buy from you?
Time to move on to the next one.
Get out of the building
This is basically Steve Blank’s catchphrase. As a serial entrepreneur, Stanford professor and grandfather of the Lean Startup movement, you should listen to him. What he’s talking about is the value in actually talking to customers.
This is the #1 mistake I’ve seen people make (and I’ve made myself). It’s nice and comfortable to stay inside your office and dream about this perfect business you’re creating. As long as you stay in that building you can continue to dream, and everything’s right with the world.
Going outside means interacting with the public. It means pushing yourself out of your comfort zone. Most of all it means rejection.
The real world is imperfect. People are illogical. The dream you had about building the perfect company is often shattered upon first contact with your potential customers.
In the real world, people tell you no.
That sucks. But let me tell you what’s worse – working 80 hours a week for 3 months and spending thousands of dollars of your own money only to THEN going into the World and hear that big fat NO.
In the early days of Ladder I spent a whole year of evenings and weekends theorizing business ideas that never made it past the pitch deck stage.
Seriously – they never even saw the light of day. I was killing myself working 80 hours a week, earning half my previous salary and sacrificing time with my friends and loved ones… for nothing.
I was told to ‘get out of the building’ time and time again by lots of smart people, but it took a whole year of wasted effort for me to really internalize it. It was only after I really started listening to customers that I realized how wrong my theories were. From there we made changes to our business that helped us triple in revenue over the next 6 months and hire 15 people.
Don’t make the same mistake as I did, for as long as I did.
Remember: in theory, there’s no difference between theory and practice. In practice, there is.