Three easy ways to test if your business idea will make money
So you’ve got an amazing business idea and you hope it’s going to make you lots of money (or at least enough to live on). But how can you be sure? How can you test your concept to check it really is financially viable?
It’s easy to get carried away with an exciting new business idea. But the reality is that as many as 20% of start-ups fail in their first year – so you need to really make sure your concept is financially viable before investing too much time, effort and cash in it.
And to help you do just that, business and marketing coach Sarah Devenny reveals three easy ways to test if your business idea will make money.
Don’t make the same mistakes as me
Having a really great business idea is very exciting – and if you’re anything like me you’ll probably start playing out imaginary scenarios in your head of how this business will be the next big thing and everyone will just be in awe of your amazing success.
Okay, first of all – don’t be like me. Yes, it’s good to dream big and a little fantasy never hurt anyone, but I have learned the hard way when it comes to starting a business, and now I work everyday to show my clients how NOT to follow in my footsteps.
For as long as I can remember I wanted to have my own business. I’m still not sure if the desire to become an entrepreneur is something we’re born with or if it’s something that’s developed over time – perhaps it’s a bit of both. I just know I’ve never felt like I belonged in the 9-5 game. And if you’re reading this, I’m guessing you feel the same way.
Here’s the thing, though. Although I knew I wanted to run my own business (or businesses), that was about as far as it went. I didn’t really have a plan of action – or any kind of plan. I had no idea what I would do, what my real talents were, and most importantly, what I could actually make a living from.
Why test your business idea?
It’s all very good having a brilliant idea and even being super passionate about it, but if no one wants or needs what you’re offering then it’s not really a business – it’s just an expensive hobby. And you want a business, don’t you?
If you do, don’t succumb to the ‘build it and they will come’ syndrome, as so many business owners do (including me). Life doesn’t usually work like that. First they come, and then you build it.
Ultimately you need to research one vital question – will people buy this? If the answer is no, then you need to cut ties and move on. If the answer is yes, then I’m sure you know what to do.
It’s an approach used by successful businesses the world over. Just look at big brands such as Coca-Cola or Nike. They don’t just guess what people want – they go out and do market research, and this is what sets them apart when they develop extremely targeted products.
So before you get ahead of yourself like I did, I want to share some quick tips you can use to test your business idea right away and see if there’s a market for it – before you spend a penny on anything like a fancy website, business cards, etc.
(Oh and before I start, don’t worry if someone is already out there doing something similar to you – if there’s no competition for your business idea, there probably isn’t a market for it.)
Three easy ways to check if your business idea will make money
So how can you test whether your brilliant business idea is ever going to be worth cold, hard cash? Here are three easy steps to validate your business, and save time, money – and massive headaches.
1) Ask people what they want
Oh, so simple. Yes, it can be a little scary at first, but how else are you going to know what people want if you don’t ask them?
There are many ways to do this, so find something that you feel comfortable with and you’ll be surprised how easily people open up to you.
Most people love talking about themselves, so when you show a genuine interest in their needs, you’ve already got on their radar. Good ways to find out what people want directly are through surveys and polls – both online and offline.
Another great way is to print up a quick flyer (nothing fancy) about your products or services and go around town asking the people who you think would be your perfect customers if this is something they would buy.
2) Check what people are already buying
In this digital age it’s so easy to find anything in a matter of seconds. People buy products and services online all over the world everyday, and this information is not secret.
Do you have an ebook you want to sell, or a new digital course? Doing a simple search on Amazon, Google Trends or Udemy are great ways to see what people are paying for – and how much. Check things like reviews to see how you can offer something better, add extra features, etc. Whether you sell digital products, physical goods, or even services, the only way to know if you can sell them is through market research.
3) Do a test run
I saved this step for last, because this, in my experience, has been the most effective way to really know what people are prepared to pay for before you even think about spending money on your business.
This is now even easier than ever, can literally be done in minutes and works for digital and physical goods as well as services.
Say, for example, you want to create a new online course, but you’re not sure whether it will actually sell. You can set up a quick sales page for free (or even as a Word doc), link to a PayPal account and distribute it to the people you think it would interest.
If you make sales, all you have to do is refund them immediately and tell them it’s sold out for now, but as soon as it’s available again, they’ll be the first to know.
I know this seems dishonest, but I assure you that it’s a very commonly-used market research tactic, and unless you want to spend weeks creating something that doesn’t sell, this is the way to go.
Alternatively you can invite people to sign up for a free Beta testing phase in exchange for a review. Now you know that people will buy it, and you have some testimonials to add to your sales page when you do put it out there.
Start testing out your idea today
And that’s it, three simple but oh-so-important ways you can test whether your business idea is quite so fantastic after all. So if you’ve been toying with a business concept, why not start testing it out today – and take the first step to a potentially successful future.
And once you’re ready to launch, you’ll need a business bank account that can handle all of the boring stuff like setting aside money for tax automatically. Monzo has a free business bank account that lets you do just that.
Sarah Devenny is a business and marketing coach. You can find out more about her work on her website.