Transcripts
1. Course Introduction: Imagine spending three years of your life struggling to build a business only to find out that no one actually
wanted your product or service in the first place. 90% of businesses fail,
but yours doesn't have to. Today, I will be sharing
seven steps that I use in order to validate my business
idea before I got started, which eventually then led to over 15,000 online customers, but more importantly, a retail network of over 600 partners. So this will be a
step by step guide providing real life
examples and steps that you can follow in order to validate your idea before you get
started. So let's dive into it.
2. Intro & Real-life Example: My name is Simon,
and today we will go through the seven
steps that you should complete before heading out of your business
to understand if your business idea actually has the potential that
you think it has. I use the exact seven steps in order to evaluate
my business idea, my first business idea that eventually made over 1
million euros in revenue. So first of all,
congratulations. Why? Because when you
click on that video, I assume that you already found an idea that you
believe in that is great because finding an idea is actually one of the hardest
parts in the beginning. However, what you do next is absolutely crucial
because in the end, you don't want to waste your
valuable time, your money, or even other resources
running after an idea that will never be
successful from the get go. This course is all about asking the questions
that you maybe fear deep down can poke a hole in your plan or that can get you
out of your comfort zone. But the goal is to
really understand if your business idea has the
potential to be successful. After completing the seven steps that we will go
through together, you will have drastically
increased your chances of success and decrease the
degree of uncertainty. It is important to note
that the seven steps that we will go through work
for all kinds of ideas. It doesn't really matter
if you plan to launch a digital platform or a physical product or something
completely different. But in the end, all ideas,
all business ideas, no matter what they are, they should be tested before you commit any kind of
resources to it. So let's get in I think it's the
easiest to visualize the seven steps by providing
a real life example. I will share some
insights on how I evaluated my first business
idea using the seven steps. It was all about
cleaning tablets. Small cleaning tablets that wants you to solve
them in tap water, leave the customer with
effective cleaning liquid. Why would we come up with
something like that? Well, the customer can just simply reuse bottles
they have at home. They can save a lot
of money because a tablet is much cheaper
than just buying a whole bottle again and they can reduce a lot
of plastic waste. Initially, we started selling our products online
because there we had a big logistical advantage over normal cleaning
quid because we didn't ship any water weight
around the planet because the water was already
at the customer's home. So in the end, the idea was a game changer not only
for logistics because we didn't have to ship
any water weight around for the environment
because people were able to reuse plastic bottles and also for the
wallet because it was much cheaper to just buy a cleaning tablet and use the water that you
already have at home. On top of that, the product also looked very nice compared
to other cleaning bottles, so we also had an edge there. So three years later,
we had over 15,000 customers and a partner
network of over 600 clients, and they loved our product because how easy it was to ship the logistical advantages and how easy it was
to stock compared to normal cleaning liquids. We only got to that
success because we did our homework
before launching our business by looking if our business idea actually has the potential that
we thought it has. Now that I've introduced you to the example that I will be
using throughout those steps, it's now time to dive into the first actual step that you can do to validate
your business idea. How I want you to
look at this is to imagine a letter that
stands between you, your business idea, and a
successful product launch. On this letter, each
step will represent one experiment that we will do that will get us
closer to that launch. After each step or each
experiment that we conducted, we want to analyze the findings. Based on those findings, we then want to make the
decision if we either want to move to
the next step and continue with the
next experiment, if we maybe want to sleep one night over it and organize
our thoughts a bit, or if you already say,
I want to pivot my idea because I already feel that this idea is going
nowhere, that's fine. But then we just start
at the first step again. Let's
3. Step 01: Research Your Competitors: Now we will start
climbing the ladder, and the first step
to understand if your business idea will be successful is to
do your research. And I know this is not
the most exciting part, but it is absolutely crucial. At this stage, we should also understand
that we are just at the very beginning and all the research we do right
now is very, very basic. That just gives us
a brief overview of the competitive landscape or whatever landscape we
are about to enter. The easiest way to start your desk research
is obviously by just simply typing in your idea into Google and see
what you can find. But perhaps you have
hesitated to Google your idea because maybe you have been scared of what
you will find. And if so, then you're
actually not alone because I talked to a lot of young
entrepreneurs and they say, yes, I Googled my idea. Obviously, that was the
first thing that I did, but also the first
thing that I did was that I found out
something already exists like that and they get discouraged and they actually don't continue on their journey. Through the Internet, we are all very connected
with each other. It is very, very likely
that when you type in your idea and
you will look at the results that you will
get discouraged because it may already exist or
something very similar to it. Especially at this stage, competition should
not be considered as a bad thing because imagine you're trying to introduce a whole new product to the world that no one
has ever heard about. There is a huge
market. There's a lot of people that you
need to educate. You need to spend
a lot of money. You need to spend a lot of resources in order to get there. But now when you have some competitors doing
something similar, then you develop the market
together and you only have to spend a fraction of your
money on your own resources. I benefits everyone, at
least in the beginning. As soon as the market
gets more crowded, then of course, it's a
bit of a different thing. Competition can
also inspire you. Maybe you take a look
at the competitor and you immediately spot
some things that you know you can do
better than them that the customer actually
cares a lot about or maybe your competitor introduce something that you never thought about and that
inspires you to do something similar or
in the same direction. Just keep in mind to not get lost by looking
at your competitor, but concentrate on yourself and only look around you
for inspiration. What I want to say with that
is that you should not get discouraged when
finding competitors in the space that
you want to enter, but just continue and
start analyzing them. I would suggest that you
take two or three of the most relevant competitors and break them into the
following categories. The first category is direct
versus indirect competitors. Direct competitors do the
exact same thing as you, they solve the same need the customer has in
the exact same way. While indirect competitors only solve the same need
that your customer has, but in a whole different way. The second category would be what geographic
market they target. Do they target one market or can they be found
across the whole world? You can find that out by researching which
countries they ship to, what kind of languages
they have on the website, and how many domains they
have online, for example. The third category that
I think is relevant is the size of your competitor,
how big are they? And there are some markers
that you can have a look at. For example, maybe they talk
about their revenue numbers. You can find out how
big their team is, how many employees they have, and how many partners
or customers they have. All those are indications
about the size of a company. The fourth category is what their go to
market strategy is, which sales channel
are they using? Maybe one competitor
is targeting their customers online while another is targeting
them offline. Maybe one is
marketing directly to customers while another one is selling business to business. The final category is how much momentum
does the competitor? Here, you can look at how many social media
followers they have. Do they have engagement online? Have they maybe recently
closed a funding round, or do they currently have open job positions on their website and they are
hiring to increase their team. The following tools you
can use in order to understand what the traction
of your competitors. You can do a keyword
search with Google Trends. You can analyze the web
traffic of your competitor. You can check discussion forums, and you can read the
reviews on the website. When I completed this
step for my idea, I was very surprised to find some competitors that just launched in the same
market that we did. We saw immediately
that we were not the only ones that
had the same idea. Immediately found
out that we had two direct competitors in our market that just
launched two months ago. At the same time, we
also saw that we had another competitor in the US who launched over a year ago. But instead of getting
discouraged by saying, someone already made this idea happen and it's already reality, we got encouraged because we saw that we were not
the only ones with the idea and that
there's something in the market happening that
we can be a part of. Therefore, this was a very, very classic example of finding competition but not getting discouraged but actually
encouraged by it, and that really fueled
us in that moment. Spending four to 5 hours researching your
competitors from your desk, you can now look at the
takeaways and see how you feel. You maybe feel discouraged
because you found a big direct competitors that is operating
exactly in your market. Do you feel maybe encouraged
because you found some smaller
indirect competitors that you can take
inspiration from, or do you feel very unsure
because you could not find anything and no one has ever
come up with your idea. Here are some
indications on how you can move forward based
on your findings. I think it's no secret that if you found a direct competitor that is doing the
exact same thing as you in the market
that you want to enter, you will have a whole set
of challenges on your hand. Because in order to convince customers to buy your
product instead of theirs, you will need to
have an edge that this large competitor
has not found yet. If you found a lot of
smaller competitors that just launched and seem
to have great traction, then you can take
this as encouragement because you just need to
find an edge over them, but it basically
says that the idea has some potential because
others believe in it too. In some rare cases, you will
find no competition at all, not direct or indirect. That means that you
were actually the first one who came
up with that idea, and that comes with
some advantages and disadvantages because
the advantage is, of course, that you
are the first one to introduce that idea,
that is great. But the disadvantages is
that there are no signs from competitors that will indicate if your idea has
potential or not. The next step of the
idea valuation letter become even more important
for you at this stage.
4. Step 02: Visualize Your Concept: After we were looking
outside and we map the competitive landscape of the market that we're
about to enter, now it's about focusing again on us and start with
the second step. The second step is to
visualize your idea. Trust me when I say
that this can be a game changer for your company. When I say visualize your idea, it's all about getting
the concept out of your mind out into a visual form in order
to show it to people. The immediate benefits
that you will feel directly are that
it's much easier to pitch your idea and it will be way easier for people
to relate to your idea. Let's look at why
it's so important to visualize your idea
as early as possible. As an early stage
founder, it's very, very important that you are able to convince people
of your concept. If that's either
customers, investors, maybe co founders
or early hires, you need to convince all of them that your concept
is a winning one. Trust me when I
say that a picture says more than 1,000 words. It's so much more effective
to show a picture of your idea compared to just explaining your
idea with simple words. And when I say to
visualize your idea, it doesn't have to be anything
advanced or complicated. Just use the resources
that you have in order to bring your concept from
your mind onto paper. If you have a physical
product, for example, can be as easy as just
sketching it on paper, using Photoshop or
making a three D render. While, when you try to
visualize a digital platform, all you need to do is maybe make a clickable prototype using
FICMA or other platforms, just to have something to show to people when you
pitch to them. At our startup,
visualizing our idea was an absolute game changer because we went from
a simple sketch to a slightly more
advanced three D render of our product and
what it did for me was that I went from
pitching my product verbally to just simply taking up my phone and
showing the picture. What took me 3 minutes before just verbally
explaining my idea, which was sometimes very tricky because I use
different words. It was very inconsistent. Now only took me 30 seconds
because I just simply whipped out my phone and showed
a picture of my product. Every time I showed the
picture of the product, I could see the reaction
in the people's face. All of a sudden they immediately
understood the concept, they understood the advantages, and they understood why I think people would
like to buy it. I sparked real interest and
we actually had a very, very engaging
conversation afterwards. Those conversations
I would not have had if they wouldn't be able
to visualize the idea, to understand what
I'm talking about, and to align our views on it. Now that you have
visualized your idea, we're ready to take
it to the next step. Unless, of course, during
this visualization step, you have realized that your
product has major flaws and that you will never be able to create it in the first place. Then of course, you need to find a new idea and
start over again. For those that have
now visualized it, we can move on to step three.
5. Step 03: Customer Interviews: So after we have now visualized our idea, as I said before, I had a lot of encouraging conversations and I talked
to everyone about my idea, with my friends, family,
and everyone around me. I think it's very great to talk about your idea with everyone. However, it is, of course, also dangerous to do that
in your social circle. And that is because of the
similar attraction effect. It's a psychological
concept that explains that people around you usually
have the same attitudes, values, interest,
and backgrounds. Danger is that we end
up in an echo chamber only hearing opinions from
people that are closest to us. But in the end, we don't only want to sell to
our social circle, so it's crucial that
we break out of this echo chamber and talk to people outside our
social circle as well. Your job at step three of the idea valuation ladder
is to break out of your echo chamber and
start interviewing strangers to find out the
reality of your idea. The task is to find
random people that you consider in your target
audience and start asking them questions to find out if your idea will solve a pain that they have and
more importantly, if they would become
a paying customer. Does that sound simple? Well, let me explain why it might not be as
simple as you think, and that is because people will lie to you and even worse, it is your fault because
you have to be very, very careful to remove all kinds of human biases when
talking to people. For example, some people,
especially strangers, they don't want to be rude
and they will just say something that will not offend you and will not
tell you the truth. At the same time,
other people might be over supportive or
under supportive. So it is your job right now to understand how to
ask questions in order to remove all
those human biases and go directly to the truth. Luckily, there's one simple trick that you can do in order to tweak your questions to
dig directly to the truth. Actually, with this
trick, even your mom would give you
unbiased feedback. It's explained in the
book, The Mm test by Rob Fitzpatrick, and I actually highly
recommend reading that book. But for now, here's the essence. The trick is not to tell people about your idea when
talking to them. For example, the worst question you can ask a stranger is, would you buy a monthly
subscription to a cookbook? Why is that? Because
people are very, very bad at predicting
their future behavior. Instead, we have to
ask questions about their past behavior because this will only get us closest to
the truth because in the end, the past behavior patterns are the best way to predict
future behavior. A better question asking about past behavior
patterns would be, where do you get your
cooking inspiration from? How often are you searching
for new recipes online? The key is to ask open questions about past behavior
patterns and then digging deeper by
asking follow up questions like why or
can you tell me more? And while doing that, it's also extremely important to
let the customer speak. For reference, you
can say if you talk more than 30% of the time, you're pitching and
you should do that. Pay attention and listen, and you should also
not getting distracted by compliments or other clutter, it's really about understanding the past behavior
patterns that will eventually predict
if they would become a paying customer for the pain that you will be
solving for them. In order to help you prepare for your first
customer interview, actually created a
guideline that you can download for free with
some sample questions, some dos and don'ts, and also
a checklist of things that you have to have order before starting the first interview. The test here is to get your
questions ready and then go out and interview at least 30
strangers about your idea. You can also do that online. You should gather the
data by taking notes, stay clear of biases, and also draw conclusions. When we completed this we actually interviewed
over 75 people and we made sure to ask the
question that we fear deep down could
actually break our business. For example, have you ever
bought cleaning liquid online because we knew the
answer would be most likely no and that will
be a challenge for us. Of course, asking the
core questions of your business that can make
or break them can be scary, but we have to remember
that we're here to validate our business idea
and that we really want to understand if the
idea has potential or not. If we don't ask those questions, we will never find out
and maybe we will waste our time running after an idea that will never become
successful from the get go. Also had a lot of
insights about what a customer would
value about our idea. It was all about
reducing plastic waste, valuing the design and the
simplicity of the concept. But we also found out
some things that we initially thought was very
important to a customer, but that actually ended up
not being important at all. That was, for example, eco
friendly cleaning ingredients. People just wouldn't
care about it. It was just important
that it cleans as good as any other cleaning. Gathering this data from
over 75 strangers was super crucial for us to understand where we
are at with our idea. With this data, we were now able to understand who our
customer might be, what they value about the idea, and what they don't think
is important at all. This is actually what
we then analyzed in the fourth step,
which we will now go in
6. Step 04: Create Product-Market Fit: Now that we talk to a bunch of strangers and we
gather data from that, it's important to go
back to the desk and combine our data with the
gut feeling that we have. Keep in mind that at this stage, it's absolutely normal
that your idea might need some fine tuning or maybe you want to pivot completely
to a new idea. That is absolutely normal because no idea is
perfect from the start. Just make sure that when
you pivot your idea that you're as excited about the idea that you
started off with. Therefore, it is now time to head back to the
desk and organize your findings from the
customer interviews across the value
proposition canvas. I will share my screen and we can do it together right now. Now that we have talked
to all those strangers, we should have a
fairly good idea of what our customer
segment might look like. We can organize our thoughts now on the value
proposition canvas. On the right, you see
the customer profile, it's the customer jobs, the pains, and the gains. On the right side, we can list all the things that the
customer wants to achieve, the job that the customer
wants to get done. At the pain section, we can
list all those obstacles, barriers and pains that the customer experience
while getting the job done. This is all very negative that the customer wants to
avoid in the future. At the same time, at the gains, we can here list all the
benefits and aspirations or all the positive things that
the customer experience while getting the job done. The nice thing about this part is that the more we learn
about our customer, the more detail we
can fill in this map. After talking to
all those strangers during your customer interviews, you should have a
fairly good idea of what to include here. On the left side of the
value proposition Canvas, can explain how your product
and service works and this should be a direct answer to the job that the customer
wants to get done. At the same time, here
we list all the product features with the goal
to relieve the pains that the customer
experience while getting the job done here
we list all our product features that can increase the gain that
the customer experiences. I know that is a bit theoretic, so I prepared an example to
have a look at it together. This is the example of Uber. When we start on the right side, we can easily list what the
customer wants to get done. Of course, they want
a convenience and affordable transporting
option with quick booking, seamless payment, they
want to save time and hassle and they also want to
track the driver's location. Let's look at what
the customer pains are while getting the job done. When for example, taking a taxi, they can have long wait times, have a concern of safety, and also maybe be uncertain
about the driver's ability. At the same time, the
positive things is a peace of mind because they don't have to
drive themselves, they don't think about
parking, et cetera. They have an on demand
transporting thing. They appreciate a
simple payment option, and they also like
transparent pricing. Once Uber found out about
this customer profile, they started creating
a service around it that directly
answers the job that the customer wants to get done that eliminates the pains that the customer experience and enhances the gains
that the customer experience while
getting the job done. As a direct answer to
the customer's job, they created a convenient and affordable personal
transport solution that increases
convenience and safety. The goal here is to create
a clear connect between how features can create gains and
relieve the customer pains. Let's have a quick look at
how Uber answered that. You see, for example,
in order to remove the concern of safety
from the customer, they started to introduce
the 247 customer support and also driver ratings. In order to remove
the uncertainty about drivers availability in
the long wait times, they started introducing
the real life tracking of drivers so people
don't have to wait on the street and they can also be sure that the driver will
be available for them. With that, they
created a service that immediately removed
the customer's pains that they experience. At the same time, they enhance the gains that the customer
experience as well. Piece of mind gain
was enhanced by the seeming SUI of Uber,
the real time booking. In order to offer affordable s, they introduced ride sharing. In order to have simple payment options and
transparent pricing. They introduced
payment solutions like Apple Pay, cash, et cetera, and also an upfront
pricing so you always know what to pay before
jumping into the taxi. The more efficient your
product or service is at enhancing the gains and removing the pains
of the customer, the higher the product market. The higher the
product market fit, the easier it will be to market your product and to convince customers to
eventually buy it. Keep in mind that this is
an ongoing thing because you will continuously learn about your customer
and with that, you can continuously improve the product features as well. You have achieved a product
market fit at least on paper. Once your product gain creators enhanced the gains
the customer wants to feel and your products
pain relievers relieve the pain
that customer has. In this process, you should
always be open for changing your idea so that it best responds what the customer
in the market wants to have. The better you know what
the customer wants, the better you can
get at answering that with your product features.
7. Step 05: Create a MVP: We already came a long way on the idea valuation ladder
because now we're already at Step five and we have created a market fit at least on
paper, which is exciting. Because at this stage, our idea probably has some
real potential. So we might have struck gold, and the best thing is
that we have invested nothing but our time
and brainpower. With a solid foundation
that we have built so far, we should now be comfortable in order to take the next step, which is building an MVP. Let's first get out
of the way what an MVP is and what
it needs to do. The easiest definition
of an MVP is that it's the simplest version
of a product that you need to build
to sell it to a market. So the goal is to
build a product that is good enough to
make your first sale. So let's look into what we
need to do to build an MVP. First, it is important
to mention that not all MVPs require
financial investment. For instance, when you have
coding knowledge yourself and you can create your own
platform, that's great. For all others who are dependent on suppliers,
partners, et cetera, we should now be able to be comfortable to take at
least a little bit of a financial risk
through the foundation that we've built through
the prior steps so far. At this point, we will have to throw all of our
insecurities that we still might have about our product
or service overboard and just commit because we don't want to get stuck
in a testing loop. In the end, the goal is
to launch this product. Of course, it is important to test your product,
which is what we're doing, but it's even more important
to also not launch too late, but launch with
something that you believe in has the potential
to make your first sale. There is a great quote from the LinkedIn founder who said, If you're not embarrassed
by the first version of your product, you
have launched too late, and that's nothing
we want to do, we go right ahead and
build an MVP that we are comfortable enough to sell
later in the next step. First, I would recommend
that you embrace a bootstrapping
mentality and that you do yourself what you can do. But at the same time,
you're probably reliant on maybe suppliers
or other partners, and there maybe a small
financial investment is needed. The thing about building
an MVP is that it's highly specific to whatever product or service you're
going to build. Because of that, it is very
hard to give concrete advice. I think it's maybe the
easiest if I show again what we did back then with our
idea when we built an MVP. As we were dependent on suppliers because we were
building a physical product, we had to commit
financially because of minimum order quantities
and storage and so on. And that was a big
challenge for us because we were only at
the validation stage. But through the solid foundation
that we've built before, we were okay with doing that. We started investing
our time by creating the relationship with
relevant suppliers. We also took some
money in order to receive some samples and
give the first order. I must say that our MVP
had a lot of flaws, but it was one of the
most exciting moments in our entrepreneurial
journey when we first held our physical products in
our hand. That was amazing. So therefore, at the
end of this step, you should have an
MVP that you're confident enough to get
your first paying customer. That is the whole
goal of the thing. So once you have
created an MVP that you're confident enough in to get your first
paying customer, you have completed step five, and we can move on to step six.
8. Step 06: Get a First Paying Customer: Now we have arrived
at the top of the idea valuation ladder and it's time for
the ultimate test. We've done a lot of testing and we ran a lot of experiments, but people still have not put
money where their mouth is. Now in step six, it's the ultimate test to get
your first paying customer. Remember, this is not a launch. This is not
a product launch. This is just an
experiment if we can get a first paying customer through the infrastructure that
we have built so far. We should remember the
quote of the Linked in founder because perfection
is not our goal. Should brace for maybe
harsh critics, bad reviews, and angry customers,
but that's okay because the customer can
take it on the chin. In the worst case,
we can always refund the customer and give the money back. That is not a problem. But why a paying customer was not happy with the
product or service that we supplied
them with is worth gold for product
development down the line. The question that we
now need to answer is, how do we get our
first paying customer? The simple answer
is to advertise. We have to test our go
to market strategy. And I don't want to go
into detail about go to market strategy because you know best how to market your product, but it's eventually to
put that channel to test. And sales channels, of course, depend highly on the
business that you have. So if that's running meta ads to a lending page in
order to make a sale, to schedule meetings with sales rep of a software company, or if it's about one to one sales meeting with category managers of a supermarket, you know best who
your customers are, how to find them, and how
to eventually sell to them. Once you made a first sale or maybe you haven't
made a sale, but you understand now the
temperature in the market, you should go back
and draw conclusions and analyze the feedback
that you've get. If you were running
online ads, for example, you can look at all
the data that you get from so what kind of
conversion rates that you had? What kind of click through rate? Where were the bounce rate high and so on, you can
improve on that. You will also learn
if you need to adjust something in
your sales approach. Maybe you need to
adjust your pricing or change your sales approach. Or perhaps your product is already flying off the shelf and you hit the jackpot right from the Geo. Everything is possible. But only trying to sell an MVP to a paying
customer will get you the actual insights
that you need in order to successfully
launch your product. Our case back then, we created a simple landing page and ran some social media ads to
drive traffic to that page. We knew from the start
that we had a challenge on our hand because in
the customer interviews, we learned that people just don't buy cleaning liquid online and we were just advertising cleaning liquids through
an online sales channel. Despite a very, very
bad website and even worse ads because those
were simply just mock ups, we achieved our first
paying customers, the KPIs that we were tracking
like conversion rate, customer acquisition costs
and click through rate, we're actually very successful. We got very excited because we knew how much upside
potential we still have because all steps of the sales funnel were still
able to be optimized. Crucially, what we also
did was that we sent a post purchase email where
we informed the customer that they just bought
an MVP and that is the first version of our product and that we would really
appreciate their feed. If a customer was not satisfied
at all with the product, we always offered a refund, but only in exchange for very, very detailed
feedback, which was worth gold for us in the
future product development.
9. Step 07: Launch!: Well, we made it to
the end step seven. You have made it
successfully to the end of the idea valuation letter.
We've done our homework. We created a product market fit, and we actually got our
first paying customer. If you made it through all the seven step
with your concept, it is more than
likely that you're sitting on an idea with
loads of potential. I hope that you
enjoyed going through the seven steps of the idea
valuation letter with you. Make sure that you don't load all the free resources that are provided and we see us
in the next course.
Simon Ziolkowski
