How (and Why) to Test Your Business Idea

• Testing your business idea is key to seeing if it’s a viable business model.
• Don’t rush into launching a product without careful consideration and planning. If it fails, it could be a waste of critical resources.
• Building a prototype and creating a marketing plan can help determine whether or not your idea has potential.
• This article is for aspiring entrepreneurs preparing to launch a new business.

Do you have an idea for the next big thing? You may think your idea is perfect already, but it’s wise to test it out before you spend too much time and money developing a business or product for which there’s no market. Ensuring your idea is something the world wants before you launch it is vital to business success.

How to test your business idea

Here are eight steps to test your business idea and determine its value proposition.

1. Contemplate your idea.

Although you’re no doubt excited about your new business idea, you might want to wait a while before fleshing out a potential company, said Greg Isenberg, CEO of product design agency Late Checkout. 

“After I’ve gone through the process of writing down a bunch of ideas, I don’t like to rush into building a business plan or recruiting the team,” Isenberg said. “I like to wait a few weeks [to] see which ideas really stick with me.”

Isenberg said he only moves forward if he has a burning feeling that the world genuinely needs his idea.

“Once I’m through that, the best way to test a business idea is to build some prototype and show it to people to get some honest and authentic feedback,” he said. 

Did You Know?

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2. Build a minimum viable product.

The lean startup model provides a great way to develop your business or a specific product before going to market. The most important part of that model is to build a minimum viable product (MVP).

An MVP is “the simplest form of your idea that you can actually sell as a product,” said Eric Ries, a Silicon Valley-based entrepreneur and the author of The Lean Startup. 

Using the principles of Lean Six Sigma, Ries’ book advocates having a version of your product to test and market early in the development process so that you can make any tweaks or changes in response to real feedback from your target audience.

3. Run it by a group of critics.

When your first prototype or test service is ready, present it to potential target customers.

“You should talk [to] and/or survey at least 50 potential customers to see if they identify with the problem the same way you do,” said Wayde Gilchrist, a senior technical manager at Amazon. “In other words, you need to find out if this is a real problem for a majority of your target market or just a few.”

However, to truly put your new business idea to the test, select your 50 potential customers or clients carefully.

“Identify people in that target [audience] you know to be skeptical and critical,” said Chip Bell, founder of business consultancy firm The Chip Bell Group. “These people could be irate customers from previous encounters or friends who always take the glass-half-empty perspective.”

Bell advised hand-picking your test group and then asking these people to pick your idea and minimum viable product apart. [Find out how to tell if you have a bad business idea and how to tell if you have a great business idea.]

Tip

The ability to give and receive effective feedback is a crucial skill for small business leaders.

4. Tweak it to suit your test market.

When Isenberg tested 5by, an internet video finder app he developed and has since sold, he and his team went to college campuses and showed mock-ups of what the product was going to look like. Feedback from students was invaluable in fine-tuning the original idea.

“We were able to quickly gauge that people … were frustrated that they couldn’t open an app and just be able to find the best internet videos in whatever they were interested in with just a tap of a button,” he said.

Isenberg realized that although his initial business idea and mock-up were a good start, they needed tweaking. Based on the feedback he received, his team made fruitful adjustments.

“We quickly knew we were on to something and then focused on building out the product, raising money, etc.,” he said.

5. Create a test website with social media tie-ins.

Once the word is out about your product or business, your target market needs a place to get more information about it or to show it to their friends. Building a simple website with a landing page specifically for the product and promoting it on social media are great ways to provide information and monitor how many people are interested in what you plan to sell.

Make sure your site features opportunities for interested people to join a mailing list to receive updates about the product launch date or to sign up for preorders.

“You’ll be able to tell if the idea will get traction from the number of click-throughs on the ads and the number of people who fill in your form,” Gilchrist said.

6. Create a marketing plan and use it.

All of your preparatory work means nothing if you can’t get a response from prospective customers. Once you have a viable product, you need to act on the interest in it. But while you may know your target audience at this point, you’re unlikely to know which marketing strategies have the best chance of converting their interest into future sales. For that reason, your initial marketing plan should cast a wide net.

Develop strategies to take advantage of different advertising, marketing and PR channels across mediums. As you execute the strategies and monitor the results over time, you’ll be able to sharpen your marketing plan based on what did and didn’t work. This is also another opportunity to gain feedback on what you’re planning to sell.

7. Adopt an experimentation mindset.

Too many businesses are afraid to fail, so they don’t put themselves in a position to succeed. Often, this manifests in either avoidance of pursuing new ideas or failure to properly test a product idea before launching it.

If you adopt an experimentation mindset, you’ll be more willing to make mistakes and test a variety of ideas. Your business model will unlock more long-term value, as you’ll give more ideas a chance to come to fruition. In this case, failure can also be a success, as it allows you to better understand what works and what doesn’t in the ever-changing business world.

Tip

While you want to be able to embrace your mistakes, too many pitfalls can torpedo a business before it really gets going. See the reasons many entrepreneurs fail by their second year.

8. Implement design thinking.

Design thinking involves the cognitive, strategic and practical processes of developing new ideas or products. It helps innovators redefine problems and create better, more creative solutions. In other words, it opens the door to more groundbreaking discoveries and inventions. [Read related article: Innovation Is Key to a Successful Business]

To incorporate this strategy when developing your potential business, follow the five stages of design thinking: empathize (research/understand customers’ needs), define (state your customers’ problems and needs), ideate (brainstorm unique solutions to their problems), prototype (create the solutions) and, most importantly, test (try them out yourself).

The importance of testing your business idea

Testing a business idea is crucial to its success. If you blindly assume an idea will be a big hit, you’ll risk a great deal of time, money and other resources on a leap of faith. 

Entrepreneurs often skip testing because they’re in a rush to launch. The costs of doing so can be significant. Below are a few of the possible drawbacks of forgoing testing.

• Poor business plan: Entrepreneurs may struggle to create a solid business plan or a viable roadmap to reach profitability.
• No data: A lack of pre-launch feedback makes catering to your target audience’s needs far more difficult.
• Misguided marketing: Marketing efforts can fall on deaf ears if they’re misaimed, even if your idea has potential.
• Product defects: Product flaws may prevent initial customers from becoming repeat clients and spark bad buzz. 
• Damaged morale: Business partners may become doubtful and want to pull their investment if the product misses the mark.

Key Takeaway

Testing your business idea is a necessary preliminary step to identify your target market and refine your business idea with their real-world needs in mind. If you don’t test your product or service, you may be setting yourself up to fail.

What to do when your business idea tests poorly

Not every idea is going to wow your inner circle or initial focus groups. Don’t worry — that’s part of the process. Here are two options for what to do if your concept still needs work.

Iterate until you find an idea that tests well.

Business is a process of iteration. You figure out what works and then continually try to make it work better. It’s not supposed to be perfect at first, and it’s important you understand that from the beginning. The point of testing an idea is to make it as good as possible before committing substantial time and resources to it. 

Let’s say you want to start a gardening service that specializes in imported plants. Some of these plants need large amounts of water, while others thrive in dry climates. If you’re based in an area under the threat of drought, you might learn from initial testing and market research that your would-be customers are mainly interested in plants and grasses that don’t require much water. The imported plants that need a lot of water won’t serve your customer base.

By taking into account the feedback you received and adapting your business idea to existing conditions, you can pivot to a business that specializes in the plants sought after in your region. This will then inform your marketing and ordering efforts so you can focus on a specialty that will actually sell. 

This is a great example of taking an idea that won’t work in its original form and adjusting it so it will. In other words, follow the classic mantra: If at first you don’t succeed, try and try again.

Develop something new.

Of course, not every business idea is a winner no matter how much you tweak it. Ideas might not work for any number of reasons. A product or service might be too expensive, face too much competition or not solve a problem customers have. An idea that doesn’t work isn’t a bad reflection on you. Part of being a successful entrepreneur is recognizing what’s not going to work and moving on quickly to something better. It’s part of the process. 

Testing your ideas is the best way to ensure you don’t invest yourself in a concept that won’t succeed. With your newfound knowledge about what doesn’t work, you can use the data you’ve collected to generate a new idea. The time and effort you’ve spent needn’t go to waste if you know how to capitalize on what you’ve already accomplished.

Trial and error

A good idea is an essential part of starting a business, but it’s just the beginning. After that, you need to execute by turning your idea into an actual product. Testing and iterating on your idea is a critical step in the process of creating a viable company. If you’re ready to get started, check out our favorite low-cost business ideas and see if they could work in your market.

Alex Halperin and Marci Martin contributed to this article. Some source interviews were conducted for a previous version of this article.