4 Questions To Validate Your Business Idea
They bring great ideas, disruptive products and are great executors but one element is missing.
What is this key ingredient and do we overcome it?
The numbers above perfectly reflect the importance of problem solving; one of the 5 required characteristics of a successful entrepreneur 95% of the entrepreneurs fail every year. While only 5% of entrepreneurs might reach success. Research shows that the main difference between the two numbers is the ability to solve a real problem in the market.
WeFair is a remarkable start-up.
It was created by an old friend named Meir, whose standpoint was excellent: 20% of drivers cause 80% of accidents on the road. There is no reason to pay thousands of dollars to the
insurance company when you can pay 700$ because of reckless drivers.
So, he built a mobile application that adapts the amount you pay for your car insurance to your level of driving. For example, if you are a good driver instead of paying the standard rate of let’s say 1,500$ per year you will pay only a few hundred. Would you use this application? I guess that the answer is yes. Despite this, I recently received a call from Meir telling me: “Lionel, WeFair has not taken off, I’m moving on.”
Must-Should-Nice Rule
M.S.N are the three letters that can explain WeFairs scenario. These might be the most important letters inentrepreneurship and innovation.
M stands for must have. If I want to build a financial table, Microsoft excel is a Must.
S is should have. Get Taxi is a “should have” app for booking a taxi..
N stands for nice to have. Checking the time on an Apple watch is only a nice gadget. Since the majority of the products/services we create are somewhere between the “nice” and the “should”, it is critical to check that your business is a MUST for a reliable group of people. The method is simple: Take 20 people from your target audience and ask them these four questions. The result will automatically show whether your product is an M, S or N.
Why do great entrepreneurs fail?
95-5
1.Does our target audience recognize that we have a solution to one of their daily challenges?
A few years ago, we built a time management mobile application for lawyers and consultants. While asking them if time management indeed is a critical issue for them? 100% of potential clients answered yes.
2.Are they likely to pay for the solution?
80% of the people we asked said Yes. Because one hour saved every day to that audience means saving 200$ per day, they were very excited to use the product. Multiply $200 saved everyday thanks to our mobile application by 20 days of the month which would save 4000 dollars a month. So yes, they were ready to pay a $50 monthly license.
3.Would they buy it from us?
A very tricky question for any start-up – by definition – requested to compete with bigger structures than ours. So, we lost another 20% of potential customers.
4.Do we as a small start-up have the ability to create exactly what the audience wants?
During one of the last focus groups we’ve conducted, a business man told me “WOW what a great invention, I’d like to input all of my weekly duties and tasks and then have your smart weekly schedule automatically organize my week” At this point I realized I no longer had a business.We did not continue.
Bottom line
This is our theory: If after a reliable focus group conducted, you still have more than 25% people (ready to use, to pay, etc…) you should continue your business. The funnel gives you this precious indication.