Why You Should Validate Every Part Of Your Business Idea

Most new businesses are started with an untested business idea. An entrepreneur connects the dots between a customer's need and a way to fill that need. Business ideas can be as simple as doing what you love to do, firing the boss, or more intuitive, like seeing a new connection in how to do something. Once making the connection, the pressure to start building the business begins to mount. 

Should you get to work right away and start drumming up business? 

No, not yet.  

Think of starting a business like running a marathon. It's a road race that unfolds over time. You can jump in and run a marathon with little or no preparation, but will you reach your goals?  

Probably not. 

Let's dig into this a bit further.  Say we have five new bloggers launching their businesses on the very same day.  They each have the same basic business model (blogging and ad revenue) but choose different market niches. Each blogger has a goal of making $5,000 a month in revenues. 

• Blogger 1 writes about personal finance topics.
• Blogger 2 writes about lifestyle topics.
• Blogger 3 writes about gaming topics.
• Blogger 4 writes about technology topics.
• Blogger 4  writes about parenting topics. 

Which of these businesses is viable? 

Are you having a hard time deciding?  Me too.  There is no way to know with the information we have here (and neither can an investor). Business ideas tell you what a business will do, not how well you will do it.  You need more information to begin to know if your business can be viable.  That is what a feasibility study can help you to do. 

A feasibility study can also shed light on the strengths and weaknesses of the business idea and the potential for success.  You question any assumptions about the business you have while trying to learn the lay of the land. 

You can boil a feasibility study down to two key questions:

1. Is there sufficient demand for your product or service? 
2. Can you deliver it a profit? 

These are broad questions to be sure, and you won't be able to answer them without looking closer the whole business and marketplace. To do that, you gather information to look for potential strengths and weaknesses.  A good business idea has a lot of strengths going for it, and a bad idea is riddled with problems. 

A feasibility study covers a number of areas to discover potential strengths and weaknesses (see this page for a few examples of common feasibility questions): 

• You and your personal strengths and weaknesses. 
• The strength of your business idea. 
• Your ability to create and deliver a product/service. 
• Your ability to manage a business. 
• Information about product/service price and quality. 
• Information about the industry, competitors, and customer demand, and SWOT analysis.
• Information about potential revenues, operating costs, startup costs, and breakeven point.  
• Based on the information above, identifying strengths, weaknesses, opportunities, and threats (SWOT Analysis). 

Feasibility studies cover a lot of ground. Think about a feasibility study this way: if there is a flaw in your business idea, you can find it and solve it now, not after the business launches. 

Let's look at our blog business idea again.  Let's start with a financial feasibility question: How will your business make money? 

Your Google search comes up with the following articles:   

• How to make money from blogging
• How long does it take to make money from a blog?
• How long does it take to make money blogging?

The first article ("How to make money from blogging") covers several ways you can make money from a blog. Good information to know, but you are only interested in the ads section right now. You learn that Google AdSense will put ads relevant to our content on a specific page. That means the ad is relevant to the post we have published. This information supports our business idea. 

In the second article ("How long does it take to make money from a blog?"), you learned it took ten months to start making $1,000 a month (he expands his timeline later in the article). While this is supportive information, it adds a new wrinkle to the situation- time.  How long do you have to reach you revenue goal? If you have enough time, this might be a favorable development. If you don't, it becomes contradictory information. Contradictory information forces you to modify or abandon your business idea.   

In reading the last article ("How long does it take to make money blogging?"), you learn about three other bloggers and how they generated income. The article suggests that blogging with ad revenue alone doesn't fair too well and affiliate marketing is recommended to reach higher revenues.

And so it goes.  The information you review supports or modifies your idea. The real value of a feasibility study is that it can save you money and time and increase the odds of your business succeeding by finding flaws now. 

Once you have collected and assessed your information, you will have a list of strengths and weaknesses about your business and the market. You ask yourself now whether you should move forward or stop together. 

It's rare (in my experience) to go through the feasibility process and find nothing but supportive information or find information that completely contradicts an idea. Most of the time, I find information that supports the idea and requires the business idea to be modified.  

Based on the information you have gathered, you have three courses of action available to you:

• Move forward with your idea as you have defined it. 
• Modify your idea based on what you have learned. 
• Abandon your idea (critical flaw)

Whatever you decide, try and be as objective as possible in your review and decision. Falling in love with a business idea is a leading cause of business failures in my experience. Better to have an idea that truly has potential rather than an idea that looks good on the surface. 

Don't get too bummed out because your idea wasn't what you thought it would be. That is an expected outcome. Better to know it now than later. You can come up with another idea, which can be better based on what you have learned. Take what you have learned and come at it with fresh eyes.

• What were the key lessons in all of this? 
• What did you learn about the customer and what problems they have? 
• What other solutions can you come to see? 
• How can you play to your strengths? 
• What new contacts have you made? 

Starting a business is a journey. You need to have the right conditions and have some identified key advantages. Remember, reality will either support or undermine your strategy. The better you understand reality, the better your plan, and execution. You can take a moderately strong idea and make it stronger but can't remake a concept that is riddled with flaws.