How to test your business idea
When you start a business it's important to test your idea on your target audience. We take you through why you should test your idea and how to do it.
Why is it important to test your business idea?
It’s easy to get caught up in the excitement of finding a great business idea and rush to go to market. However, testing your idea is an important step to creating a business that is set up for success.
First, testing your idea will help you avoid spending time and money on an idea that won’t work. While there are no guarantees, you can gain confidence that you’re on the right track and get useful feedback to make any necessary changes.
The feedback you get from testing your business idea can help inform the development of your product or service. Plus, the insights you gain during testing and research can give you important information to help you write your business plan and create a marketing strategy.
Competitor and market research
Before you put money into creating a product or launching a service, take a look at what the market and your competitors are doing.
Market research is a must for any business. A simple way to start researching your competitors is to make a list of their USPs, pricing, and any important features of their products or services. You might find that your idea already exists and you should find how you are unique, or that there’s a gap in the market perfect for your idea.
Make sure you look into your target market. Create buyer personas to see how likely they are to buy, which problems they’re having that your product or service can solve, and other demographic information relevant to your idea.
The information you get from your competitor and market research will become an important part of your business plan when you come to create it. It’s also a great way to see the viability of your idea without spending any resources creating a physical product to test.
Create your product or service
To test your idea, you’ll need a version of your product or service to get feedback on. There’s a couple of ways you can do this. The first is to create a minimal viable product (MVP), and the second is to create a prototype.
An MVP is the minimum version of your product that is fit for purpose. It’s a common term in the startup community. An MVP might not have all the features of your dream idea, but it will be enough to get some feedback and see what’s working.
A prototype is a test version of your final product. It will have all the features you’re planning on including, but you will only produce one or a small number for test purposes as it’s likely you’ll make adjustments based on feedback.
If you aren’t creating a product and instead are offering a service, make sure you have what you need to demonstrate your idea.
Get feedback on your idea
Now you’re ready to get feedback on your idea! The best way to get feedback is by showing it to your target customers. There are a few different ways to do this depending on your budget:
- Organising a focus group
- Creating a website and marketing it
- Sharing it on social media and asking for feedback
- Involving friends and family
The most meaningful way to get feedback is by asking the people you plan on purchasing your product. To collect feedback make a survey with the questions you want to ask your audience about your product or service. That way, you can easily analyse feedback by comparing responses.
Check your finances
Another important aspect to seeing if your business idea will work is your finances. Check in on your finances and see if you have enough capital to get started, or whether you need to get a loan or investment to bring your idea to life. Knowing how much money you need to get started is an important aspect of your business plan.
Along with knowing how much money you need to put into the business, it’s also important to think about pricing and consider this in your testing. Along with figuring out how much you will need to sell to break even, you also need to find out whether your potential customers will be willing to pay it for your product or service.
Pricing can always be adjusted in future, but it’s important to think about how you will price your goods early on.
Manage your finances with accounting software
Online accounting software like Bokio gives you everything you need to manage your finances in one place, so you have all the information you need to make the right decisions for your business.
Bokio is a simple way to do your accounting, invoicing and more online. Our software takes you through the process step by step, with time saving features like automated bank feeds, smart bookkeeping templates and integrated invoicing. If you need help with your accounting, you can invite your accountant or colleagues to work together in Bokio.
Accounting is kept simple with Bokio, so you have more time to spend running your business.