How to Know If You Have A Viable Business Idea

Guest Post by Kristin Flink Kranias :: When I tell people I left a stable, senior role at a top consulting firm to co-found Hipiti, a new shopping technology company, the first question I often get is, “Where did you get the guts?” Immediately after comes, “How did you know you had an idea that could work”? While the first answer definitely varies for everyone, I believe the second is very knowable if you take the time to research your idea.

Once you’ve come up with your business opportunity, there are two steps I recommend to pressure test whether it could really be a successful venture. First, you need to pinpoint your target customer group.  Second, you need to talk to them… a lot.

Who are your target customers?  An advisor gave us good early advice that your friends and family are not your customers, and if they were, your business wouldn’t get very far. Instead, you need to find that niche of people who most identify with the problem you’re trying to solve – these will become your real power users down the road. In retail consulting, we call this your Design Target. This customer becomes your muse for the product or service you’re creating. Each decision you make on functionality, aesthetics, voice, etc., is taken from the perspective of what would please this person. For example, at Hipiti, we are designing for an affluent late 20’s career woman and young mom – she’s into fashion or decorating and loves a good deal but doesn’t have time to sift through her inbox to find them.

The best Design Target should be aspirational and generally younger than your expected customer base. By identifying this person early on, you have identified not only who will use your product or service most, but also who will inspire others to become users as well – if chosen correctly, the Design Target will create a halo effect for other customers who aspire to be like him or her.

Once your Design Target is identified, you’re ready to hear what they have to say about your idea.

Pressure Test Your idea with Target Customers.  My past life as a consultant for 10+ years demonstrated the value of talking directly to your customers. Over the years, I interviewed, intercepted, shopped alongside and surveyed countless end-users and the results never ceased to amaze my clients. It’s remarkable how the voice of the customer can and should influence major business decisions. Here are the steps we took to test Hipiti before we took our big entrepreneurial leap:

• Find some Design Target customers: It’s important to do your first primary research with potential power-users, but how do you find them? Describe what you’re looking for and meet them through friends of friends, former colleagues, LinkedIn, and so on. Still can’t find them? Go stand outside a competitive store and offer random shoppers a free coffee to talk with you. I can’t tell you how many times I’ve hung out in the mall with my clipboard – it takes thick skin, but the feedback from strangers is honest and direct.
• What to ask them: Talk to at least 10 of your Design Target customers in person or over the phone. Ask open-ended and non-leading questions about your problem. How do they experience it? What do they do to avoid or resolve it? What is missing from their solutions? Are they aware of and what do they think of competitive products? At Hipiti, we wanted to hear whether our target online shoppers were bothered by inbox overload (they definitely were) and what they did about it. Through our 20+ conversations, we not only confirmed the problem was real, but also learned that existing products had very low awareness and poor reputations. These findings helped mold our product roadmap and formed the basis of the quantitative survey used to test broader appeal.
• Use your findings to create target user surveys. The Design Target conversations help to confirm your idea, but they represent a small sample size of very like-minded people. In order to make sure your idea has broader reach, you need some statistically significant feedback. The common rule of thumb is that 50 responses are sufficient, but you’ll want at least 200 so you can segment the answers (e.g., men answered this way, older people liked this). Use the survey to further confirm the idea, test competitors and get feedback on potential product features. A few survey best practices:
  • Questions are no longer open-ended. They should be multiple choice using the interview responses as guidance for your answer choices.
  • Include questions to segment your users by interest level. For example, we asked, “How frequently do you shop online?” so we could differentiate answers between people who would and wouldn’t be too interested in our product.
  • Always include demographic questions (sex, age, zip) but put them at the end. This helps to better understand the characteristics of who likes or doesn’t like your idea.
  • When testing new features, never ask if users want these extra features – of course they want something for nothing! Instead, ask them to force rank your list so you know relative prioritization of their interest.
  • Find participants and launch your survey. Where do you find people willing to take your survey? It’s okay to use some friends and family if they have a fleeting interest in your product, but focus on lesser known acquaintances. You can find them by asking your interviewees to send to their friends, post on your Facebook page or LinkedIn, or you can pay for them through a low cost channel like Survey Monkey who offers completed responses for as low as $3. Even if you use your connections to find your sample, you’ll probably want to offer an incentive like a giveaway to encourage participation.

At this point, after analyzing the results, you’ve definitely either proven or disproven that a market exists for your business. And now the real fun (and work) begins!

Kristin Flink Kranias is the cofounder of Hipiti, an online sale and shopping organization platform. If you have retail email fatigue or want to learn more about Hipiti, sign up for the beta here. Prior to starting Hipiti, she spent ~10 years in strategy and operations consulting at Bain & Company focused on Retail and Ecommerce clients. She has an A.B. in Economics from Harvard and an MBA from Stanford.  Follow her on twitter @flinkranias or pinterest @hipiti.