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How to Validate a Business Idea

While coming up with an amazing business idea is a great start to entrepreneurship, it takes much more than a good idea to build a successful company. If you’re an aspiring business owner, taking your time with the idea validation process is the best way to find out if you have a viable product or service idea worth investing your time and money into. When you validate your business concept, you’re taking your startup idea and testing how it behaves in reality. The last thing you want to do is sink a ton of resources into a product concept that doesn’t have a large market of potential customers. In this article, we walk you through how to validate your business idea, so you can feel confident that there’s sufficient market demand for your product offering.

What does it mean to validate a business idea?

The goal of idea validation is to determine whether there is enough demand for your business idea to make it worth pursuing. This means looking at the existing market to see if there’s a need not yet being met by your competitors, and finding out whether people will actually spend money on your business idea. By performing market validation research up front, business owners can reduce potential risk and minimize business costs down the line.

The information you gain during the validation process is crucial for determining whether your business idea has potential. That’s why it’s in your best interest to do the work of validating your business idea before you get too far along in your entrepreneurial journey.

If that weren’t enough to convince you, another huge benefit to doing market research and idea validation is that you’ll have access to honest feedback from customer interviews you can use as proof of the validity of your business idea for investors, crowdfunders, and banks when you seek business funding. Business idea validation can also give you insight into whether your product idea will be effective at meeting customer needs, and how you can market your product so that it appeals to your ideal customers.

What problems or pain points are you trying to solve?

A successful business idea needs to solve a problem and fulfill a purpose. That’s why many entrepreneurs find it helpful to start the process of idea validation by identifying the problem your idea is designed to solve, confirming the problem exists, then determining whether your product or service is actually able to solve the problem.

Customer problems are also sometimes referred to as pain points, which are areas your potential customer struggles with. The pain points that your business idea seeks to solve will determine who your target customer is, and vice versa.

One of the challenges you may face in defining your customer pain points is that your potential customers may not even be aware of the problem they’re experiencing. This means that part of your job will be making them aware of an existing problem and marketing your business as the perfect solution.

Pain points will differ depending on who your target market is, but here are some common pain points you may encounter.

  • Financial: for example, your ideal customer wants to save money on a certain product or service.
  • Productivity: your customer may value efficiency and make choices based on convenience.
  • Process: they may need help automating their business or simplifying their processes.
  • Support: they want more support from their product or service providers.

Once you identify your potential customer’s pain points, consider what it would take for them to feel satisfied in relation to those problems. Does your business idea effectively solve their issue? How can you show potential customers that this is the case?

Think about the features and benefits of your product or service, and how they measure up to those of your competitors. For example, perhaps you offer a less expensive option which is better suited to customers with financial pain points, or your product is more efficient, for customers who value productivity. You need to convince prospective customers that your business can offer them a competitive advantage and that it is worth choosing you over a more established competitor with a similar offering. 

Who is your target customer?

Even if you have an amazing business idea and a perfect product, your business won’t go anywhere if you don’t understand who your target audience is. A person can be considered a target customer if they need or want your product offering and are willing and likely to pay for it. The more specific you can get about who will benefit from your business idea, the easier it will be for you to market it to them in a way that allows them to see the value in spending their hard-earned money on your business.

A good place to start is thinking about what type of person will be interested in what you sell. Try to understand who they are, what they need, and what their motivations are, so that you can deliver your product and messaging in a way that speaks to them and converts them into real paying customers.

When it comes to defining your target customer, it may help to divide them into distinct customer segments. For example, many different types of people could benefit from your product offering, but marketing to them in the same way may not be the most effective way to present your business. Instead, you may want to come up with different marketing lists based on what defines the various types of customers you serve, so that your marketing copy will make each individual type feel understood.

Who is your target market?

Sometimes referred to as a niche market, a business’ target market is defined by a specific demographic or common interest. If you’ve already done the work of determining your company’s  target customers, you have a head start in defining your target market. However, if you’re still unsure where to find the potential market for your business idea, start by looking at who your direct competitors serve.

Often, you may find your target market consists of people in certain demographics, like age, gender, location, educational background, income level, values, lifestyle, and more. This is all very important information to have when it comes to fine tuning your offering. For example, if your target market belongs to a lower income level, you may want to reconsider your pricing structure to ensure they’re able to afford what you sell.

When thinking about your target market, you should also identify your business objectives and goals. Do you want your business to grow and expand into an international conglomerate, or do you prefer to serve individuals with a more personalized experience? The answer to questions like this will help you define what market you serve.

While it’s important to get specific about who your business idea is designed for, make sure that the market you will serve is still big enough that your potential business can be profitable. After all, marketing to women who knit sweaters is one thing, but specifying that your target market is women who knit sweaters for cats under 10 pounds may be a little bit too specific, meaning that not enough people will be able to relate to what it is you’re offering.

Does your business idea already exist in the market?

No business idea is completely original, so it’s definitely not the end of the world if there are other business owners that sell a similar product or service to yours. Depending on your market size, there might be room for multiple companies who sell the same thing. However, it’s important that you make sure your business idea is not already trademarked or patented, and that you won’t be infringing on anyone’s rights if you go ahead with your idea.

Your best bet is to perform a market analysis to identify the key players in your niche while compiling information about market statistics and forecasting. Start by performing a simple online search using keywords related to your business idea. You can also search the Canadian Patents Database and other trademark registries.

If your research determines that your business idea doesn’t infringe on any intellectual property rights, you can proceed with starting your business.

Who are your direct competitors?

If your business idea is not completely original and unique, you’ll need to focus on distinguishing your business idea from current solutions on the market. Researching your direct competitors can give you a ton of insight into the pros and cons of their offering, who they serve, and how they market their business. 

Direct competitors are businesses in your niche who provide the same product, solve the same problem, and have the same potential customers as you do. If you’re not yet aware of who your competitors will be, this process will help you find out more about them. That way, you can use the information you collect to help conduct your own market research and better position your business idea as the preferable choice for your shared target market.

You can learn a lot about what works in business and what doesn’t by looking at what your competitors do. Not only does this allow you to stay ahead of the game, you’ll also be able to learn from their successes and failures and determine what advantages your business idea has over theirs. For example, they could be missing out on targeting a key demographic in their target market, and that gives you an opening to get your foot in the door.

One way to learn about direct competitors is to perform an online search using relevant keywords, then visit your competitors’ websites. This will show you how they visually present themselves and what kind of language and calls to action they use, and it may also provide you with information on their pricing structure.

You can find out even more about your direct competitors by looking at comments on their social media pages and reading reviews on third party platforms. This will give you more honest feedback than if you rely solely on reviews left on their official pages or website.

It’s possible to do market research and analysis for yourself, but you can also choose to hire a professional market researcher who can provide a detailed market report that you can use to help you understand the market and stay competitive.

Steps to take when validating a business idea

Now that you have a thorough understanding of the factors that can help determine the business idea’s potential success, we’ll take you through the idea validation process step by step. 

1. Write down your business hypotheses and validation goals

Business validation is all about testing the assumptions you have about your business idea. For example, who do you think your target market will be? How do you anticipate that your product will solve your customers’ pain points? What results do you think your market research will uncover?

Think about what you want to achieve from the process of validating your business idea. What information do you hope to obtain, and what parts of your business do you feel need validating? Assumptions about your business can also include things like the value you believe your product offers, your ideas about product pricing, and your business model.

It’s a good idea to write down any ideas you have about your business, then use the validation process to test those ideas. You may have great business instincts, but you still need to stay open to the possibility that your market research will contradict your initial assumptions.

You should also determine what kind of data you will collect and how you will use it to determine the potential success of your business, also known as your minimum success criteria. This means deciding the minimum amount of positive responses to your business idea for you to be convinced your idea is viable.

2. Perform market research

Finding out the size of your target market is key to determining your business idea’s potential for profitability. Keep in mind your market size will vary greatly depending on where your business will operate and what locations you plan to serve.

Market research can fall into two categories: qualitative and quantitative. Qualitative research focuses on open ended questions and unique individual responses, whereas quantitative research is more about finding where the majority lies on a given topic. A combination of both types of research may be effective for validating your business idea.

In addition to looking at the market size, you should also pay attention to competitors’ sales data, the number of businesses operating in your niche, market trends, the amount of the market share your business could own, and where your business will fit in with your competition.

3. Research search volume and keywords

A great way to get a sense of the potential market for your business idea is to look at consumer activity regarding keywords related to your idea. When you use a search engine to look up a keyword or term, pay attention to the number of results your search returns. If a search term brings up a high amount of monthly searches, that tells you that there may be an interest in your product or service.

On the other hand, lower search volume could mean that your idea isn’t in demand, but it could also simply indicate that you’re using the wrong keywords or your target customers aren’t yet aware of their need for your business idea. If that’s the case, try using search terms that are related to your target customer’s pain points rather than those describing your specific business idea. This will help you to determine whether there is sufficient need in the market for a solution to their problem.

Another benefit to researching search terms is that it can give you insight into what words your prospective customers are using. This can help you decide what terms to use in your product descriptions, website copy, and social media communications to increase the chances that your business will end up on the first page of search engine results.

4. Conduct customer validation interviews

Once you determine there is a need for your idea in the market, it’s time to try direct communication with consumers. This can include interviews, online surveys, or focus groups with members of your target market segment.

Ask them questions about their motivations as a consumer, what needs and preferences guide their purchasing decisions, and any other feedback they may be able to provide. You can also ask about the current solutions they use to solve their problem, and what they feel could be improved upon. Use this opportunity to test your business hypotheses and assumptions by asking open-ended questions.

5. Test your product or service

Now it’s time to allow consumers to test your offering to see if it works. There are two different types of testing that you can use: alpha and beta.

  • Alpha testing: internal employees of your business test the product or service to find any remaining issues that need fixing before it can be made available to the public.
  • Beta testing: a limited group of external users test the product and report back on their user experience.

Alpha or beta testing is an important step in validating your business idea because it gives you the opportunity to receive real feedback from potential users.

6. Start small

If your research sufficiently validates your business idea, you may be tempted to dive right in and start ordering inventory like there’s no tomorrow. However, it’s probably wiser to start small with a basic landing page and email list sign up form to gauge how many people are interested in your new business. You could even create a pre-order page or a crowdfunding campaign.


While every entrepreneur hopes the idea validation process will confirm their belief in their business idea, it’s important to remember the information your market research turns up isn’t personal, it’s just business. After all, wouldn’t you rather know now if your idea doesn’t have market potential, rather than finding out the hard way when you’ve sunk all of your savings into your business?

If your research shows that your idea doesn’t have strong market validity, use what you’ve learned through this process to decide whether your idea can be improved, or whether you’re better off going in a completely different direction. No matter what information you come up with, you’re better off knowing!

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