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What you need to know to validate your startup idea

You have an idea for a startup. How can you be certain that your startup concept holds water? Which of your myriad ideas should you pursue?

Before embarking on this entrepreneurial journey, your pre-journey phase will be to validate three core elements which are the key elements for your startup success, by asking the following:

•        Perception – How is the problem perceived by the potential audience?

•        Value – How significant is the problem to people?

•        Size – What is the size of the potential addressable market?

Every entrepreneur’s journey begins at a familiar crossroad. Once you’ve pinpointed the problem, the next step will be to identify who has it.

Many entrepreneurs fail in that phase. They have a personal point of view of the problem, and assume everyone shares it as well, or they might speak with very few friends, or potential business partners who may have the issue and base their conclusion that the problem is real only on that.

1.    Learn who Cares About this Problem

Segmenting your audience is the key. By identifying specific groups plagued by this issue, you begin to narrow your focus. Engage in conversations with those individuals to grasp their perspective on the matter.

A true problem worth solving will resonate immediately, and people will start telling you about their experience with that problem. If your audience can’t grasp the issue within seconds of your explanation, it’s likely not their problem to begin with.

This process will unveil the various nuances of the problem. Take, for instance, the universal disdain for waiting in lines. While some dislike airport security queues, others dread the supermarket or any governmental/official service. Yet, which line truly warrants a solution?

To determine this, speak with 100 people to get their perception of the problem. Consider two factors: frequency of use and Total Addressable Market (TAM).

While visiting the Apple store when a new iPhone is released is comparatively rare, supermarket store lines are a frequent annoyance. And while occasional travelers might not mind airport security, frequent flyers certainly do.

So, how do you decide which problem to address? First, you need to hate it enough, it needs to be personal, one that you have the passion and the urge to solve, but this is not enough. A problem worth solving would be a widespread issue that occurs regularly. Such opportunities are few and far between. Most problems cater to niche markets or don’t occur frequently enough. Niche and painful enough are good problems to solve.

2. Determine the problem’s value. How big is it?

In this stage, you must determine what individuals are willing to shell out to eradicate it. Services like valet parking and Uber Eats thrive because people pay to bypass wait times, but I’ve heard of people waiting in line for Apple stores to be opened to get the new iPhone, and other people are willing to pay them for that. Line-avoiding services at the end of the day are simple exchanges of time and money, but in reality, are exchanges of frustration over money.

However, the discerning between potential and actual willingness to pay is tricky. While the former is a good indicator, it’s not enough.

3. Assess Market Size

Determine the potential customer base size and the value your solution could bring. For instance, die-hard Apple fans might value cutting down their wait time for the latest iPhone more than occasional travelers value a fast pass at the airport.

If your market is broken into multiple segments, find one flavor of the problem that is worth solving and focus on it.

A problem “worth solving” is one where the total addressable market (TAM) multiplied by its value is substantial and big enough.

Then you calculate the TAM and multiply it by the willingness to pay, to figure out the size of the opportunity, if it is worthwhile, and what strategy you should use.

Only then, you will be ready to embark on your startup journey.

The article was preveiously published on Forbes.


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