Validating ideas should be worked like a sale; using stages to ramp up your ideas to ‘Closed – Won’.
The Correlation Between Sales & Idea Validation
Imagine a B2B sales cycle with multiple deal stages: open opportunities, needs assessment, price/quote, negotiation/review, and closed won/lost. The deal starts small, but as it moves through each stage, the chance of success increases. Validating your ideas should follow a similar structure.
Building an Idea Validation Pipeline
First, we need to build an idea validation pipeline. I personally recommend using Hubspot’s free CRM to create a new pipeline called ‘Idea Validation’. This will allow you to create a new “deal” for each idea you have. The benefit of doing this in a CRM is that you can keep all your notes about an idea in one place. Alternatively, you can use a Google Sheet to do the same thing; it’s just harder to organize.
Idea Validation Stages
Let’s define our deal stages for our Idea Validation Pipeline.
- Open – A fresh idea you want to explore.
- Identify Existing Solutions – Research how to do your idea today without coding or designing anything. If your idea is very easy accomplish elsewhere, move the idea to ‘Closed – Lost’. If the idea is difficult to accomplish elsewhere, proceed to the next stage.
- Opportunity Analysis – Research areas where you could make improvements on existing platforms. Opportunities can be features, integrations, services, or resources that your competitors are lacking. As a general rule of thumb, if you can’t see 5 opportunities for improvement, it’s best to scrap the idea.
- Market Analysis – Field research to validate the idea amongst relevant market players. This stage’s activities comprise of discussions and surveys. The questions you need to answer are (1) Did they recognize the pain I’m trying to address? (2) Did they see value in my idea? (3) On a scale of 1-10, how engaged were they in the conversation? If your conversations didn’t go well, you might need to refine your audience; otherwise, proceed to the next stage, or scrap the idea.
- Design / Refinement – The iterative process of designing and refining your initial product (not your MVP). The people you show your demo to should be potential users and customers of your product/service. In the best case, find people who agree to buy your product/service and that will work with you to develop your MVP. If your idea is in the B2B space, the next few stages can help you make money before building the product.
- Proposal / Price Quote – Once you’ve identified 1-2 partners to help you develop your MVP, it’s time to introduce a special type of partnership. In exchange for their help and assistance to refine your MVP and test it in their working environment, you will provide some level of consultancy to their business. Some conditions to include in this arrangement include (1) Expectations for the MVP development process, (2) Number of meetings per month, (3) Agreement that if reaching product success, they will introduce you to relevant businesses within their network, and (4) The retainer price for your services.
- Negotiation / Review – This is where ideas rest while the terms and conditions of a proposal are being worked. Items may include an agreed discount on the product upon completion.
- Closed – Won – Your idea has been validated, you have a means to make money while developing your MVP, and you’ve acquired your first customer.
- Closed – Lost – The idea was not validated.
Working The Idea
Opening a New Idea
Now it’s time to install and run your first idea as part of the Idea Validation Pipeline that we created above. For this example, I will introduce my idea for a YouTube Influencer Marketplace – a place to pick and choose influencers to promote products and services.
- Deal Stage = Open
Identifying Existing Solutions and Competitors
I decide I’m going to work this idea and see if there are any business opportunities to leverage for a new company. I move the idea from ‘Open’ to ‘Identify Existing Solutions’. Now I begin researching ways to accomplish what I imagine my idea to do using only existing solutions. In my research I find 3 solutions:
- Fiverr.com – Pay $5 for someone to promote your products/services on their channel.
- Famebit – A campaign-based approach to working with influencers on YouTube.
- Traacker – A CRM platform designed for working with influencers.
Finding Competitive Opportunities
Now I begin conducting my opportunity analysis. I move the idea from ‘Identify Existing Solutions’ to ‘Opportunity Analysis’. In this stage, I’m looking for ways a product could be better than competitors. In my research I found the following:
- Feature to browse influencers by channel and industry.
- Introduce influencer-types as a dropdown field for companies managing the influencers they work with. Videos could be brand awareness (a shoutout), research-oriented (a product unboxing and review), or a customer satisfaction video (testimonial video).
- Include a feature where the influencers and business can share remarketing snippets, UTM links, etc.
- Ability to create influencer deals in bulk for high-spending companies that want fast results.
- Ability to create lists of influencers based on who worked on previous campaigns so that companies could re-engage their best influencers.
- Integrate the platform into Salesforce and Hubspot to enable marketing automation, campaign analytics, and performance reports.
Conducting a Market Analysis
Next is market analysis. There are many different ways to validate a market, but I prefer talking to prospective users and customers. You may decide to use a survey, ask members of a Facebook Group, or write in a discussion forum on Reddit. For this case, I’m going to leverage my own method; personal networks and phone calls. Before beginning, move your idea from ‘Opportunity Analysis’ to ‘Market Analysis’.
- Who would use this product? Marketers.
- Why would they use it? Because locating and leveraging YouTubers for campaigns is difficult.
- Why would it excite them? Because it would allow them to run more campaigns using influencer marketing (an effective/difficult brand recognition tactic).
- Who do you know that is in a senior role that might find this idea cool? My friends that are Marketing Directions, CMOs, CROs, CEOs.
How to Communicate
- Facebook Messenger: I’m working an idea right now that aligns with your field of work. Would you mind providing me some honest feedback on it over a phone call.
- Phone Call 1: General discussion to feel-out their opinion and response to the idea.
- Action Item: If positive indicators, move onto next pipeline stage, ‘Design / Refinement’, and request a second call to go through a demo.
Design and Refine
After you’ve discussed your idea with your prospect, it’s time to deliver on a mock-up version of the product/service in action. Using a tool like Invision, you can create a very strong initial demo to quickly revise and iterate on the design and UX of the product. During your next call, let the prospect play with the demo themselves. Your job becomes the observer as you will watch how they use the demo, and whether or not they get to the ah-ha moment where the value is realized.
Proposal / Price Quote
This is the hardest part of idea validation, but worthwhile to pursue. With your best efforts, try to develop a paid-partnership with your prospects. This way you can earn a minimal amount of money from your first customer as you beat down the road of startup and innovation. This step can be sensitive amongst founders as often times they busy themselves working for the customer rather than building a product and company. That’s why a proposal is required to explicitly state expectations, roles, and responsibilities.
In the example of the YouTube Influencer Marketplace, market validation would occur if a prospective customer agreed to pay me to develop a somewhat customized application for their influencer marketing needs. The value exchange at the earlier start would entail learning how they currently do influencer marketing, and then seeking ways to improve it. Meanwhile, I would implement features that address problems I experience throughout the learning experience.
Negotiation / Review
This stage is where your ideas sit during the revision and review of your proposal. Items that are required for the entrepreneur include:
- Dedicated staff member to act as Project Manager to help your arrangement succeed.
- A set retainer for a fixed amount of time.
- Negotiable: A discount on the final version of the product (and for a set period of time; typically milestone-based).
- Negotiable: A clause that the partnering company will introduce you to members of their network out of goodwill.
Closed Won & Closed Lost
At this point, your idea has either been validated, or has failed. If validated, congratulations for working through this vigorous process to acquire your first customer. If your idea has failed, there’s no shame in the lessons learned. Take some time to reflect on the experience and try again. No one hits it big right away.
Be critical and make money. No market. No business.