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How To Validate Your Business Idea By Testing A Hypothesis

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Re: How To Validate Your Business Idea By Testing A Hypothesis

#31

Post by wpietri »

gchokov wrote: post #3

While I do see the value of validation, this is not a silver bullet. People try to simplify things, find patterns, but this cannot always work. There are so many reasons why I would not want to validate things: - Sometimes, people will not tell you what they want, because often they do not know what they want, until you show it to them. Someone smarter than me said this before. - People judge from their experience. Y…

It sounds to me like you haven't had much practice validating things. Nobody serious about this sort of validation would suggest you ask people what they want. Instead, when you think you know what people really want, it's your job to prove that.

Suppose that you make something that you're convinced is the best product in the world. You work for years, you spend millions. And then you launch. It turns out that nobody cares; you go bankrupt. Someone might ask: "Was it really a great product?" We could argue the answer to that, but I think it's the wrong question.

Businesses need to be sustainable. Some ideas work, some don't. I think the best thing we can do is to a) maximize our chances of success, and b) minimize the cost of our failures. I believe the only way to do that is to continuously and aggressively test our hypotheses. Otherwise, investment just ends up being the way we fool ourselves a little longer.

Products aren't art. They're commerce. If you want to do art, just do art.

Re: How To Validate Your Business Idea By Testing A Hypothesis

#32

Post by dammitcoetzee »

jjoonathan wrote: post #27
dammitcoetzee wrote: post #19

How is the scientific method not used for this always? The scientific method and way of thinking is probably the most useful thing you can ever master. Science allows you to set up a question and then set up an experiment in such a way that you cannot lie to yourself about the result. For example, let's ask the question: Is my business doing well? A layman's approach will almost certainly be evaluated on a subjective…

> This way of thinking is invaluable. Is it the way of thinking or the things you assumed the business already had that were invaluable? You assumed * The existence of a large enough steady stream of paying customers to quickly gather statistics on. "Steady" is especially atypical in many environments. * Enough runway that you can afford to tackle issues one-by-one (i.e. using a control) rather than scrambling and gu…

I assumed all those things in my hypothetical example application of the scientific method to a decision. I'm not really certain what you're getting at?

The article linked above already goes into some detail as to how to use this to simply evaluate an idea. I was just expounding on another possible use just to show how invaluable this is. Heck you can even use it in relationships. You can tell if someone is lying. You can use it to tell if people like you. You can even use it to lose weight. I'm using it right now to see if I need to drink more water daily or if something else is wrong. It's basically a super power.

Re: How To Validate Your Business Idea By Testing A Hypothesis

#33

Post by wpietri »

enraged_camel wrote: post #30
gchokov wrote: post #21

Earlier quoted context omitted.

It's one thing to say how much you will pay, and different to pull out your wallet and actually pay.

Yes, but asking someone how much they would pay for it takes them almost all the way, mentally, to actually paying for it. You're basically asking them to make a verbal and very informal commitment, but that's enough to make most people think about it seriously (as opposed to saying "omg I love it!!!" just to be nice).

That's not my experience; I now avoid asking hypotheticals because the results for me have been very unreliable.

I'm certainly unreliable that way. There are a number of Kickstarters where I've said, "OMG I'd pay for that!" But if I come back to it a couple of days later, I'll never actually click on the signup button. I'm even worse with things like this in person. I don't like disappointing people, so I'll try hard to find the most positive thing to say about their product.

When interviewing, I might ask people a question like, "What's a fair price for X?" But that for me would be more about the follow-up question: "How did you pick that number?" An insight into what they see as equivalent products, related value propositions, or personal value metrics would definitely help me think about pricing.

Re: How To Validate Your Business Idea By Testing A Hypothesis

#34

Post by coldcode »

A startup I know had a great idea, great product name, validation from some actual people in the industry that it was something everyone would want. They built it and launched and discovered that the industry as a whole was technology phobic; the problem was that the supposedly representative people they talked to where among the few that understood the benefits of the technology (in this case mobile). It's like a poll I read about in the 30's where pollers called a lot of people to ask about phone usage. The problem was that they only talked to people with phones so the answers were useless.

Re: How To Validate Your Business Idea By Testing A Hypothesis

#35

Post by exelius »

davidroetzel wrote: post #14

This kind of advice pops up on HN from time to time and while I believe it to be valuable, I guess it is at least incomplete. Here are two stories from my failed ventures to augment this advice: 1) Years ago I started a small side-business with a few colleagues. It was a web-based service for a very specific group of clients. Best of all: The idea had already been validated. We had our first paying customer before we…

Sounds like two things here:

With #1 you found a problem, but failed to find a market. It's hard to say without knowing the product and/or situation, but it sounds like your product was in the unfortunate position of being an enterprise B2B product that was not solving a problem in the SMB space. The typical strategy for a B2B product is to sell it to SMBs early on, then use that revenue to fund the massive feature set that large enterprises usually need. This is one of the things that happens in startups -- sometimes you don't know your market is a dud until after you have a product. It's not a sure thing.

With #2, you just didn't have a large enough sample set. Response rates for e-mails collected via landing pages like this are around 1-2% in my experience. It's a bit of a chicken and egg problem to be honest, and it's hard enough that many startups will throw a marketing budget into it.

Re: How To Validate Your Business Idea By Testing A Hypothesis

#36

Post by RogerL »

wpietri wrote: post #25
mason55 wrote: post #20

Earlier quoted context omitted.

> Also, liking a product/idea is not the same as being willing (or able) to pay for it. A great thing to do is when you're validating products you ask the prospect how much they'll pay. Then say "Ok, so if I put a contract in front of you that says you'll pay $x if I deliver this product you will sign it?" You'll find out very quickly whether someone is just being nice or whether they are serious.

Indeed, rather than just asking if they'll sign a contract, you can pull out a Letter of Intent [1] and ask them to actually sign it. You can explain that they're not legally binding if you need to keep people from freaking out. But there's something about signing an official-looking document that a) makes people take it seriously, and b) makes people more likely to really sign up when you come back to them. Dependin…

Please, no.

As soon as someone starts trying to maneuver me to take money out of my wallet, I'm gone. It's not my problem that you don't know if your product is good or not. There is no way on earth I'm signing anything, giving you a credit card number, or what have you. I'm utterly shocked that this is considered a good way to gauge interest in a product.

Even if I really am interested, so what? I have a budget, my appetite exceeds my grasp, just because your product might solve a pain point doesn't mean I will buy it. I need to consider the needs of my entire business, weigh pros and cons, and so on. If you are pulling out papers to sign after a conversation, I'm so gone.

I'm reminded of some 3rd party home alarm installers that came around to my house a few months ago. We were thinking of re-activating the alarm in the house, so we talked to them. Didn't take long for the papers to come out, etc., and it didn't take much longer for us to tell them to pound sand.

I don't give emails out (because on average the spamming becomes relentless) to landing pages, now I'm supposed to give you a CC number just so you can do marketing research?

No.

Re: How To Validate Your Business Idea By Testing A Hypothesis

#38

Post by mason55 »

gchokov wrote: post #21
mason55 wrote: post #20

Earlier quoted context omitted.

> Also, liking a product/idea is not the same as being willing (or able) to pay for it. A great thing to do is when you're validating products you ask the prospect how much they'll pay. Then say "Ok, so if I put a contract in front of you that says you'll pay $x if I deliver this product you will sign it?" You'll find out very quickly whether someone is just being nice or whether they are serious.

It's one thing to say how much you will pay, and different to pull out your wallet and actually pay.

That's why you ask the second question. "Ok, great, so then let's draw up a contract with that pricing and you'll sign it?"

Make them put their money where their mouth is.

Re: How To Validate Your Business Idea By Testing A Hypothesis

#39

Post by ryanSrich »

davidroetzel wrote: post #14

This kind of advice pops up on HN from time to time and while I believe it to be valuable, I guess it is at least incomplete. Here are two stories from my failed ventures to augment this advice: 1) Years ago I started a small side-business with a few colleagues. It was a web-based service for a very specific group of clients. Best of all: The idea had already been validated. We had our first paying customer before we…

> Lesson learned: Newsletter- or Beta-signups from your landing page is NOT the same as validation for your idea.

The importance of this comment lies with the false reality of believing at face value that someone loves your product and says they'd use it. Until their money makes it into your bank account, take everything they say with a grain of salt.

It's also worth noting that changing the habits of individuals is a massive feat of social engineering. I've seen products that save time and money and yet the market will stick with what they've always done.

Re: How To Validate Your Business Idea By Testing A Hypothesis

#40

Post by j45 »

wpietri wrote: post #25
mason55 wrote: post #20

Earlier quoted context omitted.

> Also, liking a product/idea is not the same as being willing (or able) to pay for it. A great thing to do is when you're validating products you ask the prospect how much they'll pay. Then say "Ok, so if I put a contract in front of you that says you'll pay $x if I deliver this product you will sign it?" You'll find out very quickly whether someone is just being nice or whether they are serious.

Indeed, rather than just asking if they'll sign a contract, you can pull out a Letter of Intent [1] and ask them to actually sign it. You can explain that they're not legally binding if you need to keep people from freaking out. But there's something about signing an official-looking document that a) makes people take it seriously, and b) makes people more likely to really sign up when you come back to them. Dependin…

LOI's are generally more interesting to investors. As someone who is bootstrapping or working with limited time or money, there's no better validator than money.
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