5 methods I use to test the profitability of a business idea.
Starting with the boring ones…
1. DO YOUR RESEARCH
First, you need carry out a research to know if the business idea already exists. If it does exist, then a proper research will help you examine find how the businesses are performing.
- Are their performance good or bad?
- Why is their performance good or bad?
- What can be done better?
These are questions you should consider answering when carrying out a research to validate your business idea.
2. CONDUCT A FOCUS GROUP
A focus group is a gathering of deliberately selected people (Ideally 4 – 20 people) who participate in a planned discussion that is intended to produce qualitative data (preferences and beliefs) that may or may not be representative of the general population.
Focus groups are also great for problem-solving, idea generation or forecasting technique where several experts or informed individuals share their point of view on a specific topic, product or problem.
This is a great way to hear directly from people who are possibly going to be your customers or clients.
- Gather a few of your friends and families, and online friends and followers to help you complete this part.
- Find out if they will pay for your product or service idea when you launch.
3. DO A SALES FORECAST (GUESTIMATE)
Sales Forecasting is the process of estimating what your business’ sales are going to look like in the future.
I always find this very effective, because it helps me understand if my business idea will be profitable or not, and most importantly, it helps me build a sales plan that can help me avoid unforeseen cash flow problems in the future.
Now we are done with the hard part, over to the fun part
4. TAKE IT TO THE GRAM (INSTAGRAM)
If you want to know if your idea will sell, then open an Instagram account for it, and start building up the awareness, even before you launch. I do this with all if our brands– so it totally works.
However, Instagram can be a dream killer and maker. The key is to focus on the number of people enquiring about your product or service, and not the number of likes and followers – people love beautiful pictures, so be careful, they could be liking and following you to see more beautiful pictures.
Follow all the Instagram best practices, including posting often (consistently), using hashtags and geotags, sharing eye-catching graphics, with compelling captions, embrace storytelling, and remember to be social.
5. START BUILDING AN EMAIL LIST
It’s easy to have 100 likes and comments on Instagram, but it’s hard to convert those likes into leads if you don’t have a conversion strategy. Right!
Now one of the easiest ways to convert all that attention into leads is by adding them to a waitlist even before you launch. This is is a great way to validate your business idea.
So if people subscribe to your waiting list, then they are interested in what you are selling, and they are a step closer to becoming a paid customer.
If you do all of the above, and the results come out positive, then it’s time to make it happen. However, if it’s negative, you don’t have to discard that idea just here, make a few changes, and try again.
Remember! there are no bad ideas, if there were, then so many people won’t be in business today.