Market Validation: The First Step Towards making a Go/No-Go Decision on Your Startup
Professional experience is your superpower. With as little as three years of relevant industry experience, you’re already 85% more likely to be a successful founder.
There are good reasons for this. You understand your industry and have developed a strong network. You have direct experience with an actual customer problem. This initial Position of Strength already sets you apart from other founders.
So far, you haven't taken much risk. You’ve developed your Position of Strength within the safety of a paid job. Going all-in on your startup by quitting your job will mean taking on significant financial and personal risk.
Make this a deliberate data-driven decision - it's too important not to. You'll need more than passion and motivation to succeed.
Keep your job as a safety net until you confidently decide to go all-in.
Start by confirming if there’s a verifiable market opportunity for your business idea.
You can’t build a business without a clear market opportunity. Validating your market is your critical next step. It enhances your Position of Strength by adopting a problem-first, customer-centric mindset.
The only way to do this is by talking to customers. Customer data is the sole source of market validation.
5 Reasons why you can’t move forward without market validation
The goal of market validation is to identify the following:
(1) a large market and a group of early adopters - your first customers
(2) a priority problem these customers have that you can solve.
The best way to answer these is through customer interviews. This takes time. Don’t rush ahead to build and test your solution.
Lower the risk of your venture by making sound, data-backed decisions using customer data.
(1) Focus your energy on the main driver of successful businesses
Your solution is only one of many aspects required to build a successful business. Contrary to popular belief, solutions aren’t what drives success. It all starts and ends with your customers.
Customers will only buy a solution that solves a big problem for them. This is the value you must identify by talking with customers. It links directly to your business's Unique Value Proposition (UVP) - the core reason why customers will buy.
Market validation keeps your focus on the problems your customers care about. It enables you to build the right solution.
(2) Validating your market is a win-win, regardless of the outcome
You might find there is no market opportunity, or you couldn't find a priority problem you could solve.
It's time to refocus your energy and resources on something better. All you’ve lost was a few weeks, but you've gained fundamental insights into this market.
In the best-case scenario, you’ve identified a large market, a priority problem, and a group of early adopters you’ll target as first customers. Narrowing down will help you optimize limited resources and build the right solution for the right customers.
(3) If you sell to everyone, you sell to no one
Talking to customers helps you identify those that matter right now. These early adopters are so desperate that they'll take a risk with you. They help you to generate your initial validation through revenue.
Don’t start by tackling a larger market initially.
Your goal is to lower your startup risk step-by-step. You have limited resources and the bones of an idea. Targeting everyone or a large market with your solution will likely fail.
(4) Build the right solution for the right customers by avoiding the innovator's bias
Almost every founder starts with an idea. But the danger is overinvesting in this idea without validating a real market opportunity.
This is the innovator's bias at work, and it's also the main reason founders fail: building something no one wants.
The development of your business and solution requires a customer-centric mindset. Don’t build your first big idea - build a solution that customers will pay you for.
Market validation refocuses your understanding of what customers value. It avoids your innovator’s bias and allows you to make data-driven decisions instead.
(5) Communicating your business opportunity
Becoming an expert on your market is the foundation of communicating your business opportunity.
To succeed, you’ll need to attract the right people to help you build this business. And the right people, whether investors, co-founders, or employees, need more than just an idea for a business. They need to be convinced by an expert like you using customer data that there is a real market opportunity.
Market validation provides you with the customer data to become this expert. Done right, this will enable you to effectively communicate this business opportunity to anyone.
The Market Validation process allows you to make data-driven decisions about your market opportunity. Building any other part of your business is only possible after knowing your market.
It takes hard work and dedicated focus to validate your market. But it's doable and maximizes your Position of Strength.
After validating your market, your next step involves validating your business model to know if your business is feasible and viable.