How to Test Your Business Idea Before You Build It

Don't build what nobody wants. That's the single most expensive mistake I saw in the research for The $100 Startup, and it's almost entirely preventable. The philosophy is simple: prove demand first, build second.

I call it "market before manufacturing." And one of my favorite stories from the book shows exactly why it works.

The $900 guide that didn't exist

A friend of mine created a specialty guide aimed at the high-end car industry. He priced it at $900 and advertised it in a magazine. There was just one catch: the guide didn't actually exist yet. He knew it would be a lot of work to put together, so why do the work if no one wanted it?

Partly to his surprise, he received two orders. The ad had cost $300, so that represented $1,500 in profit if he could actually create the guide. He wrote to both buyers and said he was developing a "2.0 version," and he'd love to send it to them at no additional charge as long as they could wait thirty days.

He offered to refund their money if they didn't want to wait. Both chose to wait.

The reality check

Before you run any market test, sit with these questions. They come straight from the book, and they're designed to separate genuine business ideas from hobbies you wish were businesses.

Questions for you:

• Instead of just during your free time, would you enjoy pursuing this at least twenty hours a week?
• Do you enjoy teaching others to practice the same skill or hobby?
• Do you like the ins and outs, all the details, not just the fun parts?
• If you had to do a fair amount of administrative work related to this, would you still enjoy it?

Questions for the marketplace:

• Have other people already asked for your help?
• Are enough other people willing to pay to gain or benefit from your expertise?
• Are there other businesses serving this market (usually a good thing) but not in the same way you would?

That last one surprises people. Existing competitors are a positive signal. It means money is already changing hands. You just need to find your angle.

Think about Mignon Fogarty. Before Grammar Girl became a hit, she spent a full year promoting "Absolute Science," a science podcast she was passionate about. It was well-received but never made money. She didn't abandon her passion altogether—she connected the right passion with the right audience. Science had passion but not enough market. Grammar had both. That's what the reality check is for.

If you can't answer "yes" to most of those questions, it doesn't mean you should give up. It means you probably need a different idea, or a different angle on the same idea. The book calls this convergence: two circles, not three. Your passion or skill in one circle. What other people care about enough to spend money on in the other. The overlap is where a business lives.

Seven steps to instant market testing

You've passed the reality check. You believe the idea has potential. Now it's time to test it for real.

Here's the seven-step framework from the book. Not every idea needs all seven, but working through them in order gives you the clearest picture of whether you've got something real.

1. Make sure you care, and you're not alone in caring

You need to care about the problem you're going to solve. That part's obvious. But there also needs to be a sizeable number of other people who care too. Always remember convergence: how your idea intersects with what other people value. If it's only interesting to you, it's a hobby. If lots of people share the problem but you don't care about solving it, you'll burn out in months.

2. Check that the market is big enough

Test the size by checking the number and relevancy of Google keywords. Think about what people would search for if they were trying to find a solution to the problem your product solves. If you were looking for your own product online but didn't know it existed, what would you type in?

Pay attention to the ads. The top and right sides of search results pages show you who's spending money on those keywords. Ads mean businesses are paying to reach those searchers. That's a strong signal of demand.

3. Focus on blatant admitted pain

This is one of the most useful concepts in the book. Your product needs to solve a problem that causes pain the market already knows it has. It's dramatically easier to sell to someone who already recognizes they have a problem than it is to persuade someone they have a problem that needs solving.

Don't try to create demand. Find it.

4. Understand that it's always about pain or desire

Almost everything being sold is either for a deep pain or a deep desire. People buy luxury items for respect and status, but on a deeper level they want to be loved. Having something that removes pain may be more effective than realizing a desire. You need to show people how you can help remove or reduce their pain.

Jason Glaspey saw this clearly with the Paleo diet. Thousands of people wanted to follow it, but the planning was overwhelming—what to buy, what to cook, what to eat each week. The pain was obvious and admitted. Jason created Paleo Plan, a one-man business that told subscribers exactly what to do. He started it in three weeks with $1,500. Within a year, it was bringing in more than $6,000 a month in recurring revenue, and he spent about two hours a week maintaining it.

5. Make sure your solution is different and better

Always think in terms of solutions. Make sure yours is different and better. Note that it doesn't need to be cheaper—competing on price is usually a losing proposition.

Is the market frustrated with their current solution? Being different isn't enough on its own. Differentiation that makes you better is what's required. There's no point introducing something where the market is already satisfied. It's significance, not size, that matters.

6. Ask the right people

Ask others about the idea, but make sure the people you ask are your potential target market. Everyone else provides bad data. Your mom will say it's brilliant. Your coworker will say "you should totally do that." Neither of them counts.

Create a persona instead. A persona is the one person who would benefit the most from your idea. Examine your whole network—community, friends, family, social media—and ask yourself if anyone matches your persona. Take your idea to that specific person and discuss it in detail. You'll get much better data than talking to anyone who'll listen.

Kris Murray learned this the hard way. She spent years selling marketing help to small daycare centers in Hudson, Ohio—and couldn't figure out why the business wasn't growing. The daycares were too small to invest in her services. Then she "changed the WHO," as she put it. She pivoted to multi-location childcare center owners who had bigger businesses and bigger budgets. Same skills, same service, different buyer. She went from barely getting by to earning more than $20,000 a month.

7. Give it away to a small group first

Create an outline for what you're building and show it to a sub-group of your community. Ask them to test it for free in return for feedback and confidentiality. This group feels involved and will act as evangelists when you launch. Giving builds trust and value, and it gives you an opportunity to offer the full solution later.

The decision-making matrix

What if you've got several ideas that all seem promising? This was a problem I ran into myself. When you have more ideas than time, you need a system for choosing.

Score each idea from 1 to 5 on four criteria:

• Impact: How much of an impact will this project make on your business and customers?
• Effort: How much time and work will it take? (Scoring is inverted: 1 means a ton of work, 5 means almost none.)
• Profitability: Relative to your other ideas, how much money will it bring in?
• Vision: How close of a fit is this project with your overall mission?

Add up the scores. Highest total wins. Here's how I scored my own ideas back in 2011:

Project	Impact	Effort	Profit	Vision	Total
Publishing Guide	4	3	3	5	15
Empire Building Kit	4	2	5	4	15
Community-Building Webinar	3	4	2	3	12
Shopping Cart Project	3	3	3	3	12
Small, Live Workshops	4	1	1	4	10

I liked the idea of small, live workshops until I realized they would require a great deal of work for little reward and impact. The matrix made it obvious. Without the scores in front of me, I might have spent months chasing that idea.

The matrix won't make the decision for you. But it forces you to think clearly about tradeoffs instead of just going with whatever feels most exciting in the moment.

Testing matters, but so does starting

I want to end with a story that balances all this testing talk, because there's a real danger of letting "validation" become another form of procrastination.

Early in the life of my business, I created a project called Travel Ninja. I'd been to more than 150 countries and flew more than 200,000 miles a year, so I figured I'd make a guide about how it all works—Round-the-World tickets, airline mistake fares, the whole system. When I surveyed my audience, plenty of people said they were excited. On launch day, I got up early, made the site live, and waited.

I sold 100 copies. Not terrible, but a previous product had sold 500 on its first day. Something was wrong.

It took me weeks to figure it out: most people don't care about the intricacies of how airlines work. They just want cheap tickets. I'd taken them into the kitchen instead of giving them the meal. Too much detail, not enough outcome.

A year later I regrouped with Frequent Flyer Master. I made it more accessible. The sales copy said: "Maybe you don't want to travel to twenty countries a year like I do. But if you could go to one place for nearly free, where would it be?" It sold 500 copies on launch day and went on to produce more than $50,000 in net income over the next year.

The year after that, I applied the lesson even further. The most common request from Frequent Flyer Master owners was for updates on late-breaking deals. So I created the Travel Hacking Cartel with the message: don't worry about the details, just do what we say and you'll earn enough miles for free plane tickets every year. More than 3,000 customers joined on day one.

Three products. Same topic. Each one worked better because I'd listened to what the last round of customers actually wanted.

That's what testing really looks like. It's not a one-time gate you pass through before launching. It's an ongoing conversation between you and the people you're trying to help. Run the seven steps. Use the matrix. Ask the hard questions. But at some point, ship the thing and see what happens. You'll learn more from your first hundred customers than from any amount of market research.

Frequently asked questions

What if my idea fails all seven tests?

Good. You just saved yourself months of building something nobody wants. Go back to the convergence concept, where your skills intersect with what people will pay for, and try a different angle. Most of the people I studied tested more than one idea before finding the one that worked.

Do I need to complete all seven steps before launching?

No. The steps aren't a bureaucratic checklist. If you get through step four and you've got clear evidence of demand, that's enough. Don't let testing become another form of procrastination.

How long should the testing process take?

A week or two at most. You can run the keyword test and the persona conversations in a single weekend if you're motivated. If testing is dragging past two weeks, you're probably overthinking it.

What if I have too many ideas and can't pick one?

That's exactly what the decision-making matrix is for. Score each idea on impact, effort, profitability, and vision. The math won't make the choice for you, but it'll make the right choice a lot more obvious. I had five competing ideas in 2011 and the matrix cut it down to two in about ten minutes.