How to validate your small business idea before diving in

If you don’t validate your small business idea before diving in, you’re making a big mistake

Consider these statistics:

  1. 45% of new businesses fail within the first 5 years
  2. 42% of small businesses fail because there is no market need
  3. Not having a proper business plan is one of the main reasons small businesses fail

By validating your small business idea, you will be able to make a fact based, educated decision on whether your business idea has a viable market

Furthermore, the benefits of validating your small business idea is manyfold. You can save yourself a lot of money, time, and unnecessary frustration before you start committing fully into setting up your new business

What idea validation is

So what does it mean to validate your business idea? 

In a nutshell, you test whether there is any traction to your idea before committing all your time and resources to it. Ideally, you will have already secured a small group of paying customers even before launching your small business idea

Properly validating your idea will considerably increase your likelihood of success, and avoid yourself being a part of the statistics above

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What idea validation is not

However, validating your business idea is not to be mistaken as a guarantee of success. There was and always will be unpredictable risks that will lead to challenges and failure, it’s part and parcel of an entrepreneurial journey

It is also not an easy process. You will still need to invest effort, time, and some money to do so. 

You’re just doing it in a smarter way

Here are 5 steps to validate your small business idea

Step 1 – Generate your idea

Start off by listing down as many ideas as you can

At this point, don’t let the details bog you down. You also don’t need to criticize your idea now

However, keep in mind that your idea needs to solve an underlying problem for your core target audience

Once you have your list of ideas, start trimming them down to a smaller list of ideas that you think have the biggest potential, until you are left with 1 – 3 ideas that you feel strongly about

Ideally, your small business idea needs to be an intersection between your skills, passion, and also experience

Here’s an example of my draft when I was generating my small business idea

Skills you already have

Your idea should take advantage of the skills that you already have in order to give you the best chance of success

You’ve already spent years learning and perfecting the skillsets you have now. Why put it to waste?

While generating your idea, you might also realise that you need to learn some skills that are complementary to what you already know. That’s ok, and that’s better compared to having to learn a completely new skillset

Things that you are passionate about

It’s easier for you to do something that you enjoy. Therefore, you’ll want your business idea to be something that you are passionate about

Furthermore, the road to success is a difficult and overcrowded one

Small business owners face challenges on a daily basis. If you’re not passionate about your idea, you might give up in the face of a major challenge

Your experiences

Working on an idea that relates to your experiences will help you grow it faster

With experience, you will be able to identify opportunities accurately and also better relate to your customers. Thus giving you an advantage when it comes to marketing to them

Apart from that, you will be able to better anticipate challenges that you might face. This way, you can avoid making costly mistakes and focus on more important things in your small business

Step 2 – Research your idea

Now that you have 1 – 3 ideas that you feel have the biggest potential, it’s time to backup your assumptions with factual data

The objective of this step is for you to get a better feel for the market of your small business idea 

Here are some of the questions you can ask during the research phase

  • How many competitors are there? Is this a saturated market?
  • How is your idea different from what is in the market?
  • What is the market size of my idea and who are my core target audiences?
  • What is the potential revenue that I can generate on a yearly basis?
  • Is the industry that I want to go into recession proof or susceptible to any major external influences?
  • How scalable is my idea?
  • Is my revenue model based on one time sales or recurring sales?
  • What is the margin of my product?
  • What kind of resources do I need to get the idea off the ground?
  • Is the time vs profit ratio justifiable?

Sources of information

There are many sources that you can refer to when you are researching your idea, these includes:

Search Engines

You should be able to use search engines to answer most of the questions about your market. 

You can also use search engines to get a list of your competitors for the competitor analysis that you will be doing shortly

On top of that, you can also take advantage of Google’s ‘People also ask’ feature to find out other related questions to your business idea

Social Media

Are there specific groups around the industry of your small business idea? Are they active? What are people in those industries talking about?

You can use social media to find out information about other similar business owners, the challenges they face, and also customer feedback

  • Facebook
  • Instagram
  • Snapchat
  • LinkedIn
  • Twitter
  • TikTok

Competitor Websites

This is information directly from its source.

What are your nearest competitors selling? What are their USPs? Are they competitive?

Having these information allows you to develop your own USP or carve your own niche


You can do your pricing research to determine a suitable price for your products

Browsing through marketplaces will also give you an idea on whether the market for your idea is saturated, and also the common expectations of a customer in your industry, such as delivery times and customer service

  • Facebook Marketplace
  • Instagram Marketplace
  • Amazon
  • Ebay
  • Lazada
  • Shopee


Forums are a powerful way to collect feedback about your idea

By browsing forum topics that are related to your small business idea, you might also discover features or ideas that you hadn’t thought about and use them to strengthen your core idea

You can also find out the common questions or challenges around your idea

  • Reddit
  • Quora

Online tools

You can use online tools to find whether your small business idea is trending upwards or losing momentum

On top of that, you can also use these tools to measure your market size, and also other topics surrounding your small business idea

  • Google Keyword Planner
  • Google Trends
  • Ubersuggest
  • Facebook Audience Insight Tool

Competitor Analysis

By now, you should have a list of your top 10 competitors. It’s time to dive deeper into their strength and weaknesses

You can go through your competitors’ websites and social media pages to get a deeper understanding about their overall competitiveness, and also how challenging it is to enter to the market

Here is a list of questions that you can answer

  • How many years are the competitors already in business
  • What is the quality of their websites
  • Do they update their products regularly?
  • How is their customer service process like?
  • Are there a lot of product varieties?
  • What is the price range for their products
  • Do they regularly run promotions?
  • What information do they usually post on social media?
    What are their customer reviews?

If you want to take it a step further, you can even buy one of your competitor’s products to experience what an actual customer goes through

  • Was the overall experience good?
  • Was the payment process easy?
  • Did you receive your goods quickly?
  • What was the packaging like?
  • Was the product’s quality good?
  • Did they do any upselling or cross-selling?

Developing your USP / Competitive Advantage

Now that you have a deep understanding about your competitors, it’s time for you to differentiate yourself from them.

Taking your competitors strengths and weaknesses into account, what are the things that you can do to give yourself a competitive advantage?

Can you differentiate through a specific feature?

  • Is it possible for you to offer same day delivery?
  • Is there a market for you to offer a premium, more comprehensive version of the product?
  • Can you provide outstanding customer service?

Based on your research, you should now have a draft of what your small business idea is going to be, together with your competitive advantage

Step 3 – Create a potential customer feedback group

Speaking to potential customers is the best way to validate your idea

You should speak to 2 groups of people:

People who fit the profile as your potential customer

Check whether what you are offering appeals to this group of people. Get them to poke holes on your idea and ask them if they have any feedback. Also, will they buy what you are selling?

People who have purchased similar products before

Why did they buy that product? By asking this question, sometimes you might even discover different motivations of a customer buying a product

How was their product experience? Identifying what a person is happiest about a product can help you further strengthen your product idea

What would they like to be different? You might be able to get some inspiration for your competitive advantage here

If a lot of the comments you receive are negative, remember that it’s better to get shot down at this point of time compared to when you already spent thousands of dollars developing your idea

Don’t be discouraged, just go back to the drawing board and try to start over

On the other hand, if you receive encouraging feedback and interest from a majority of the people you reached out to, remember to ask if they would like to be included in future updates and compile their information into a list

At this stage, you can use all the feedback you received to further fine tune your idea

Step 4 – Build an MVP

With all the information you gathered through your research together with feedback from people who fit your customer profile. You can now develop an MVP (Minimum Viable Product)

MVP (Minimum Viable Product) : A version of your product that is in its simplest form – just enough to satisfy what your potential customer needs now, without having to invest too much time and money into creating it


For example, if your idea is a an e-book about the best off-the-beat tourist spots in your country that is based on local recommendations, your MVP could be a 1 page website with some sample content and a email sign up form or pre-order form

Here are 2 more well known examples of a product and a service’s MVP

Pebble Smartwach

The Pebble Smartwatch launched in 2012 with only a landing page on Kickstarter listing down the core features of its product

They ended up raising 10 million dollars, even before they started developing their product


In 2007, Airbnb founders Brian Chesky and Joe Gebbia had an idea to cut out the middlemen and provide short term rentals

They took some pictures of their apartment and built a simple website offering accommodation to attendees of a conference happening in their city. They quickly got 3 paying customers

Today, Airbnb is valued at $26 billion

Today, there are many platforms that you can build and showcase your MVP on without breaking the bank, such as:

  • Shopify page
  • Online landing page
  • A simple Google Slides presentation
  • A flyer

Step 5 – Get 10 paying customers

With an MVP ready, start by following up with the people in your potential customer group.

Message them, email them, call them. It’s worth putting in some effort to connect to them individually at this stage

You already built a relationship with them through the feedback phase, ask them if they like or need your product enough to be one of your first paying customers

Remember to also check if they can recommend a friend they think your MVP will be a great fit for

If you want to validate your idea to a bigger group of people, now is a good time to invest in some online ads to secure some paying customers

Make it easy and worry-free for people to become your customers

At this stage, there might be some people who are worried you might not be legit, or they may not even see a completed product

To overcome this, make their commitment process as easy and risk free as possible

You can give them a steep discount or an early bird price

You can take a small deposit with a guarantee that you’ll refund the money if you’re unable to deliver your product within the promised time

The objective here is not to earn money yet, it is to see if people are willing to put their money where their mouth is

If you can secure 10 paying customers, chances are you can secure 50, 100, or even 1000 paying customers

If you have successfully reached this stage, congratulations, you have a considerably higher chance of success compared to immediately diving into an unvalidated business idea

Now is the time to commit your resources and time to this small business idea and start delivering!



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