How to validate a business idea

Working on a new business idea is both exciting and scary. You are trying to bring something new to life while being unsure of its survival. That is why you must validate your business idea before you invest 2873 hours and 50 grand in it. It is risky to go all-in without ensuring your idea is sustainable.

Shyp did not validate its market size and demand and failed in the end. It targeted individuals for on-demand shipping services, without realizing that they would just ship packages only occasionally. Shyp could not understand its market and did not sustain itself for long, even in a lucrative on-demand services industry. 

To prevent a similar fate, you should always test your idea and do a trial run. Now, idea validation is easier said than done. 

Worry not; this article will walk you through the process of validating your idea. You will understand each step, from market research to customer validation and testing your MVP (Minimum Viable Product), once you read the article. 

What does it mean to validate a business idea?

Man holding lightbulb in hand as a representation of validate a business idea.

Validating a business idea is like doing a test run of your new product (or service). It is a way to ensure there is a real demand for what you are offering.

Even Dropbox tested its idea first before committing to develop the cloud storage mammoth it is today. Dropbox started with a landing page to gather email addresses and gauge the interest of potential customers.

“Validating a business idea ensures there is real demand for your product/service (and people are ready to pay you for that).”

Business idea validation typically has three stages:

  • Market validation: Validate if there is a market for your product or service. Conduct market research to establish if there is a demand for your offer, and identify the size of the target market and your competitors.
  • Idea validation: After market validation, you validate the idea itself. Test the prototype or concept with potential customers and find out their pain points. By conducting one-on-one surveys, you validate that your idea solves a real problem and addresses a real need.
  • Product validation: In the final stage, you validate that the product or service is viable. In this stage, you build an MVP and test it with potential customers. By recording user feedback, you can understand what they want in the product and ensure a better product-market fit.

These stages may not be linear in many cases. You may need to revisit previous stages as you gather information and identify potential risks at every step. 

Related: Market Opportunity Analysis: How To Do It

5 steps to validate any business idea.

Five people around a conference table discussing ways to validate a business idea.

Follow this five-step process for validating your idea and grow (or pivot) your business:

Step 1: Write down goals, assumptions, and hypotheses.

To begin the process, lay out the concept of your product or service as precisely as you can. Just the simple act of writing will pull out all the crumbled thoughts and jumbled ideas.

Those words are your very own assumptions and hypotheses. You should answer them and get clarity over them, and go out to test them as soon as you have emptied them all on a paper (or screen).

The sooner you test them, the less risky your business idea will be. Resources are scarce, and time is even scarcer. So, map out your assumptions and prioritize them. 


By defining your goal. Goals matter the same in validation as assumptions. Defining your goals defines the direction you take towards validation. It helps you identify the most critical assumption. It enables you to decide what aspects to validate first.

Step 2: Start market research process.

The next step in idea validation is to test your ideas and discover your potential market size. Your task is to gather more information about your ideal customer and the problems you might be able to solve.

The first step in market research would be to dig into the trends. Google Trends is a free tool to identify potential demand for your idea. There are many other ways to use Google and start your market research. 

Once you have done prelim market research and found that your idea has potential, it is time to dig deep. The best way to do so is by creating market research surveys and questionnaires to understand what people actually need.

You can also listen to feedback, comments and user reviews online to discover what people are saying about the product or problem you are trying to solve. It is a great way to learn the actual pain points, features, and positioning of your product. 

Did you know? 

You can automate the market research process using online reviews and get daily insights to validate your idea at every step of your journey. Find out more

Step 3: Analyze market research insights.

Now that you have validated the market, it is time to assess it and learn about your potential customers. It will help you identify the customers with the highest potential to buy.

So, take a step back and ask yourself if your target market is too small and scattered. If it is not, i.e., if it is enormous, ask if you can acquire enough customers to make a significant return on investment. A good way to test the interest is through an online experiment. Spare some changes to create a landing page and an ad campaign that directs people to it.

The experiment will help you find if there indeed is a demand; that people are interested in your offer. If you generate leads, it shows your business idea has the potential for growth. So, look at your competitors and compare your idea with theirs. Think about how different your idea can be and why your customers should choose you over others.

Related: How To Find Your Unique Value Proposition

Step 4: Conduct customer validation interviews.

Next, talk to actual, real-life human customers. Think about your ideal target customers and find where they are. They could be in malls, parks, or offices, or they could be your friends and family.

You may not have to wander offline, even; you can find them online. Just keep in mind that you must do face-to-face interviews. It helps you understand the subtleties of body language.

Conduct an appropriate number of interviews to validate the idea. Ten people showing a pattern does not mean much. Fifty diverse people answering in a similar pattern might mean you are onto something big.

The more, the merrier. The more people you get to interview, the more you can bet on your business idea. If possible, have two people conduct the interview. Different people catch different insights from the same replies.

One more thing!

Ensure that the interviews are comprehensive but short enough not to exhaust the participants. Be respectful of their time. To get the most out of your interviews, ask open-ended questions. It encourages them to share more information about their pain points.

Show genuine interest in the conversation, and they will open up like a close friend. The idea is to engage them and get them comfortable enough to reveal what they actually feel. One excellent way to do so is by asking relevant follow-up questions instead of sticking to the pre-defined set of questions.

Read More: How to Conduct Market Research Surveys

Step 5: Turn feedback into action.

You certainly will find valuable pieces of feedback during the interviews. So, create a system to put them together for evaluation. The next step is to build a prototype, an MVP, with all the research, analysis and interview you carried out. This is the final step in validating your idea.

Sit together with your team (or brainstorm if you are a solopreneur) and review the feedback data. Compare it with your assumptions and hypotheses, and refine your business idea accordingly. What you need right now is to look for common themes and patterns.

Use what you have learned from the interviews to put things in motion. It is time to build an MVP keeping the customers’ points of view in mind.

While you are working on the prototype, try not to aim towards perfection. Your MVP is just the minimum viable product. It is not meant to look polished. It will be the first version of something that you will refine a hundred times based on follow-up interviews.

When you have developed something meaningful, go back to your ideal customers. See how people respond to it; you will know whether the idea is worth pursuing.

Related: The 7-Step CRO Marketing Strategy

Validate in real-time through agile market research with GapScout.

Validating the idea is vital for the success of any business. It is what ensures that your concept sees the light of day to be called a business. This idea validation begins with market research. With market research, you get insights into customers’ needs, preferences, and habits that help you make informed decisions in the future. 

Does the idea of market research seem time-consuming or stressful?

Well, GapScout is here to help!

GapScout automates the process of conducting market research by scanning online reviews and giving you validation insights on a single screen. 

Ready to Automate Your Market Research?
Get exclusive access to GapScout prior to release!

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Anmol Sachdeva
Anmol Sachdeva
Anmol is an independent content marketing consultant who loves to write actionable pieces on small business growth, marketing automation, market research, and growth as a solopreneur. Reach out on Twitter.

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