How to test a business idea before you spend money
Before a logo, website or loan: a simple way to find out if anyone wants your idea, using conversations, one small offer and a pass mark.
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The most common first mistake in a new business is spending before finding out. A website, a logo, a batch of stock, a course or a registration feels like progress, and none of them tells you whether anybody wants what you are making.
There is a cheaper route. You can learn a lot about an idea in a few weeks using conversations and one small offer. This guide describes one way to do it. It cannot guarantee that an idea will work, and passing a test is not the same as having a business. But it will usually tell you whether to go on, change or stop, before you have spent much.
What you should come away with
- Start with a problem a particular person has, not with a product
- Ask about the last time the problem happened, not what people would do in future
- Politeness is not interest: look for something people give up, such as time, money or an introduction
- Set your pass mark before you test, and write it down
- A small offer, even a paid trial, tells you more than praise
- The test is for deciding, so decide when it ends
Begin by writing the idea as a problem. Not 'an app for tutors' but 'tutors in my area lose time and money chasing parents for fees every month'. A problem has a person in it, and a moment when it happens. If you cannot say who has the problem and when, you are not ready to test anything, and the first job is to find out by watching and asking.
Next, list fifteen people. They should be people who might have this problem, or who deal with people who do. Do not list only friends, since friends are often too kind. Include family contacts, neighbours, a shop owner, a senior, someone from a club. If you cannot think of fifteen, the group may be too narrow or too far from you.
Now speak to them, one at a time, for about fifteen minutes each. Do not pitch. Your aim is to learn how they deal with the problem today. Ask about the last time it happened. What did they do? How long did it take? What did it cost? What did they try? What did they not like? People are poor at predicting what they might do and quite good at describing what they did. Ask 'Would you use this?' and almost everyone will say yes to be polite. Ask 'How did you handle it last time?' and you will hear what really happens. Rob Fitzpatrick's book 'The Mom Test' is a short and widely read guide to asking questions this way, and is worth reading before you start.
Write down what you hear immediately afterwards, in the person's own words. Keep a simple table: name, what they do about the problem now, what they said it costs, what they dislike, and anything surprising. After ten conversations, read the table. Are the same things coming up? Do people already pay or spend time on this problem? Or do they shrug? If most people say the problem is minor, you have learned something important at a cost of a few afternoons.
Be careful of three traps. The first is leading questions, where you describe your idea so attractively that people agree out of kindness. The second is treating compliments as evidence: 'nice idea' costs the speaker nothing. The third is asking only people who are likely to agree. Deliberately talk to some who are sceptical, and ask what would make the idea useless to them.
If the conversations suggest a real problem, move to a small offer. This is the step many people skip. An offer asks the person to give something up: money, a firm commitment, a few hours or an introduction to someone else. It may be a simple paid trial of the service, done by hand without any software. It may be a small first batch. It may be an agreement to try it for a week with a promise to say honestly whether it was useful. If somebody will pay, even a small amount, for something that does not fully exist yet, that is strong evidence. If many people like the idea but nobody will pay, give up their time or recommend it to someone else, that is evidence too, and it is usually the harder kind to accept.
Before you make the offer, write your pass mark. For example: out of fifteen people, at least three will pay for a trial, or at least five will agree to try it for a week and give feedback. The number is your own, and it does not need to be scientific. What matters is that you set it before you see the results, so that you cannot adjust it afterwards to feel better. Also write down what you will do if the result is well below it, and what you will do if it is well above it.
Do the offer by hand. You do not need a website or an app. If you plan to sell a service, do it yourself for the first few people. If you plan to sell a product, make a handful. Doing it manually shows you how the work really goes, and keeps the cost low.
At the end of a fixed period, perhaps three or four weeks, look at the result against your pass mark and decide. There are three honest outcomes. Go on, because people paid and the work is something you can repeat. Change, because the problem is real but your first solution was wrong, or the people with the problem are different from the ones you expected. Or stop, because the interest was not there, and you can apply what you learned to something else. Stopping after a month is a result, not a failure, and far cheaper than finding out after six.
Passing the test does not mean you have a business. It means you have a reason to continue, and a few people who know you. The next questions, such as pricing, how to find more customers and what to register and when, come after. Check current registration, tax and licensing rules with an official source or a professional when you reach that stage. But you will be asking them with evidence in hand rather than a hope, which is a far better place to start.