A Guide to Testing your Business Idea

The key to success to any new business is knowledge; how to run your business effectively and, more importantly, information about your business market. There are many methods you can use in testing your business idea, many of which are suitable for small start-up businesses with little capital.

The main focus of any business should be what the consumer wants; many entrepeneurs can make the mistake of assumingwhat consumer will buy when they go into business, rather than actually researching and testing their model first.

4 Steps to Testing Your Business Idea

The first step in testing your business idea is to identify your market. This will help you establish what the consumer wants; you may think you've come up with a firm idea that people will by into, but it is important to extensively research a potential market before investing capital into a business idea.

To identify your business market you need to establish how big the market is for your current product. Is there already an established market for your product, or is your idea something relatively new that doesn't fall into a particular category?

If there is already a market for your product, you need to look at your competition and find out what kind of prices other companies are selling their products at and what kind of consumers are buying these. Usually, a few extensive online searches can help you with this kind of market research. Once you have an idea of the kind of market your product will be in, you can look for opportunities or gaps in the market - can you sell your product cheaper than competitors, or can you tailor it to a certain type of consumer in the market whose needs have been left unmet by other competitors?

If your business is relatively new and doesn't fit into an established market, you should still look at examples from similar companies and use the same methods to establish any potential gaps when testing your business idea.

Once you have an established market, identify your customer. Think about who the perfect customer would be to buy your product; their age, profession, potential income, and what their main motivation would be for buying your product. This step is essential for structuring your advertising and how you will sell your product.

You can then move on to actually testing your business idea and measuring demand. Usually, big companies hire focus groups to do this for them - but if you don't have a lot of capital, you can visit expos, trade shows, industry meet and greets or any other kind of gathering that is relative to your market. You can use such meetings to increase the number of contacts you have in the industry and increase awareness of your product and, more importantly, test and measure reactions to your business idea from industry experts and potential consumers before you invest in advertising and selling.

After visiting a number of trade shows or any other gathering in your industry, you should develop a list of contacts (including customers, similar businesses and suppliers) which you can begin selling to as potential customers. This is still an early stage for any business, so you can alter your sales tactics if necessary and continue to learn from your contacts and competitors.

Trial and Error

When testing any business idea, it's important to remember most steps should be taken slowly with a "trial and error" approach; be vigilante in your methods and monitor each decision carefully to identify what works and what doesn't. There is no "golden formula" to success in the business world, but an extensive knowledge of your market and a list of contacts will help you tremendously in your business venture.

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