You've got a great idea. Now what?
That's when Wolverine would tell you, "Now you do some f***ing market research, bub".
Ok, maybe Logan didn't actually say that but it doesn't make it not true.
You need to validate your idea before you spend a small fortune developing a product or service nobody wants to buy. And as Paul Graham, former co-founder of Y-Combinator says, your mission is to "build something people want".
One of the most important things we should be striving for is to build something that either solves a problem or makes people happy. I.E., scratch an itch.
Step 1: Check out the market - how crowded is it? What can you do to differentiate yourself from your competitors?
Step 2: Check out the competitors - who are they? Are they well organized with a good product or is there an opportunity for you to beat them in some way?
Step 3: Check out the competitor's product(s) - what do they sell/market/offer and how do they do it? Is your differentiator enough to move the market? Are you targeting a specific market segment or vertical that they aren't addressing?
Step 4: Market potential - now you should really try to evaluate and understand - what is your target market and what is the opportunity you could expect if your concept is successful? Clearly, the bigger the market, the more potential buyers. I would imagine if wanted to build a deep-sea wreck sight-seeing company, that might be possible but it might also have very limited commercial viability. I'd clearly have to find the right audience and buyers.
Step 5: Lots of entrepreneurs today test ideas using landing pages or go forward with an MVP. If you decide to build an MVP, consider using Lean Startup principles, meaning - do not build the most awesome app (or product) that you can to reach every channel you possibly could. Instead, build enough to validate the idea and start building traction using whatever measure you value (demos, evals/trials, newsletter signups, signups, downloads, pre-sales, sales, webinar attendees, etc).
Just because you love the idea does NOT mean people will buy your product or service. In my own case, our initial service and value proposition sounded good to me. Friends and family told me what I wanted to hear - great idea. However, I had targeted an extremely competitive market (credit monitoring) with LifeLock as a dominant player and other powerful players that all have deep marketing pockets. A year later and practically no sales and I'd learned otherwise and decided to hedge my bets with another project.
The next year, I did everything differently from the previous year. The result, an Android app that has (so far) been downloaded over 100,000 times in the last 4 months. We'll start trying to monetize the app this week, so I'll report on how it's going later. I'll also be officially shutting down the credit monitoring/credit restoration business to focus on our app.
How do you validate an idea?