Guess what? That idea that's been bouncing around in your head could be worth a lot. Or it could be worth nothing at all. Wouldn't you like to find out as soon as possible?
Many people put their ideas on the back burner, uncertain if they have potential or daunted by the amount of money they'll need to get started. It doesn't have to be this hard. With QuickMVP, we've simplified the hardest part of starting up into four questions that will help you predict the success of your idea.
1. How Big is the Problem?
Before you do anything else, figure out if you're solving a real problem and for whom. If you have a sense of who your customers are based on previous interactions, go interview them. Set up a coffee meeting or a phone call to ask them a few questions and further understand how you can solve for their needs.
Conducting effective interviews takes practice and interpreting the qualitative data can be subjective. You can use the problem interview scoring technique to quantify results and make a faster decision based on the score. An interview score of 25 or higher indicates that you're onto something with the problem you want to solve.
2. How Much will Customers Pay for Your Solution?
If you're not sure who your customers could be or have a few ideas you want to test quickly, start with a landing page experiment instead, then interview people once they sign up. Include a price point on your landing page and use Google Adwords to drive targeted visitors to your page.
Measure the number of visitors who convert and leave their emails based on the price you set. Aim to get a 10 percent to 15 percent conversion rate to proceed with your idea. Test different price points and determine the value of a customer even before building your business. You can use QuickMVP to set up this experiment in five minutes.
3. How Much Does it Cost to Acquire Each Customer?
After you've validated that people will pay you to solve their problem, figure out how much it costs to get more people to your product. Paid ads is a good technique to calculate customer acquisition cost (CAC) early on since it gives you a representative customer sample and their conversion rate.
Customer acquisition cost = Total spent on ads/# of paid conversions on landing page
To build a sustainable business, the acquisition cost should be significantly less than what customers pay to use your service.
4. How Big is the Market? How Accessible is it?
Now that you've acquired a handful of customers, can you get 1,000? 10,000? Is the opportunity big enough? Find out early.
Many startups have shut down because they could not acquire enough customers. To get an idea of your market size, look at the search volumes of relevant Google keywords. Find uncompetitive keywords with a high search volume to reach a large market at a low acquisition cost. If your keywords are popular but competitive, you're entering a saturated market and will have a harder time scaling.
Next time you have a great idea, jot it down and test it with these four questions. The sooner you test your ideas and get answers, the sooner you'll know which idea is worth pursuing. All it takes is a landing page and Google Adwords to get started.
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About the guest blogger: Grace Ng is Co-Founder of QuickMVP, the 5-minute way to test your business idea. Grace has helped thousands of entrepreneurs launch new businesses and worked with executives from companies like GE, American Express, and ESPN, to help them validate ideas for new products. As an industry expert, Grace has been a featured speaker at conferences and universities worldwide on the topics of entrepreneurship, UX, and female leadership.