Two women are pictured in an office setting. They are both leaning over a desk looking at  a computer screen. One of the women is illustrating a point by gesturing with her hands.
Taking steps to test the viability of your business idea prior to launch helps you better understand your target market and identify potential pain points before they arise. — Getty Images/Willie B. Thomas

Whether you're growing your side hustle into a full-time business or starting from the ground up, building a new business involves a fair amount of risk. That's why testing your business idea before launch is so important.

Testing not only gives you confidence to move forward, but it can also act as the groundwork for your future endeavor. Through this process, you can solidify your target audience, identify potential issues, and estimate your financial needs for launching. In short, testing your business idea helps you prove its viability and ensures that there's a solid foundation for your fledgling company.

While there are countless things you can do to gauge your target market's reaction, these seven steps are a good place to start.

1. Prepare to test your business idea

Before you begin testing your business idea, write a basic business plan. It doesn't have to be totally fleshed out with in-depth financial projections and market trends, but your plan should answer some basic questions about your proposed business, such as:

  • What problem will this product or service solve?
  • Whom do I want to target with my product or service?
  • Is my product or service a viable financial idea?

Once you have a solid plan, you can test and validate your business idea.

2. Analyze your competitors

Two of the most important steps in testing your business idea are determining who your competitors are and how their products or services differ from yours. If your business idea has been conceptualized, executed, and popularized before, that's a good sign — it means there's a need for your product or service. However, if it's too similar to what your competitors offer and you can't articulate what makes you unique, you may want to refine your idea.

3. Talk to family and friends

This step is a good initial way to understand whether people will be interested in your business. Family and friends tend to be supportive, so make sure your loved ones know they can be brutally honest about your future company.

Bring up any doubts you may have and ask them for feedback on those concerns. Most importantly, only ask for the opinions of people you trust and value.

The founders of Airbnb used an MVP to see if their idea had any weight with a larger market.

4. Talk to potential customers

When starting a business, have a good idea of your potential audience. Find some individuals who represent that market and ask them about your idea. Potential customers should be able to tell you if you have a good idea, how much you should charge for your product or service, and how quickly you should expect your business to grow.

You can make this process as defined or as abstract as you like — perhaps by asking each person the same questions and logging results, or just having informal conversations with customers and noting any feedback you receive. Be prepared to embrace negative feedback, and treat each interaction with a potential customer for what it is: an opportunity to learn. No matter what, thank them for their feedback.

5. Create an MVP

An MVP, or minimum viable product, is a manufacturing term useful for testing any business idea, including a service business. The goal of an MVP is to use early feedback to refine your business idea to the point where you can create an early version of your product or service. The founders of Airbnb used an MVP to see if their idea had any weight with a larger market.

"With no money to build a business, the founders of Airbnb used their own apartment to validate their idea to create a market offering short-term, peer-to-peer rental housing online," reported ProductPlan. "They created a minimalist website, published photos and other details about their property, and found several paying guests almost immediately."

6. Try alpha and beta testing

A more formal way to collect feedback about your product or service is through alpha and beta testing. These methods allow you to get specific about what's working and what isn't rather than generalized information about your concept. It also lets you iterate on a product idea before setting up your supply chain.

Alpha testing asks internal employees to test a product in a staged setting. This type of testing allows you to identify issues or bugs before releasing a product to outsiders. For example, restaurants often host a soft launch with friends, family, or industry contacts before opening to the public.

Beta testing is a similar process in which a limited group of real customers are invited to try a product or service and identify problems. Software products often release updates in beta to give a limited group of users time to experience the version and see what happens.

These two testing methods help you further refine your business idea or MVP in a more structured environment.

7. Put your idea on a crowdfunding site

A crowdfunding site, like Kickstarter, can be a good way to get your idea out there and see how much interest there is. This strategy can be especially helpful if you have an idea that's specific to a certain niche.

Promote your project heavily on social media and spread the word to family and friends. Your crowdfunding project could potentially give you the funding you need to get off the ground.

Already sure that your business idea is a winner? Check out our step-by-step guide to launching your new venture.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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