2.3. Testing Your Online Business Idea(s)

“Everything starts with the customer.” – June Martin

Before investing in a new business, you need to test your idea’s true potential. You surely don’t want to put your stakes into an idea only to discover later that no one likes to buy your product or use your service. Therefore, you should do your best to check if there’s a paying market for your offering, is the market big enough, what is the level of the competition and if your idea is profitable on long run.

Whether you have been creative and generated tons of great ideas, you pre-selected 5 promising ideas (like we have suggested) or you have a single “winning” idea, you should first make sure if they are viable and worthy to peruse.

Big investments might need comprehensive market research done by professionals, but that requires substantial finances and time. Fortunately, online entrepreneurs and small business owners have at disposal many free (or affordable) methods for testing online business ideas. If you don’t feel comfortable with any of the methods described below, or you don’t have the time, you could always hire an affordable and experienced freelancer to do the testing for you.

Regardless of what you decide to do, you should be aware that there is no definite way to tell if an idea would be successful or not. The final verdict will be given by the market itself when your business is up and running. Anyway, any type of research can reduce the risks and can help you make more informed decisions. Therefore, we suggest that you at least use the Google’s Keyword Planer (described below) to test your idea.

In the cases where testing the idea costs more (time, resources and nerves) than starting the business itself (like an informative website model) you could skip this phase and go to 2.4. Outline a Business Concept , before you establish your online presence in Step 3.

Tip: Instead of doing your own research try to find if some did it already. Google “<<you idea>> industry report” or ““<<you idea>> market analysis” and you may be surprised that many useful information might be available freely on the web. For more updated information, filter the search to only include results from the past year.

2.3.1. Google tools for testing business ideas

When we talked about generating online business ideas we also discussed Google Trends and Google Keyword Planner. They are great for initial testing of the validity of your business ideas too. Since these tools are based on real searches done by real people they are great indicator for the validity of almost any business idea. They only lack a clear picture about the competition (their presence and strength), but that is something you need to analyze further, after you initially test your idea with these tools.

Google Trends

The purpose behind Google Trends for testing business ideas is to discover if your industry or niche has a rising trend or not.

The best businesses to enter are the ones that have rising trends, and that’s for several reasons. As new customers enter the market, they may not be aware of the existing products and brands so you can earn their attention and their money more easily than in established and saturated industries. Another reason is that the existing businesses might not be prepared to satisfy the rising demand. On the other hand, the worst industries to get in are those that have declining trends. Make sure you avoid declining industries and at least choose ideas that have steady demand in the recent years.

After you enter search term in Google Trends that describes your business idea or offering (industry, niche, product, feature, need, problem or similar), you will get a trend line (select 5 or 3 years). The trend line does not show the actual volume of searches but a relative one based on peak times. If you want to get clearer picture about the volume of searches done, check the same search term in the Google Keyword Planner. When using Google trends, you can narrow your search by setting filters by country or state, time range, category and the search type (web, images, youtube and shopping). Monitor the graph for any long term or seasonal trends and also observe the suggestions to discover some related terms that may have rising trends.

Besides observing the trends, the tool is also great to compare different ideas especially if they are in the same industry. Comparing ideas from different industries might be tricky since they most probably have different profitability and different level of competition. Anyway, you may just compare the trends to choose the one that has a rising one.

There is no doubt that Google trends is useful tool, but be aware of several downsides you may encounter:

• a single search term not always represents your business idea as a whole (you may need to test several search terms to get a better picture for the entire industry or niche)
• there might be some rising niches in declining industry (and vice versa)
• users may have changed/altered the search terms for same issue over time
• when testing a niche, always use quotations to monitor the actual searches for that term and exclude related terms.

Google Keyword Planner

While Google Trends gives you the trend of a search term (rising, steady, falling), the Keyword planer gives you the volume of searches (in ranges 0-10,10-100,100-1000 etc) and the level of competition. The level of competition (high, medium, low) is not based on all competitors but only those who advertise for that search term using Google Ads. The price range for bids to get a top position in Google indicate the level of competition but the profitability too.

The volume of monthly searches will give you a general idea of the demand for your offering. The higher the volume, the better. Anyway we should be more interested in the profitability of a given search term per, let’s say, 100 visitors. The profitability of search term may vary per business, since not every business has same costs and same efficiency.

Great indicator for the profitability of the search terms (and the industry) could be the bid height, what this tool also presents. If a company pays a $1 per click (bid height) for an ad they would expect at least $100 profits (not counting the ad costs) per 100 visitors or they will make loses. If we multiply the monthly volume with the bid height, we can get the overall profitability of a search term what we can use to compare the profitability of different ideas (niches, industries etc.). (For the profitability of an industry, you should also analyze the competition.)

Unfortunately, the tool cannot tell us if we can reach the customers more efficiently than our competition and be more cost-efficient in order to achieve the same or higher profitability. Having this in mind, if we want to estimate the true profitability potential of our ideas we should also analyze the strengths and weaknesses of the competitors in the light of our ambitions and capabilities.

2.3.2. Reviewing the competition

One of the best ways to test your ideas, or even to get new, is to analyze the competition in your selected industry or niche. Actually, reviewing the competition is something you shouldn’t miss when starting a new business and you should at least do a quick glance in the industry you get in.

There are many reasons why would you like to review your competition. When you analyze the competitors, you can discover their way of doing business, the products and services they offer, the quality of their site and content, their straights and weaknesses and so on. The process may help you understand the landscape better, refine your idea, narrow your niche and learn how to position your business for success – capitalizing on the competitors’ weaknesses and your own straights.

Since, in this phase of your business journey you want to test your idea’s feasibility, besides on the profitability, you should focus on the quantity and the quality (of the main) competitors and your ability to get into that picture.

The presence or absence of competition can give you insightful information about the plausibility and profitability of your idea. Don’t just assume that your idea is unique and there are no competitors. Unless you discover a cure for cancer, teleportation device or another extraordinary invention, you will most certainly encounter competition, even if it’s an indirect one. Anyway, if somehow happens that your idea has no competitors (or just few), you eider found you self a gold mine, or (most probably) your idea is worthless, since there are not enough paying customers for it.

If there are no, or there are just few competitors for your business idea, be careful. Before you start you venture, first ask/test you potential customers if they would be willing to pay for your products or services, for what reasons and under what conditions. If you manage to get enough favorable answers about your idea, you are on the right track.

A large number of competitors tells different story. On one side, many competitors signal a profitable industry since everybody wants to go where the money is. On the other side, you have to know that it’s not easy to run a business in a competitive industry …unless you are getting into a trending one (with fast annual growth rates) or you have something superior to offer.

While the number of the competitors signals the profitability of an industry (or a niche), their quality (strengths) will actually show if there is a real business opportunity for you. If you can spot weaknesses in the majority of the competitors where you can fill in – there is your chance, but if the competition seems so strong and flawless and you have nothing new or different to offer you should probably modify your idea (pick a niche market) or go step back and test a new, different idea.

So, since in the most cases you will encounter competition, the question is how you can get a piece of the pie. To do so, you will have to try to be better different (in some or all aspects of the business), or you should find an underserved profitable niche(s). (We previously discussed strategies how you can fight (or avoid) the competition with differentiation and niche marketing).

If the landscape is not that competitive, or the competitors didn’t fully exploit all online marketing channels, you could try to enter the market by mimicking successful online business. Anyway, on a long run, you will have to differentiate your business and develop recognizable brand in your industry (or niche) in order to protect and grow your market share.

Hint: If you want to start an online business for a first time and you don’t plan to invest much money into it at the beginning, don’t waste too much time for reviewing the competition since almost all profitable industries will have many competitors. The good news is that they are not perfect so you can learn how to compete with them over time.

Where to find the competitors?

The most straightforward way to discover your competitors is to Google your industry or your niche using search terms that describe your business or your offering.

Note: In many cases, as you search, instead of competitors’ sites you may get well known sites (Wikipedia, youtube, reddit, quora, pinterest) , sites that combine offerings (or links) of more than one competitor (eBay, Amazon, etsy, local directories) or articles related to the search term (best xyz, how to xyz, what is xyz). Such results may widen the perspectives for your business giving you clues where you may want to place or promote your offering (besides on your own website). Anyway, if you get such search results but you still want to discover your direct competitors you should refine your search terms adding niches, location, features or words like store, company, provider etc, depending on your business type and industry.

When using Google to discover competition, the first 10 results in the list (first page) could be considered as your most vigorous competitors and you should (at least) analyze these. If the list continues to the second (and third) page you should probably consider narrowing your niche or abandoning your idea completely unless… you could offer something better or slightly different that will attract customers to you instead to your competitors.

Other sources you may consider when searching for your competitors, depending on your business idea, are: Amazon, eBay, Facebook, Twitter, Pinterest, Linkeding, Yelp, Craigslist, Yellow Pages and so on. Besides the abovementioned, there are probably many other places (sources) where you can find your competitors online.

What to analyze?

After you discover your direct competitors, you should make a list and start analyzing their way of doing business and their strengths and weaknesses. Analyze at least 3 to 5 competitors but there is no need to go over 10 since it might take a lots of time. (If you have selected narrow niche with no competitors analyze the competition in the closest offering to yours).

While a big number of competitors (in general) indicates a profitable idea, you should also check if you could beat or at least match the prices of their offerings. If you are not able to match the prices, you should consider offering extra value to your customers by offering premium services, freebies, extra features, extraordinary customer service etc. To check the profitability of your idea you should also check if your competitors advertise and how much they spend. Besides Google Keyword Planner you can try services like SEMrush, Spyfu, and Ispionage where you can “spy” your competitors if, and how much they advertise. If they advertise on a long run, it is almost certain sing that the idea is profitable.

The analyzes of the strengths of the competition should teach you how to improve your business and your offering, the weaknesses on the other hands could show if you could fill in, or where you could capitalize the most. Actually, your entire business idea might be based on the major weaknesses of the existing competition in certain industry.

To analyze your competition and discover their strengths and weaknesses you should review some or all of the following aspects:

• time in business (use Wayback Machine https://archive.org/web/)
• website usability and structure (speed, navigation, user experience etc)
• home page, about page, portfolio, contact page etc
• website traffic and traffic sources (use tools like alexa.com, SEMrush, ahrefs)
• call to action (email subscriptions, give always, promotions)
• products (landing pages, pictures, features, quality, prices, discounts, etc)
• customer service (delivery, returns, warranties etc)
• blog (topics, frequency of posting, comments, etc)
• content quality (text, images, videos)
• keywords they use (titles and subtitles, bolding, in text, in links etc)
• level of SEO (positions at google, inbound links, seo tools in use etc)
• social media (buttons positions on the site, number of followers/likes, number of likes and shares on posts, frequency of posting, engagement in discussions etc.)

The competitor’s site and social media pages are great sources to analyze but you can get even more insights by subscribing to their mailing list too and analyze the content and their strategy there.

Since Google is a major traffic source for the most of the websites you should analyze their level of SEO (Search engine optimization) but you should also check their social media pages to get the complete picture. The most important social media sites include Facebook, Twitter, Pinterest and Instagram.  You should do this not only to discover their online marketing tactics but also to discover if they efficiently exploit all online marketing channels available. For example, if your competitors are not present or aren’t active at Pinterest that might be a great business opportunity for you.

If you spot any weaknesses in the areas mentioned above or if there are possibilities to offer something better or different, something that will attract customers to your offering, there might be your business opportunity. On the other hand, if the completion is strong, has no major weaknesses and you have no ideas how to be better or different you should probably consider different idea.

Let’s conclude. When you test your online business idea, you should analyze the competition for two major reasons. The first one is to find out if your idea is profitable, the second one is to see if you are capable to compete in that industry (or a niche) and get a piece of that pie. You also may want to refine and improve your idea based on the competitors’ strengths and weaknesses. The observation and analyzes of the competition should continue even after the start of your business in order to further improve your business and defend your positions.

2.3.3. Surveying the potential customers

Previously (the above methods for testing ideas) you investigated the need (demand) for your offering using some Google tools, you observed the performance of your competitors and you found areas and gaps where you and your business idea may fit. Anyway, none of these can predict the real success of your future business. Therefore, the best way to put your business idea on test is (directly) to ask/survey or test your potential customers (or audience). It really doesn’t matter if you think your idea is cool and promising one, it only matters that you can reach (real) consumers that see value in your offering, really want it and are willing to pay for it.

There are several approaches you can use in order to get the desired response from your target audience. You may ask direct questions, you may try to validate your idea with a landing page (subscriptions, pre-orders, MVP) or you can make a crowd-funding test. Some of these approaches are free, they will just consume your time, but other may require some finances to get the best results. You don’t need to use all methods but only the one which you think is the most appropriate.

Target Audience

Regardless of what method(s) you choose to approach your customers, first you need to define your target market and the places where you can find and approach them. You may assume that everyone is your potential customer but identifying your perfect (best profile) customers will bring you better success not only in the survey but also later in the business.

When defining your target audience, first think about basic demographics like gender, age, location, family income, and education levels. Include information that is relevant to your product offerings, such as hobbies, interests, and life goals. Next, consider if your potential clients will use search engines and what search terms would they use to find you or would they encounter your offering at other sites. Finally, determine where (online and offline) you can find and approach your target market in order to test your business idea.

Since it is so simple, you may decide first to survey your friends (offline and on social media) and may also ask them to share your posts (spread the word) to their friends too. The question here is if this way you could get honest and enough answers.

Besides your personal profiles at the social media as starting point, other sites where you can reach your target audience for free and more precisely include Reddit, Quora, Craiglist and many forums on different topics. Any of these sites have certain rules that you have to follow if you want to have chance to ask your questions or get hits on your testing/questioning pages. For example, at Reddit you need to have aged profile and positive Karma (score) in order to post in some subreddits (topics).

If you have difficulties, reaching your target audience via the free sources you should consider placing ads at Google Search, Facebook or other sites that gather your target audience. For a small budget, you can test your business idea targeting your audience by search terms they use (Google search) or by precise demographics and interest (Facebook). For this purpose, you can even use the free ad coupons offered to first time customers at these advertising platforms.

Another handy online service that can help you create the surveys and reach your target audience is Google Surveys, where at affordable rates you can research the viability of your business idea.

For some business ideas, you may want to survey your customers offline, for example, at Starbucks or at the local mall if the visitors there meet your definition of your target audience and you have the skills and will to do the questioning.

When your idea targets other business as your customers (B2B), you may approach them onsite or via phone or email. If that’s the case for your business idea you will easily find at least a sample of 20 to 30 potential clients using Google, Yelp, Foursquare, Yellow pages or other business directories.

Interviews and questionnaires

After you define your target customers and the sites where you can approach them it is time to ask some questions. This activity can be done through interviews and/or questionnaires.

The interviews are done in person (in real time) regardless if it is onsite, by phone or by e-messengers. This method is more time consuming but you can ask more complex questions and sub-questions and get answers that are more detailed.

The questionnaire is a form that consists of series of questions and it is distributed (offline or online) to the respondents. This method is more suitable to get more answers in shorter amount of time. You can easily prepare a questionnaire in Google forms, distribute the link to the target audience and get automated analytics too.

The questions you may ask your potential customers can include but are not limited to:

• Do you have a need for such and such product (or service)?
• Do you already use similar product and from which providers?
• How much you spend for such products monthly/yearly?
• What you like and dislike in the products you already use?
• What new or improved features would you like to see in the product?
• How much would you be ready to pay for an improved product?
• Would you switch from your current supplier and why (why not)?
• Would you like to make a pre-order from us?
• Would you like to try/buy our new product when is ready, and under what conditions?
• Are you willing to give use your e-mail address in order to inform you when the product is available at the market?

If you don’t have precise targeting it is good idea to ask for the respondents’ characteristics like age, gender, location, income, education, interest etc.

Also, make sure your list of questions is not too long. Make it answerable in no longer than 15 minutes and note that on the start of the questioning.

After you design the questions, you should distribute them to your target audience through the selected channels. It is very important that you get at least 30 (honest) answers at minimum, let’s say 10% response rate (30 answers form 300 questioned). If you can not achieve that, there are at least tree possibilities. The first possibility could be that the market is to small, next is that your offering is not attractive enough and the third is that you are having trouble reaching your target audience. In each case, this is not a good sign for your idea since you may encounter any of these after you start your business.

After you collect enough answers you should analyze them. Not all answers should be favorable in order to recognize a good business idea. The rate of favorable answers that will indicate a promising business would vary depending on the market size, numbers of competitors, product familiarity, etc. For example, if the market is big enough to fit 10 profitable competitors and you get 20% favorable answers (6 out of 30) you are on a great track. If you get less then 3 favorable answers entering that business could be riskier.

The answers of all respondents, favorable or not, may also help you sense the attractiveness for your future product, the real need of the customers, and the weaknesses (and strengths) of the competition. All this can give you hints to improve your business ideas and business model and test your offering one more time if necessary.

If the potential clients are not aware for the need of your product or are reluctant to change current suppliers but you still believe that your offering will bring more value to them, you should make sure that there is a way you can convince them to try and change supplier before you start your business, not after. In some cases, offering free samples or trial version could do the work, but sometimes you will have to put much effort and resources. Otherwise, start looking for another online business idea.

2.3.4. Validating online business ideas with landing pages

Approaching your customers and asking them questions regarding your business idea is a great way to apprise the potential market and the attractiveness of your product in the light of the present competition. Anyway, questioning your potential customers may be tricky. It might happen that you best customers are too busy or reluctant to answer questions. The respondents may also give untruthful answers because they are in hurry, they are being polite or they didn’t understand the question. At the end, when your real offering is ready and presented to them, they might act differently from the answers they gave.

Having this in mind, it comes out that the best way to test the target market is to create real market environment and check if the potential clients are ready to give us something of value (e-mail address or money) for our (still in development) products or services.

Testing online business ideas with lending pages comes in several different scenarios:

• Subscriptions (Present the idea and ask the potential customers their e-mail address in order to stay in touch and inform them for the future activities.)
• Pre-order (Ask the visitors to register in order to get the featured product first.)
• Pre-sales (Ask the visitors to pay some amount in advance in order to get the product when is ready.)
• Selling MVP (Make a product with minimal acceptable features (minimal viable product) and if customers buy – develop the full version)
• Mimic sales page (Act as if the product is ready and fully functional and test if the customers are ready to spend money on it by hitting the order button)

If you decide to use any of these methods for testing your market, you will need a landing page (at least free subdomain and hosting). Despite the free resources to do this, we would suggest that you establish your real web presence (Step 3) so you can make your landing pages feel and look more legitimate and more reliable to the potential customers.

After you create the landing pages, next task in this method would be to bring visitors to your pages and observe the reaction of your potential customers. Since bringing visitors to your site is not that easy you should consider paying for ads and precisely target you preferred audience. You can use Google Ads and Facebook Ads and try to get free coupons as first time customer.

2.3.5. Crowdfunding test

Crowdfunding is a method of funding a venture or a project by raising small amounts of money from a large number of people online. Crowdfunding is great for rising money, but is also a great way to validate your business idea. Namely, rewards-based crowdfunding platforms like Indiegogo and Kickstarter enable start-ups to get finances from the individual investors in exchange for gifts or future products.

If enough people like your business idea and are willing to finance your business in return for your future products is certainly a great sign for your business . The finances you will acquire and the pre-sales you make will ensure a smooth start of your business.

Crowdfunding platforms can bring many people to see your business idea but do they match your target market, do they understand your offering, or do they need your product type at all? Therefore, if your idea fails the crowdfunding test but you still believe in its potential, you should try using other validating methods. Anyway, potential investors may give you useful information about your business idea and products, and how to make them better.

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After you test the validity of your business ideas using the above mentioned tools and methods you should make your final decision which idea you are going to pursue. Criteria for choosing your best idea could include: your personal preference (intuition, confidence, competences, skills), earning potential (industry/niche profitability), market size (monthly searches/number of customers), competition strength.

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In-Depth Reading:

Simple Ways to do Market Research Online

Tools to Analyze Your PPC Competition

Sites to get Unbiased Feedback on Your Business Idea

Setup a landing page for testing a business or product idea.

Crowdfunding to test the Minimum Viable Product (MVP)