Guidelines on how to test an idea for profitability before implementing?
Surely you've heard of Ramit Sethi (this guy: http://www.iwillteachyoutoberich.com/ ). In one of his courses, he teaches how to model an idea and test it for profitability before implementing it. I'm pretty sure there's nothing new under the sun, and that some entrepreneurs somewhere have done this before. Can anyone provide me with a bullet point list, outlining the steps you would take to model a given idea and test it for profitability?
Thanks
-
You listed a site that answers your question. – Jeff O 12 years ago
-
Hmm, not quite. Unless there really is an article there that has bullet points. If so, listing them here as an answer would aid Googlers. The content I mentioned is something he sells as part of a paid package, and, while I'm sure it's good, I want to hear from real entrepreneurs their tried and true methods. – Walrus The Cat 12 years ago
-
You should also consider the fact that sometimes there's no way to know. Entrepreneurship is also about gut feeling and taking risks. Take a look at http://www.brightjourney.com/q/give-product – Frenchie 12 years ago
-
So either you want us to read and summarize this information for you **or** the information costs money and you don't want to pay for it? Either way, **if** this actually worked there would be no need for startups, venture capital, etc. – Gary E 12 years ago
-
Oh gosh Gary, what I want is for someone who does have this information, from whatever source (even real life), to write it here. If you can't do that, move along. – Walrus The Cat 12 years ago
-
@frenchie sure, but there's got to be a way to model the scenario, perform experiments, make predictions, etc. – Walrus The Cat 12 years ago
-
@WalrustheCat: yes, of course there are! Google The Lean Startup; it'll give you a very well thought-out perspective on the topic. But as you go through market testing, always keep in mind that all the conclusions you come to might actually be irrelevant. Overall, the Lean Startup concept is probably the most interesting place to start. – Frenchie 12 years ago
2 Answers
This is a complicated question, but a couple of solid resources are "The Lean Startup" by Eric Ries, "Running Lean" by Ash Maurya, and "The 4 Steps To The Epiphany" By Steve Blank. All those books discuss tactics and strategies on how to discover what your market wants, create an initial product/service offering, validating and iterating on your offering, price testing, etc.
Another way to get market information, including a rough gauge on profitability of a market or even product/service offering, is to use Google Keyword tool, which lets you research keywords used in searches, along with how many people searched for each keyword (i.e., market size), competition for each keyword, and Adwords cost (which gives you a guesstimate on how profitable the market is). There are also automated tools (e.g., Market Samurai) which do some of the same things, plus additional features.
It's really quite simple to talk about:
- Find a problem. Talk to the potential customers.
- Understand the problem better than they do.
- Find a solution.
- Ask the potential customers if the solution fixes their problem and whether they would pay for it.
- If no - start again.
- If yes - build a prototype/mvp and deliver to customers for testing.
- Get feedback, iterate, release - ad infinatum.
but much harder to do.
-
Very cool, I was thinking something more along the lines of a mathematical model on which you can run experiments. Any ideas? – Walrus The Cat 12 years ago
-
Sure, when [lots] of people will pay [some] money for your product, which costs less than [lots]x[some]to produce and you keep your operating expenses [small] you might have a viable business. Seriously, that's about as mathematical as you need to get at the "idea" stage of the process. – Nick Stevens 12 years ago
