Without testing and validating your business idea the quick answer is you don’t. The key is to try to answer this question as quickly and cheaply as possible.
Everyone starts out thinking their idea will fly and will be the next big thing, but the reality is that most startups fail. The good news is that there are many strategies and tools available to startup founders to minimise the risk associated with launching a startup.
In this post we cover one of these methods, smoke tests.
A smoke test in terms of startup validation is well, smoke and mirrors. It is a method of giving users the impression that there is a product to be bought on the startups website even though there isn’t.
The user is made to think that by clicking a button or completing a certain action that they can start using the product. However, after clicking on the call-to-action it is revealed to the user that the product isn’t quite ready. Enter another call-to-action.
Essentially what you are doing is determining buyer intent.
As an example, lets say your startup concept is to sell online fitness training classes specifically for high altitude mountaineers. You want it to be a subscription service where users can subscibe to a:
Sounds like a great concept, but will people actually pay for this? Here’s our smoke test:
Step 1 - landing pages:
This isn’t your usual coming soon or pre-register landing page. It is more in depth but doesn’t have to be a full home page (it could be though). The page will include:
The button should be the only ‘click’ option on the page. Next is the page where the button takes the user. This is the pricing page. This would include:
By this stage your users are thinking that by clicking ‘Buy Now’ they’ll be able to purchase the product. However, there isn’t actually anything that they can buy just yet. The page they land on when clicking ‘Buy Now’ tells them that you’re not quite ready to take their money but they can leave their email address to be notified when the product is ready.
Step 2 - analytics & tracking
In order to determine if your smoke test is a success you’ll need 2 things:
The second point relates to setting up Google Analytics and implementing tracking codes on the ‘Pricing’ button as well as each of the ‘Buy Now’ buttons. Tracking clicks on these buttons will help determine the number of visits the site had, how many people clicked through to the pricing page and how many people clicked on each of the ‘Buy Now’ buttons.
These results will give you a good idea of conversion rates, potential buyer intent, and which options are the most popular. If you wanted to be more scientific you could build out the home page to make it look like a full website and then create a different version and A/B test the pages.
It all comes down to time and available budget. Don’t spend too much at this stage as this process is supposed to save you money in the long run.
Now that you’re all set up and ready to go, the most important step has to happen … get traffic to the website.
Step 3 - Getting people to your site - Adwords & other marketing channels
Getting friends and family to the page probably isn’t going to help the results of your smoke test. You need traffic to come from other sources and you need a decent amount of traffic. You can get this traffic in various ways:
The great thing about running small campaigns using Adwords, or other paid channels, is your smoke test can also help you determine viable marketing channels.
You might find that by spending $200 on Google Adwords you get 100 clicks and of those 100 clicks 10 people click all the way through, including clicking one of the Buy Now buttons. If your minimum subscription was $30 a month for 3 months ($90 total) and all 10 people chose this option then your $200 marketing spend could have generated $900 revenue.
On the other hand, if the 100 Adword clicks result in 0 clicks on any of the ‘Buy Now’ buttons you have to question either your messaging, the features you are offering, the pricing model or the overall concept. If this happens you probably need to spend more face-to-face time speaking with your target audience to better understand what they want.
Smoke tests are just one way of validating a startup idea and they don’t need to be run in isolation. There are many methods of doing it yet the most powerful methods remain good old fashion understanding of the target audience, knowing the domain the startup operates in (domain experience comes in very handy), and talking to people within the target audience.
People are usually happy to answers questions and discuss your ideas to help you consolidate your concept even before running a smoke test.
The key is to try and validate your concept as quickly as possible and spend the least amount of money possible doing it. The lessons you learn could end up saving you a lot of money down the track.
If you’d like to read more about a real smoke test that was run by a successful startup, you can read how Bufferapp went from idea to paying customers within 7 weeks.
If you have run a smoke test in the past or used other ways of validating your startup concept please leave a comment below. We’d love to hear about it.