Simple Ideation
June 27, 2022

Simple Ideation:  5 Steps to Test Ideas Before Pursuing an MVP

Before you ever start building anything you need to have an idea. Most of those ideas, if we’re honest, will suck. Part of the art of building a startup is ideation, research, and validation of a business model before you build anything.

Let’s take a look at a few filters to run your crazy ideas through to see whether you should pursue them or not.

1. Desirability- does it solve a problem?

Far too often, we treat our idea like a SISP (solution in search of a problem). What is far more effective is to start without an idea if you can and instead identify a potential market or client with problems. From the problems, you can identify a solution.

If your already have a startup idea, then you need to make sure it actually solves a genuine problem. Not just a perceived issue or support. Unless it is genuinely a big issue with poor ways to presently solve it, people are not likely to put in the effort to switch to your solution.

2. Do you know or understand the market?

Before you pick a market to find problems in, it is worth narrowing down the list to ones that you either already understand or have a genuine interest in. This will help you make more educated guesses early on but will also ensure creditability and a desire to persevere when the going gets tough. Which it will.

For example, our software development company’s leadership team met and we identified a few key markets that we have experience and/or strong interest in:

  • Education
  • Trades
  • Real Estate
  • Agencies

From here, we started to narrow down a list of possible types of ideas while doing market research and interviews to identify the biggest problems with current solutions.

3. How big can it get? Is it worth it?

This is a question of both potential and goals- do you want a 10M company or a 10B company? Does this market problem have that size potential and room in the market? For us, we’ve set a goal as a minimum 10M market-opportunity size. If you’re wanting to raise investor funds, you may need to 10x or 100x that. This comes down to whether you are aiming to build a lifestyle business, bootstrap business, or unicorn.

So when you’re working on your startup app idea- what do you actually want to be the outcome? Is your market conducive to that? Consider also that if your idea is not niche enough- i.e. aiming to rent anything to anyone- then you’re not likely to get anywhere. At the very least you have to niche down initially in order to have focused marketing and get traction. Amazon sells everything now only because it started with just books. Focus, but feel free to plan to expand.

5_steps_to_test_your_mvp_ideas

4. How quickly can you make your first dollar to test the idea?

Before you even consider mvp app development, is it possible to make your first dollar without building custom software? This could be as simple as making a simple website with a form to create an action that results in you manually doing things behind the scenes and then contacting them back. This could be using a pre-built software to test the idea. It could be doing an in-person and local version of your idea before you build anything at all.

Ideally, once you’ve settled on an idea, you can find a way to do market research and test a solution to get your first couple dollars without code.

Once you have this proven- what’s the least amount of custom code you can build to create the largest possible return on investment? Think 80/20 rule and core value proposition for clients. You may have a massive list of feature ideas but what matters the most? If you can build that in 30-60 days, then you’ve probably focused down enough for MVP app development.

5. But before that- can it cashflow?

This is a key component that was often ignored in the past but that has become increasingly important to investors. Gone are the days of building software that continuously loses money. Most investors will want to see some revenue and the possibility of profitability before they invest. If you are bootstrapping, then you know 100% that it has to cashflow, and ideally very well.

A few ways to test this in your revenue modelling is to consider your business model, average potential customer value, the cost to generate that value, and the time in between marketing/sales costs and payment.

First off, in your startup ideation, is it e-commerce, a service, a SaaS, or a marketplace? Is it B2B, B2C, or both? How large is the average deal size going to be? How much of that is left over afterwards? A service company may make large deals faster but with higher costs to produce an a difficult time scaling. A software company may have huge upfront costs in app development and marketing with near 0 cost to produce that value over and over again once ready. A B2B model will typically have higher average sales costs but with longer sales cycles, whereas a B2C model small but faster sales.

My 3 biggest cautions here to be wary of are: marketplaces, micro-transactions, and institution-regulation. Marketplaces take huge upfront marketing spend, incredibly delicate balancing, and are the most likely model to fail. They can be very defensible if they succeed but are exceedingly difficult to start. Micro-transactions have very little room for error with low profits and most likely will end up being net-losses profitability wise. Institution-regulation refers to getting into a market where the cost to be regulated and approved to even do business, or the length of time before you can get a sale due to bureaucracy, could itself kill your business. Think fintech, edtech, real estate tech, government tech, etc… It does not mean these can’t be tried, but you better have a plan and it better be worth the risk if you should attempt it.

Dream Big, Start Small, Test, Then Go All In

Finding ways to start small and mitigate risk will be key to your startup ideation and idea validation. Do lots of small tests then when you find what you believe will work, build your MVP. If that can get some initial traction, then it’s likely time to go all-in. Not feeling confident in your technical skills or leadership? Try our fractional CTO for hire service to bring the expertise of our agency to you for less than the cost of a developer.

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