Validate your Business Model using Social Networks
The only way to determine if a business model is viable or not is validating it on the market with real prospects.
I recently had the opportunity to meet an entrepreneur who intended to start a business lentil burgers in the city where I live. She said she was very excited that he asked several college buddies if they would buy their burgers and the vast majority said yes.
How to validate your business model
The aim of this paper is to give practical guidance and tools to be able to determine the viability of your business model leveraging social networks.TIP: You can use the Validation Tool Board to develop the process of validating a more graphic and organized manner.
1. Identify the assumptions underlying your business model
To begin, we must define the 3 basic hypothesis all business model:
- Customer hypotheses: The first hypothesis is about who will be our future customers. We must be very specific in our approach and create customer profiles taking into account the characteristics that would be interested in our product: age, geographic location, socioeconomic status, educational level, etc.
- In the case of our entrepreneurial and lentil burgers, let’s define two customer profiles: fitness vegetarians and people. But let’s also keep in mind that the aim of the predecessor is selling locally, then customers will be also targeted by geographic location.
- Hypothesis Problem: The second approach is what we want to solve the problem with our business idea. Remember to define a clear, simple and specifically, and also must be related to the hypothesis of customers we had previously established.
- The problem is our entrepreneurial identified the lack of vegetarian options and healthy fast food in the region.
- Hypothesis Solution: Corresponds to what kind of product or service we believe is the best to resolve the problem of those clients. Remember to add the benefits of your product to customers or how your product helps solve the problem posed.
- For our entrepreneurial, the solution is the production and sale of lentil burgers, which are characterized by being vegetarian and provide different health benefits taking into account the nutritional properties of lentils.
2. Identify where your potential customers are
And with the profile of clients defined, the next step is to go where they are. It makes no sense to validate our business model by asking friends and family if they do not fit within the profile of customers to our value proposition.
Here are some ideas for actual and potential customers for our business in social networks:
- Facebook groups: In this network there are plenty of groups of people gathered according to hobbies, interests, geographic location, etc.
- Fan pages on Facebook: In the same way, there are plenty of fan pages with interesting communities segmented according to different criteria.
- Blogs: Find blogs that target the customer segment that you want to reach out and contact people who write these blogs.
- LikedIn: This platform also have the opportunity to find gathered in groups according to interests and professional profiles.
- Twitter: Find accounts that target the segment of customers who want to go and try to get the email of the person administering the account.
3. Design experiments to validate the assumptions of your business model
We now proceed to determine the experiments will allow us to validate the assumptions underlying the business model we are building.
Avoid questions like “would you buy this product?”, “Would you pay for a product with these characteristics?”, “How much would be willing to pay for this product?”, Etc.
These questions usually generate some relevant information. At this point we need to ask people things they would do in hypothetical scenarios, we need is to find information about habits, customs, desires, problems and expectations that allow us to determine the viability of the business that we will undertake.
In the case of our entrepreneurial, these are some experiments that allow you to find relevant information to validate their hypotheses:
Experiment # 1: Publish to a Facebook group in their region the following question: Who can recommend me a good place for vegetarian food in town?
With this experiment our entrepreneurial will achieve several objectives. First, it will check if there are people in your region preference for vegetarian food; secondly, will meet real opinions of potential customers about the type of food she seeks to offer and about businesses that are its responsibility; Thirdly, it could be the case that there is definitely not a place that offers vegetarian and many users will express their need to find a site with these characteristics. Finally, with the information obtained, entrepreneurship will be validated if they really exist the customers she seeks to reach, if there really is the problem and if there really is potential interest in the product to offer.
We also recommend taking the data of people who respond to this experiment to get more information about them and then begin to sell.
Experiment # 2: Publish to a Facebook group in their region the following question: Has anyone ever tried lentil burgers? What seems to them? Is there a place in town where you can buy?
With this second experiment seeks entrepreneurial real opinions about the product that will deliver and measure the interest from the market.
Experiment # 3: Post on a Facebook group of people with a taste for vegetarian food the following question: How much average weekly spend on eating out? Or it would be valid to ask how many times a week they eat out?
This experiment seeks to investigate about habits of potential customers and have an approximation of the size of the market that we want to go. It is important to analyze the responses to find details that allow us to enhance our value proposition.
Similar experiments are performed on different environments where customers are with the profile and it is important that each new experiment is more detailed and specific than the last.
With the information we can obtain not only validate the hypotheses, but also can improve the value proposition that we are designing.
4. Start building a database of potential customers
Experiments should continue until your business is already underway and already have a sustainable sales. After the first experiments, you should already have a clearer picture of what you’re doing and what you should do idea. At this point it is essential to start building a community around what will be your business.
In the case of our entrepreneurial, could post on Facebook: “I’m putting together a group of people with whatsapp taste for vegetarian food so that together we share recipes and places we recommend. Those wishing to join the group, leave your number. “
In the same way you can create a database in MailChimp in Google Drive, etc.
The goal is to have a means of interaction with potential customers to finish validate the elements of your business model and to sell once you get going now.
5. Construct a minimum viable product (MVP)
By now you should have enough information to define the different characteristics of your product when price, packaging, design, etc. Then it was time to put the product on the market once and for all and for this we will build a minimum viable product or prototype that allows us to start generating transactions.
Here are useful tools like instapage.com (to create landing pages), blogger (to prototype websites), canva.com (to create designs), etc.
The aim of the MVP is to show potential customers that are building the product and receive direct feedback that allows us to finalize details.
6. Sal to sell!
The ultimate goal of all validation is to have people paying for your product or service.
A good experiment you can do to start generating sales, advertising is designing some parts of the product as it as it will offer and post it on our social networks or send them to databases we build in point 4.
Already at this point our entrepreneurial should be selling their burgers and generating revenue.
7. Build your business
With people paying for our product, whether it makes sense now to invest in building a company to run the business model that we have validated. It’s time to invest in marketing and in all other elements that allow us to be a sustainable, profitable, repeatable and scalable business.
Remember that every business model is unique and different, therefore, the examples mentioned in this article are just a reference for yourself define the elements that must validate and what experiments will be most convenient for the corresponding validation.
“The test of an innovation is not its novelty or scientific content or the ingenuity of the idea … is your success in the market.” – Peter Drucker