The most important thing to do before launching a business
Jesse Horowitz and Ben Cogan founded Hubble, the first direct-to-consumer contact lens manufacturer in 2016. However, before they did anything meaningful, the cofounders ran two core experiments to validate their idea and confirm that people would actually buy lenses from a newly established company:
- They ran Facebook ads on a mock product to test whether they can get enough people to sign up for such a service
- They collected emails through Facebook lead ads (more on those later) and followed up with them to see if they would be willing to visit one of their partner optometrists for a lens fitting in exchange for two-months worth of Hubble lenses.
Before the company had an online store or even a ready product, the co-founders aspired to prove that people would indeed make an effort to buy lenses from a company like theirs. These experiments helped convince them of their idea’s viability and allowed them to frame a stronger narrative to investors, who were happy to grant them $3.5 million in funding.
This is not original, and Jesse and Ben simply applied a classic “lean startup” approach, which we’ve all heard of. Unfortunately, most first-time founders ignore this and instead spend way too much time optimizing their product’s features or building detailed business plans, only to realize a bit too late that their customers don’t really want what they’re selling.
In this piece, I’ll share some thoughts on how the best ways to validate business ideas in the consumer space.
Idea validation process
The ideal idea validation process allows you to assess the feasibility of your idea at the lowest cost and shortest time possible. The process generally consists of three steps:
1) Define the questions
Start by listing the questions that you need to answer to validate that your business is indeed viable. These generally cover:
- Regulatory requirements and legal obstacles
- Manufacturing complexity
- Ease of distributing product
- Consumer demand for your product (detailed later)
Once the main questions are listed, founders should prioritize them based on ease-of-getting answers and start tackling them. Typically, most questions can be answered using simple desktop methods: A quick Google search or a few discussions with experts in the field (reached out to through LinkedIn) can help you get started. Studying your competition (or similar companies in other geographies) and analyzing trends (through Google Trends or Google’s Keyword Planner) will also help you understand the landscape and your consumer’s behavior.
At HBI, the first question we ask ourselves when exploring a business idea is: ‘What obstacles will we face when setting up this business?’ Specifically, we look at the regulatory landscape and understand the ease/ cost of setting up a supply chain (from manufacturing partners to distribution channels). Only then do we move to the next step of the process: Talking to customers.
2) Talk to potential customers
Most founders create products/ solutions to solve problems that they themselves face and thus feel they know what customers want quite well. As a result, they restrict their customer interviews to friends and family members, who are typically biased and don’t always provide critical feedback. Unfortunately, this leads to misleading conclusions and, in many cases, failed ventures.
The only way to properly validate a business is to talk to real potential customers in an open-ended conversation to find out their real pain points and what they really value in a solution.
At HBI, we have talked to more than 200 potential customers when designing each of our products. Those conversations have been extremely valuable in validating that the problem we’re solving is real, and most importantly, they helped us build a solution that fits what consumers want. Without them, we most definitely would’ve built the wrong solution and wasted months in product development even if the problem we’re solving is the right one.
When talking to potential customers, be careful of leading questions: Let them tell you what they want instead of leading them towards what you think they want.
3) Run direct-response experiments
In addition to interviews, founders should look for cheap and easy experiments to confirm that consumers are willing to make an extra effort to get your product. Thanks to Facebook and other digital advertising companies, you can do this in a few simple ways:
- Facebook lead ads are the easiest way to confirm consumer interest in your offering. All you need is a basic ad (and a privacy form that you can find online) and run it on Facebook asking interested people to leave their email (through a pre-populated form). Read more about Facebook lead ads here.
- Lead ads aren’t ideal if your product/ service is complicated or in case you want to answer questions beyond interest. In this case, you might want to direct people towards a landing page that contains information on your product/ service. You might ask people to share their email addresses if they’re interested in a discount when your product is launched and test how much it costs you to collect an email address. Your ability to collect email addresses and the related costs can help you estimate your initial customer aquisition costs and provide useful information to you in your journey. For example, if it costs $1 to collect an email address (Facebook spend) and assuming that 2% of email providers will eventually purchase, your initial CAC will end up being $50.
- If time permits, you can push the agenda further and build a full prototype of your website and track your visitor’s actions on it and level of interest (i.e., you can track how many of them click through to checkout). Ideally, you could offer pre-orders/reservations for a small fee to further validate that customers are willing to pay for your product/ service.
Those experiments will not only validate that your business is actually viable and worth the time you invest in building it. It will also convince investors that your idea has merit and that you are willing to get your hands dirty and learn in the process.
A learning journey
Building a business is simply a series of experiments and iterations. Successful founders understand what they know and don’t know and are always eager to experiment and learn. That’s why the most important trait that we look for when investing in someone or working with them to build a company is their willingness and ability to learn.
At HBI, we take this to heart: we spend on average more than a year on product development as we work with our manufacturers to test tens of samples and run multiple experiments (with potential customers and working with accredited labs) to ensure that our final product is optimized to solve the consumer problem in the most effective way.
After launching our brands, we plan to expand our experimentation field to continue learning how to optimize other aspects of our business, such as marketing (which channels are most effective to acquire customers? Which creative works best to convert people? Should our ads send people to our homepage or an article written about our brand?) distribution (which channels are most effective to acquire customers? Which partnerships can help expand our reach?) and of course product, branching out into new editions/ formulas/ formats that (formulas, format, packaging).
We realize that experiments are an integral part of business building and embed a learning mindset in everything we do!
I hope this encourages you to plot your next experiment! Go get your hands dirty and learn something in the process!