How to Test a Business Idea
- Hosted July 20, 2020
- By Admin
There’s a reason why so many successful entrepreneurs have a pivot story—the moment when they decided to change their products and business model because their original vision wasn’t working.
Not all businesses need to make a 180° turn, but every entrepreneur has to stay flexible and agile. When you’re running a business, there are many things you can control but an infinite number you can’t. The economy, natural disasters, political and social changes … they can all have huge (and potentially catastrophic) effects upon your business.
So, staying flexible is critical but it’s not easy. When you invest time, energy, money, and love into a project, it’s easy to get attached or go down a path that makes it hard to adapt quickly.
If you accept the possibility and inevitability of change, however, and you build flexibility into your business plan, you can keep your business agile. Here’s the story of how one entrepreneur used this strategy to launch and test his business.
Finding an idea worth pursuing
Camilo Maldonado is a serial entrepreneur and the founder of Contacts Compare.
When he was a kid, Camilo says he wasn’t quite sure what he wanted to do with his career—which is shockingly normal, but he struggled with that uncertainty since his twin brother, Francisco, always had a crystal-clear plan to become a physician.
Early in his career, Camilo worked on Wall Street and then in finance at a startup, before later launching a personal finance site with his brother. Through these experiences, he quickly confirmed that he wanted to work for himself. “I need to be doing my own thing. After working at another person’s startup, I realized I needed to keep pursuing entrepreneurship.”
However, despite getting an MBA and spending a lot of time thinking about different business ideas, he wasn’t sure quite what to do. Connecting his passions to a viable business model wasn’t an easy feat.
I think I was waiting until I found an idea that was so compelling and so exciting that I couldn’t sleep at night. You hear this romanticized story of entrepreneurship all the time … like, the idea should just come to you. And I honestly think that if I had waited for that, I’d still be waiting. I’d be waiting for the rest of my life.
Eventually, however, an idea started to grow on him. Camilo wears contact lenses, and he realized while talking with his brother-in-law that the process of shopping for them was frustrating. Because of his interest in personal finance and savings, he wanted to comparison shop but quickly found that it’s surprisingly hard and time-consuming since he had to shop for a specific prescription. When he started talking about this frustration with friends and family, he realized they had the same challenge.
He started thinking, “Why isn’t there a site where I can compare the cost of contact lenses at different retailers, like the sites that already exist for hotels and flights?” And after thinking about it for a bit, he decided to look into making this site himself.
It’s not like I love contact lenses so much and I can’t imagine doing anything else. But I think one lesson I had learned, by this point, was that it’s okay if the thing you’re working on isn’t an all-consuming passion. I couldn’t see myself working on contact lenses for the rest of my life, but I was excited to help people save money and I could see myself working on this project for say, five years. So I said yes, let’s do this.
Validating the idea
When he launched Contacts Compare, Camilo said, “I took more of a ‘move fast and break things’ approach rather than trying to execute each step perfectly.” After some initial informal research into the competition and potential customers, Camilo decided that the next step would be to run a lean test by launching a working version of the product on a limited budget.
I knew I wanted this to be a bootstrapped business and not a venture-backed business. And when you’re bootstrapping, you’re either really rich or you’re doing it lean and small. I had to take a lean and small approach. I decided I’d invest enough money to build out the website and product, and after that, the business had to pay for itself. And if the money ran out, then the idea’s done.
The first challenge was building the website for his new business. Camilo isn’t a website developer, and his product and business model demanded a custom-built site. When he got quotes from website development agencies, however, they were around $50,000 … way beyond the budget he defined.
After pursuing a lot of options and tapping into his personal and professional finance experience, he was eventually able to get the website built for less than 1/10 the price tag of the first quotes. Once the website was built, he moved into the next phase of customer research.
I started sending the website to people that I know and asked them questions like, “Was this easy to use? Would you use a site like this? Would you share it with your friends?” And I was getting generally positive feedback. I think it’s pretty common when you put yourself out there and you’re vulnerable, that people are going to give you positive feedback because they don’t want you to feel bad. But, the comments I was getting made me think people genuinely liked the site—they’d say things like “I just bought contact lenses, and shopping for them is so painful, and I wish I’d known about this site before.” I got this really positive qualitative feedback, and that was enough for me to keep going.
Staying flexible beyond launch
Eventually, Camilo reached that nerve-wracking, incredibly exciting milestone: launch day. Even then, he was able to keep a skeptical, open-minded approach. He kept an eye on the data, and used that as a guide to keep moving forward.
I’ve worked in business before, in different startups. With that experience, you kind of know when something’s working, or when it’s getting traction … and when it’s not. If I launched the site and the conversion rate was super low, I would have said, “Okay, there’s a big problem here.” At each step along the way, I’d look at the metrics and although I didn’t have hard benchmarks, everything was within the expected range. I felt comfortable with the direction I was moving.
Now, Contacts Compare has been out in the world for a while but Camilo is keeping that testing mindset. Rather than getting emotionally invested in the idea and the product, he’s staying focused on the data and the end goal—helping people save money. He says, “I’ve always felt like Contacts Compare was a big test because I’m going to keep iterating and making things better.”
And when it comes down to it, the drive to solve problems and keep improving is one of the defining characteristics of entrepreneurs. When you’re trying to do something new, the ability to stay flexible and open-minded isn’t just about surviving the ups and downs. It’s the skill that’s going to get you to your destination.
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