How Do I Validate My Marketplace Idea?

It’s actually quite difficult to recognise a great idea, and likewise a viable business model. That’s why it’s essential to validate a business idea before starting any UX Design or development.

You should be focused on launching your platform as soon as you can with a Minimum Viable Product (MVP), and it’s really only at that stage that you’ll know for sure that it’s viable. But before then, there’s a number of things we’d advise you to do.

How to validate a business idea

In basic terms, you don’t want to spend a great deal of time and money on an idea that fails, simply because you didn’t validate a business idea in the early stages. Just because you think it’s a great idea doesn’t guarantee that anyone else will, the result would be stress, disappointment and a waste of funds.

Don’t let your pride stand in the way of listening to feedback. You can have the best company logo, a brilliant platform, an idea that YOU think is without fault… but the people who count are those giving you feedback. If no-one is going to use it, you don’t really have a business at all. 

Begin by working out your problem/solution fit. In other words, you are identifying a problem and presenting the solution in a particular market. Write down your assumptions, what you propose, the customer segments, how you plan to distribute the solution, your revenue streams… and validate all of these assumptions. Don’t guess or estimate, make sure you are dealing with facts. Anything that you have assumed that is incorrect, amend until it is correct. That way you won’t be wasting resources based on something that is false to start with. 

There has been a lot written on this subject, read as much as you can as that will help you in the approach you take to validating your idea. You’ll learn about finding potential users to interview, how to conduct those interviews and logging the information that you learn.

In the back of your mind you want to always be thinking, what is the problem that you are trying to solve? Which people have this problem? What are they currently doing to solve this problem? What are you going to be doing differently to solve their problem? Does your solution make everyone’s life easier and present them with the best solution? Those questions need to be considered from both sides – the vendor AND the customer. 

Don’t forget, when talking to vendors, discuss the price plan that you have in mind (for example 15% of a total booking or sale) – if they don’t think what you’re offering is worth that much of a cut you need to change it until they do think it is worth it.

It’s best that you try and validate your idea through talking to real people yourself, there’s nothing like hearing feedback from the horse’s mouth, and it will be invaluable. You’ll get to understand the real problems people want solving, and they may not be quite what you initially thought they were so you can alter your idea accordingly.

Make sure you talk to a good cross-section of people in your focus groups, it may become clear that your product idea is popular with one age group more than another or a very specific demographic. Once you have this information you can tailor your offering, and don’t forget, a product that initially only a small number of users love is infinitely better than a product that a lot of people aren’t bothered about.

Some assumptions will need to be validated differently. For example, if you think you have 20,000 target customers in a particular part of the country with a population of 200,000, how can you go about validating this? There are online tools (such as SEMrush and Moz) that will help with this, for example, you’ll be able to find out how often a particular keyword is searched for in association with the geographical area that you’re looking at. 

If you can ascertain how many potential customers you have, you’ll be able to take that a step further and work out whether, if they all become customers, is that enough people to make your marketplace viable and profitable. And how about if only a tenth of them sign up? Would that be enough?

What happens when you google the service you’re about to offer? What comes up already? Are there lots of results? If there are, bear in mind that you’ll probably have to pay to reach the top position of results, and of course make sure that your offering is better than theirs.

In brief, not carrying out an idea validation process in the early stages can be a very costly error. Not just financially but also time-wise. Write everything down relating to your idea then speak to your target market, potential vendors and customers, and research real world data. Once you’ve been through this process and honed your idea, you’ll be much closer to the ideal problem/solution fit. 

A further note here about Minimum Viable Products (MVP’s), it really is the sure-fire way to bring your new product to market at speed and with reduced investment. Here at Code23 we have a team dedicated to design, build and launch a product with just enough features for your early users. 

Some of the biggest brands in the world started off as MVPs – Airbnb, Twitter, Spotify… and they all turned pretty well!