Validate a Business Model in 7 Steps

Should you build it? This free course will walk you through a simple, bullet-proof process to validate your business idea in 10 days.

2: Check Your Assumptions

The first step is to identify all your assumptions about this business idea, and get them out on the table where you can think about them and get them organized. If you had a chance to look at the Business Model Canvas (or the Lean Canvas variation), you will be familiar with what's next.

"What the...?"

Did you somehow land here in the middle of the course?

Why not start the beginning?

First, you will need a Trello board to organize your canvas components. There are online versions of the canvas, but I think Trello is faster and easier to master.

Just head over to where I have a simple, Trello board you can copy to use for this course. Simply access the board, select "Show Menu" in the upper right corner, and choose "Copy Board" to make your own. Keep my board in tact so that others can use it. Thanks!

Once you have your own copy of the board, let's talk through what's there. I have created lists for a few of the main boxes on the Business Model Canvas. I have taken the liberty of mixing and matching a few box titles, but don't let that freak you out.

The lists I am concerned with now are:

  • Customers
  • Problems
  • Value Proposition
  • Channels
  • Revenues
  • Costs

If we can successfully validate those main components of the business model, there is a pretty reasonable case to be made for building an MVP for it, and really testing it.

In my Trello board, I have included a few example pieces of content. I just made up a terrible business model by way of explanation. My idea was to match shop owners with unused capacity in their schedule with students who want to learn those skills. Pretty awful, right? But it works as an example of a simple two-sided marketplace.

What I want you to do is delete all of my cards on your copy of the Trello board and list all of your own from your business idea. Let's do it together...

Customers. Who are your target customers for your idea? If you are creating a marketplace, who are the buyers and who are the suppliers? List them both under the Customers list on the Trello board.

Problems. What problems do your target customers have that your business idea is designed to solve? You probably have some assumptions about which problems are the most important to this customer segment. I'll bet you're wrong about at least some of them. But, don't worry--the point of this course is to show you how to find out which ones they are and discard them!

Value Proposition. When customers come across your website, what is the pitch that will reel them in? What language do you use to quickly explain how your solution solves their problem? It will have to be just a sentence or two if it is going to get the point across quickly enough to hold their attention.

Channels. Where do these customers get their information about new products and services? Do they click Google search ads? Do they use Facebook and Twitter? Do they attend certain kinds of events? There are many possible channels for you to think about. List as many as you can. You will need to access some of them in the next few days to test this theory.

Revenues. How are you going to make money from this business model? Will you charge your customers directly? Will you collect a service fee to facilitate an exchange between two actors? Will you sell ads on your website? With this one, I want you to be as detailed as possible. Be specific about the money you will charge, when you will charge it, and how many of those charges will be necessary for you to profit. For some guidelines, see this article.

Costs. Finally, what will be the costs of operating this business? Be sure to include your assumptions about operating a website, running any marketing campaigns, and the cost of actually fulfilling the service for your customers. Again, the above article will help you think it through.

OK, now you have all of the major assumptions in your Trello board. The next step will include the first experiments we will run against those assumptions.

Next: Conducting customer problem interviews.

I am here to help.

Don't feel ready to go it alone? Give me a call so I can help you.

Prefer email? That's fine. I am reachable at mcafee . sam at gmail . com