There are 5 stages to validation.
There is some great information out there about what it means for a startup to be fully validated. However, Once your startup has found a scalable business model and paying customers to prove your product or service is needed, it is no longer a startup. It's a small business.
The question asked is about validating an idea, so let's assume we're talking about the early stages and what benchmarks you might use to make sure things are on track. The same validation benchmark cannot be defined for all startups, but each milestone should get you a step closer to proving your business model. What’s important is that you gain the confidence needed at each stage to spend the time and money for the next stage.
Stage one: the idea makes sense to you and to anyone else closely involved. A viable idea has four main parts, and we put these into our version of the Lean Canvas (The Lean App Canvas):
Fill out the canvas and discuss it with a number of people until it makes sense and sounds reasonable to everyone. Note that every piece of the canvas is necessary to have an offer; customers, problem, solution, and pricing. These four also need to be very specific for your idea. Learn more with our Lean App Toolkit here
Stage two: you get positive feedback from real people during in-person interviews. Once you have a laser-focused group of target customers and a path to find them, it’s time to talk with them. The number of customers you need to speak with depends on the nature of the idea and the revenue model. For example, an app which is destined to be sold in the app stores for $.99 will rely on volume more so than an SaaS app charging $200/mo. Pick your numbers with that information in mind.
Use negative feedback to modify your canvas. For each answer that is less than a resounding yes in an interview, ask yourself these questions:
- Have I picked the wrong target customers?
- Are the problems painful enough?
- Is my solution compelling enough?
- Is my pricing model justified and understandable?
Once you’ve received enough positive feedback (careful to avoid false positives), then you can be confident enough to move on. Your canvas is lookin’ good!
Stage three: you get email sign-ups from an extended group of people. Now you craft your messaging with what you’ve learned and put up your landing page. Promote with all your might and find the right channels to reach your target audience. Again the numbers you need here will depend on the volume you expect to be successful. The numbers will also depend on the way you construct your landing page. A page which encourages people to get updates on progress (newsletter signup) will be different from one that asks people to choose a pricing plan for an app that is not quite ready (pre-sales). Now that everyone is clamoring for your app, you can confidently surge forward!
Stage four: you mold your beta version into something users are ready to pay for. Even though you got a bunch of people telling you they will pay, they will only pay when the solution meets their expectations. Hopefully you’ve done a great job interpreting feedback along the way, but beta apps are not always production-worthy out of the box. Often, you’ll need to make some changes and enhancements to make it go. Hopefully, you’ve also included only what’s truly necessary in the app so as not to burn time and money in the process (this is a lot more difficult than you might think, so get outside help with it). Congratulations, you’re ready for paying customers!!
Stage five: you get and retain paying customers. In this stage, you not only continue to promote and acquire new customers through existing and new channels, but you make sure to retain existing customers. Pay attention to monthly recurring customer acquisition, referrals, retention, and churn to monitor the health of your budding company. If this goes well, you’ll have a business which can sustain itself and grow.
It’s also worth noting that you probably do some things which don’t scale at this point. You’ll need to slowly, but surely, shift over to scalable versions of those things so you can grow your company effectively.