Before we go any further let me start by saying, it just makes good business sense to validate your business idea – before you start throwing money at it. But, it’s funny…
…when it comes to software or digital products, founders of tech start-ups and creators of info product (if they’re smart ones) place a large emphasis on validating their business idea BEFORE they make and try to sell it.
Move across to the physical product space, though. You know, traditional brick and mortar businesses selling tangible products you can pick up with your hands. Or, the ecommerce version of that – all hail king Shopify – and this sort of common sense approach seems to go right out of the window. Yikes!
This is bad business sense for so many different reasons, but this article is not about that, so I won’t go there. **You can find my video on the top mistakes I see new online stores owners make right here. – read this post first, then go and check it out.
That’s why I created this mega post, because if you’re about to start your online boutique this article will help you validate your business idea, by leading you to the questions you should be asking yourself before you start.
Oh ! and I think you’ll also love my FREE competitive analysis workbook, click the link below to download yours now.
4 Q’s To ask Yourself To Validate Your Business Idea (+ a killer hack)
Here are the 4 key areas we’ll look at:
4. Desire + skill-set
Why these areas?
Well in my experience if one or more of these areas is off, even the best business idea can end up on the scrap heap of broken dreams.
- 1. IS MY ONLINE BUSINESS IDEA VIABLE?
Make no mistake, it’s entirely possible to turn a business started with $500 into a multiple 6-figure a year business.
But saying that, if you don’t have the cashflow to pay for (some) inventory and the handful of tools, you need to allow you to flourish, you’re in trouble before you’ve even started.
Here are a few costs nearly every store owner has when starting their business.
- Cost of blog hosting (if creating an authority ecommerce store)
- Cost of Shopify hosting – Shopify is the one-stop-shop ecommerce platform I personally recommend
- Cost of a quality, modern, responsive theme
- Cost of an email service provider. I use ConvertKit.
- Cost of photography – It’s always a possibility to use the pictures from your manufacturers, but this comes with some cons you need to consider.
- Cost of graphic design – if you’re building a brand built to last you need to think about your brand’s visual aesthetic right from the beginning.
There’s also the matter of where to find inventory for your online boutique, and how much of it to buy? Or, if you’re creating your product yourself, the cost of raw materials – but as that varies from person to person we won’t cover that here.
** I have a video where I share my top tips for buying inventory when you’re just starting out and you can find it below.
Once you’ve researched and costed out the above, the next thing you need to ask yourself is “can I afford to invest in the baseline stock and tools I need to get started?”.
But I would go a step further and ask yourself: can I afford to order quality samples (always a good idea) and keep those tools operational for the next 3-6 months – even if I’m not turning a profit yet?
If the answer is no? Chances are you need to spend some more time getting your start-up capital together.
Want to dive deeper into working out your viability and cash flow? check out these great resources.
- How to calculate business cash flow
- What is free cash flow and how you can calculate it
- New business idea, how to test it before launching
- How to figure if your business idea is a viable business
2. IS MY ONLINE BOUTIQUE IDEA PROFITABLE?
Sadly, I see far too many well intentioned online boutique owners crash and burn financially because they fail to factor in the actual profitability of their online boutique when they validate their business idea.
Now, you’ll find conflicting information on the internet about what sort of profit margins you should be looking for. And this will vary widely if you’re selling high-end Italian furniture, or dropshipping graphic -shirts shipped from Printful.
But here are a few of the criteria I use when deciding whether a new product will be profitable:
- Can I sell this item for 3x what I paid for it?
- Can I afford to replace this item at no/low additional cost to the customer (on the rare occasion it requires it)
- Can I get this product from a number of different suppliers if I need to?
- How much does shipping these products to me increase the unit cost of each item?
- What other platforms can I sell this product on?
- Who else is selling in my niche successfully – what are they selling, what’s their marketing strategy, who are their customers?
- Can I put this item on sale and still make a profit?
Asking yourself these questions upfront allows you to do some baseline maths indicating the profitability of your online boutique idea – while giving you an overview of what others who are already selling this product successfully are doing.
3. IS MY ONLINE BOUTIQUE BUSINESS SCALABLE?
What do I mean by scalability?
Let me explain…
The first question you need to ask yourself is: how big is the marketplace for my product, and am I able to access a reliable supply chain and logistics that allow me to sell this product in large quantities?
When you’re just starting out sending 10 orders from home in a week is nothing, but what happens when you’re making 50 sales a day and your living room has been converted into storage space? A world of stress, that’s what.
Another thing to consider is the repeat nature of your products.
Do customers need to buy more of it (like tea), buy parts for it, or add to a set?
It’s much easier to sell more to your existing customers than it is to always be searching for new ones. So products that naturally can increase in order value are always leaders when it comes to thinking about the profitability and scalability of your business, at least in my opinion.
Not sure what I mean by products that naturally lean towards increasing the AOV (average order value)? below I’ve given three examples.
- When you decide to sell bikes, you can also sell bike lights, new wheels, bike baskets, bike maintenance tools.
- When you decide to sell jewelry you can always sell jewelry boxes and other storage items, and what about cleaning products?
- When you decide to sell children’s nappy bags, you can also sell bottle bags, sanitation spray, changing mats.
See how you go from having one core product to having a whole line of items which all work together. Which, when bought together, helps you increase the average order for each customer? Nice ha!
And that leads nicely into the 4th and final question you need to ask yourself to help you validate your business idea.
4. DO I HAVE THE DESIRE & SKILL SETS NEEDED?
It might seem odd to include this when talking about validating your business idea, but I have for a very specific reason.
See, unless you’re an outlier, the first 12 months of building your brand and business are filled with ups and downs.
You’re learning the skills of sourcing, website development and management, content creation, list building and customer service – among other things. And let me just put your mind at ease, yes, it’s perfectly normal to feel overwhelmed and out of your depth at times.
That’s why if you really don’t care or have an sincere interest in the product/s your building your brand around, very soon running your business will start to fill like a chore. Trust me I’ve done this. *cough* more than once.
You’ll find many ecommerce experts (not me) teaching methods based purely on finding profitable products from Ali Express.
The problem is they only tell a tiny part of the story. Which is…
…sadly, 81% of new entrepreneurs who start their business with this shortsighted approach end up failing. Or, opening several stores before they hit on anything even close to being profitable. But that won’t be you, right? Because once you’ve read this post, you’ll know how to validate your business idea!
The trick is to find that intersection between a niche that you’re interested in (and see yourself sustaining that interest) then identifying profitable products within that niche.
In my experience this approach allows you to create a brand and business that not only makes you money, but that you’re also committed to and passionate about. Way more fun.
How To Validate Your Business Idea (and choose a niche you love)
- Make a list of 5 areas/niches you’re passionate about and feel you have something to offer in.
- Think about running a business focused on each of those niches, and look for what **really** lights you up. If you can’t imagine running that same business in 5 years, do you really want to start it?
Next, it pays to look at your existing skill set.
It requires a unique set of skills to learn how to promote your online store successfully, but luckily these skills can, for the most part, all be learnt.
Saying that it really helps to have an idea about where you currently are:
- Do you have some technical skills, or are you a quick learner?
- Do you have some graphic skills, or do you have someone who can help you?
- Do you understand how to use social media to sell products?
- Do you have the ability to write products descriptions and create content for your website?
- Do you have strong photography skills and the ability to create great images for your website?
Even if you answered no to all these questions, that’s no reason to be deterred. All it does is show you what areas you need to start skilling up in quickly, or be prepared to hire or trade services in. And trust me, taking a moment to get clear about your strengths and weakness early on really pays off with time and money saved in the long run.
Okay, so we just covered the 4 key question you need to ask yourself to help you validate your business idea but, before we start to wrap up, I want to share with you a few product niches that I’d highly suggest you avoid.
**NICHE’S ROOKIE STORE OWNERS & MARKETERS SHOULD AVOID
- Electronics – electronics of any kind are notoriously hard to make a healthy profit on, tend to have non-stop issues with returns and functionality, and unless you’re a total enthusiast for a particular product, quickly become a pain in the ass
- Health Supplements – unless you have the supply chain and the cashflow to really push a new supplement to market, or attract enough traffic to your store to sell an existing one. Stay clear. Really wanna sell supps, become an affiliate instead. There’s more than one way to skin a cat!
- Furniture. Big, bulky, expensive to ship, expensive to return, easy to damage, crappy profit margins if dropshipping, shall I go on?
Once you’ve finished validating your business idea the next step will be to order some samples from your suppliers. Actually there’s another step I like to do first before I spend a penny on building a brand, but I reserve that little gem for my coaching clients. But, saying that, I think we can both agree this is already a mammoth post and you have lots to get started with.
Want to save time on finding quality inventory for your online boutique? Then I invite you to check out another mega resource I’ve written about finding wholesale and dropship supppliers.
Bonus hack to help you validate your business idea
Now, be warned, this bonus hack does take a bit of time, skill and cash, but you’ll learn a lot about the likely success of your business, so it’s worth it. Here’s what to do.
- Set up a ‘coming soon’ landing page for your new business – make sure this is connected to your email service provider
- Showcase your BEST image and make sure your core messaging is strong
- Create some killer graphics to promote your new site – so you can use these to promote the landing page
- Promote on your personal Facebook page, and find 5-6 groups which contain your ideal customer, and promote your new offering there.
- Build a list of at least 100 people who have shown interest in the new store and product you’re about to launch
- Run a pre-sale of one item that you plan to sell – i.e sell the item BEFORE you even purchase inventory, giving your early bird customers a sweet discount for being prepared to wait
- Send out your pre-sold items, and get feedback from those who bought
As you can see this is just an outline of this pre-sell hack to validate your business idea, BUT, if you’d like me to write a blog post about it, all you need to do is let me know in the comments.
So that’s it!
I hope you’ve found this post where I shared 4 questions you must ask yourself to validate your business idea helpful. If you have, then I’d love it if you’d share this post on social media – especially in any relevant Facebook groups you’re a part of.
Got questions? Consider the comments section open.