How to test the viability of your online business idea

I didn’t invent this method, I first learned about it in the book “Four hour work week” of Tim Ferriss (highly recommended, without affiliate link :)).

In this article, I will explain the method and add some practical tips to it based on my own experience.

Bear in mind this method doesn’t work with all business ideas. Your potential customers need to be actively looking for whatever you are planning to offer.

Real life example

Before I start explaining how it is done, I would like to give you a real life example that I will reuse through the article.

I wanted to bring the concept of personal outsourcing to French speaking busy people . You could get various tasks done at a cheap price. I actually needed such a service myself when I was actively working on my facebook business because I was looking for someone who could moderate my forum and games. The difficulty was that the person needed to speak French and there were no established website that I could go to.

I decided to test if other people would be interested in such a service. I was lucky enough to be able to buy the domain name “deleguer.fr” for this experiment (deleguer means ‘to delegate’ in French)

The Tim Ferriss method

Short summary: we will be creating a three pages website, bring paid traffic to it and watch the conversion rates.

The domain name and title of the website don’t have to be the name of your future product, but it is of course better to put something related to what you are planning to sell or at least something that inspires trust. (You don’t want to impact on the result of your experiment because of a poor name.)

Weebly, SnapPages, WordPress are all free tools you can use to easily build your test site. I personally prefer Weebly because it just does the job.

You also want to use Google Analytics to understand where people exit your website during the sales process. Insert the script in all the pages of the website.

Page 1 – The landing page

The first page, the landing page, should describe your offering.

  • What is the name of your product?
  • What problem does it solve?
  • What are the benefits of your product?

Your copy should speak as if the product already exists.

Make sure you have a small form for people to ask you questions (Wufooor Google Spreadsheet allow you to create forms you can embed for free).

You also need a screenshot or a picture of your product to make it real. (The screenshot can be a mockup in photoshop).

Ethical concerns?

I can hear some people in the audience saying that we are deceiving people into making them believe that a product exists. I won’t argue that there is no truth in it and I haven’t been able to find a good answer for or against the method.
We don’t take money from the visitors and we actually try to solve a problem they have, so I don’t feel too bad about it.
A bit like telling kids Santa Claus exist.

The only call to action on the page should be links or buttons to see the Plans and Pricing which point to the second page.

Call to action

If a visitor clicks on the buttons, it means that your offer is appealing to them and they want to know more. Plus, they know they will have to pay for it and they are ok with that.

You can check the landing page at http://deleguer.fr to see how I did it for this specific experiment.

Page 2 – Revealing the price

The pricing page just presents how much your product costs. (Your product doesn’t exist yet, but your visitors must believe it to make the experiment relevant).

You may want to add testimonials (another ethical concern here), credibility badges, money back guarantees (anything you actually plan to offer with your product).

Also try to answer any question they may have at this point. What happens if they want to cancel? Can they get a refund? etc…

The only call to action should be to order and pay.

Powerpoint powered button :)

If a visitor clicks on this link, it is great. The visitor saw the price, accepted it and decided to buy it. Clicking on the call to action brings them to the last page of the process.

Page 3 – Service not available at the moment

The last page is simply used to terminate the sales process. You can do several things here.

You can ask for the credit card details (without ever storing them) to see if they were serious buyers but I wouldn’t recommend that, it is simply wasting people’s time (even more you might say).

What I did in deleguer.fr was to actually tell the truth, that it was a work in progress but I didn’t just let them leave the site in disappointment.

I added a form so that if they are interested they can leave me their email address and I can contact them and discuss more about the product.

Contact form

Set up your goals in Google Analytics

You want to define what your funnel looks like in Google Analytics so that Google Analytics can show you a nice funnel visualization report.

This is one of the goals I added for deleguer.fr:

Google Analytics Goals

Optional: A/B Testing

To better understand what visitors are after when they visit your website (what features convert best) or what pricing works best for your product, you can run some A/B tests during the experiment.

In the example of deleguer.fr, I used two versions for the pricing page for example:

http://www.deleguer.fr/tarifs-et-forfaits.html
http://www.deleguer.fr/tarifs-simples.html

and set my A/B test in Google Website Optimizer:

image

By adding a simple script in my pages, my traffic would either see the original page with five plans, or see a much simpler one with one choice only.

Optional: Adwords Conversion Tracker

By adding a Adwords Conversion Tracker (if you are planning to use Google Adwords to bring traffic in), you will be able to learn which search keywords convert better into sales.

It is not enough to have a high click-through rate on your ads, your clicks need to convert otherwise you are paying the clicks for nothing.

For example, any keyword containing “free“ would probably not be a great keyword to bid for.

Running the experiment

The pages are ready, the metrics tracker is installed, the a/b tests are set, it is now time to bring some traffic in.

I usually want to get the cheapest traffic I can (usually around 5 cents) and yet get a well targeted traffic (and I am fairly sure you do want that too).

Depending on what the business idea is about and my target market is, I would use one of the following advertising platform:

  • Facebook ads
  • Google Adwords
  • Bing
  • Reddit advertising
  • Stumble Upon ads

How I would run the campaign to get both a targeted AND cheap traffic would be the topic of a future post (if enough interest is shown in the comments).

Then I would pay $20 to $30 a day to get about 400 visitors every day for a week and watch the conversion funnel and tweak the pages, the a/b tests if needed and my ads.

Traffic in Google Analytics

Analysing the results

imageThanks to the experiment you will be able to learn the following things:

- You may have discovered some good keywords to target for your business

Again, it is not just about CTR (Click-through rate). You also need to see how much you paid for the click.

- Is your product appealing to your target market?

Looking at the conversion funnel (left), you can see where people exit your website.

In the example of deleguer.fr, for the first day of the experiment, you can clearly see the homepage itself loses a lot of the traffic and it encouraged me to add a few more elements to it to increase the conversions.

- Is your business idea profitable? and at what price should you sell your product for?

Using A/B testing to vary prices, by calculating the cost per acquisition (how much do you have to pay in ads before you get one sale?) and by looking at how much profit you actually do on a single sale ((cost to produce the product – cost of acquisition) * number of sales), you can deduce if you have a profitable idea, and which price is the best.

Pretty powerful stuff isn’t it? Again, all credits go to Tim Ferriss.

Drawbacks of this method

1. You have to pay around $200 per experiment, although it is a ridiculously small amount in what you would pay to test a business idea in the physical world, it can be costly when you get to the tenth experiment.

2. Your conversions depend highly on how well you can write your ads too.

3. The results depend highly on how targeted your traffic is, and getting targeted traffic is an art.

4. It only works if your potential clients are searching for your product. If you were the creator of Twitter and wanted to test the market with your idea, you wouldn’t have much luck with this method.

5. I am still not comfortable with deceiving people

Before you leave

I hope you enjoyed this article. The main reason I write articles is because of the intellectual pleasure I get from discussing the topic with my readers. I would like to encourage you to leave a comment, it is an easy way to make me happy :)

  • jgwong

    Aymeric,

    The effectiveness of the method doesn’t justify deceiving your future customers. Instead, build your brand on trust. If you’re going to be uncomfortable doing something, let it be doing the Right Thing. Standing up to good principles no matter the price.

    If you can’t find a good answer against the method, here’s mine.

    You’re a liar and a deceiver. How can you expect people to trust you and your services in the future? If you publish a Privacy Policy page, how can we trust that you’ll follow it? We won’t. If you can make up things so easily, how can we give you our e-mail address or credit card numbers? Your credibility is down.

    People are willing to believe in you if you’re honest, period. As an example, the hosting company TextDrive (now part of Joyent) was born with the faith of its customers: they asked for money to raise the company and promised lifetime accounts to them. Some people trusted them. Their lifetime accounts are honored to this day. They get my money and my trust.

    Surprise your users with great service and reasons to trust you. Not by finding out your Santa Claus stories were lies all the time.

  • Wyatt

    Thank you for sharing the insightful article! I am an aspiring entrepreneur, but many of these concepts and tools are only mentioned in passing by others. I appreciate the in-depth look at a good (though perhaps deceitful) way to test a business plan out. :)

  • Rollo Tomazzi

    Thanks for sharing this Aymeric, I have definitely enjoyed your post and learned from it.
    I think I’ll get a copy of the ‘four hour work week’ now.

    I’d like to read your next post on how to get a cheap and targeted traffic, so pls consider this as an up-vote.

    Thx again,
    Rollo

  • Alexis Perrier

    I have read Tim Ferriss book and found it very interesting. Thanks for adapting his method to an online idea. I needed the reminder.

  • Norio

    Great example of Tim’s methods. I really enjoyed reading it and seeing the live example! Thanks :)

    I’ve read the 4HWW and developed http://www.just1.co.za as my muse. It’s 99% automated and makes about a sale a day. I’m now moving onto my next muse and plan to use your example to test the market. Very well done. I’m sure Tim would be proud to read your article :)

  • Parag Shah

    Thanks for sharing these insights. I am going to try these for my next website.

  • Andriy

    Thanks for the great post!

    Testing a business idea this way could seem like a lot of work, but it is a MUST for a beginner entrepreneur.

    Here is a mistake that I did, and let’s hope no one else repeats it: I spent three months of hard work and 3.5 thousand dollars to start online business. Then I realized that nobody clicks on my ads and people are generally not interested in the super cool product that I developed.

    How much easier it is to create a mock web site!

    May the people who click on my ads forgive me :-)

  • Susan

    …doesn’t acknowledgment rock! :)
    I so love and yes, kinda need/crave, feedback!

    So here’s yours; I loved the article, and I will implement your ideas and get back to you!

    Thanks!

    best~