Hi there,
In last month’s newsletter, I wrote about Canva’s origin story.
The cool part is that in validating their idea, they weren’t just stuck in the founder’s basement or tinkering their pitch deck the whole time. They were a full fledged business with, what I call, Happy Paying Customers.
Several founders shared that they found that newsletter very inspiring. I got to thinking about why it resonated with so many. I believe it has to do with the lack of information about what it really takes to validate an idea - the juiciest part of the Canva story.
This newsletter is about that gap. The gap between the signals for validation that feel real and which ones actually helps you validate your idea so you’re building a business that makes you meaningful money right from the start.
Process: I gathered the ways everyone talks about validating their idea. I ranked these signals from weakest to strongest based on what it actually measures and what it doesn’t. Then keep on reading for the verdict on what it means for your business.
Business Validation Signals Ranked Weakest (#15) to Strongest (#1)
Ranked from weakest to strongest - spot the rows for what you’ve done for an honest assessment of what you measured versus did not, and the verdict on for your business.
SIGNAL | WHAT IT MEASURES | DOES NOT MEASURE |
False positives as they cost the other person nothing: | ||
15 (weakest) - Positive feedback from friends, family, your network All business types | That the people who know (and especially those who love) you want you to succeed | Whether that will hold true beyond your biased connections |
14 - Create a prototype, website, flyer All business types | That you can go from idea to producing something | Whether the problem exists, and what customers think of the idea |
13 - Build an audience on socials All business types | That people find your content or perspective interesting | Whether followers convert to paying customers (statistically, most don’t) |
12 - Survey responses All business types | What people believe or what they think they might do in the future | What they actually do when asked to pay (humans predict their own behavior very poorly) |
11 - Get waitlist signups B2B / B2C SaaS, problem-led AI | They are interested in the concept enough to give you their email | Whether they will open the email, remember you by the time you launch, and worse of all if they buy |
Feels official, but still no real commitment: | ||
10 - Customer discovery interviews (traditional way) All business types | Depends on how you run the conversation. Most commonly: what the person says they care about. | Whether they will convert into paying customers, or even take a follow-on call |
9 - Build a customer advisory board B2B SaaS, problem-led AI | That someone finds the problem interesting enough to give you their time, and associate their name with your brand | Whether their company or others in their network will convert into paying customers |
8 - Get signed LOIs (letter of intent) B2B SaaS, problem-led AI | That someone is interested enough to make it official that they will continue the conversation on this | Whether they will even continue the conversation (LOIs are the first of numerous steps to closing a deal, especially with bigger contracts/ companies) |
7 - Free beta users B2B / B2C SaaS, problem-led AI | They are interested in the solution if the price is $0 and willing to give time to try it, and change behavior | Whether they will be willing to pay for it |
Some early validation with real transactions: | ||
6 - Run a fake door test i.e. real-looking offer B2B / B2C SaaS, problem-led AI | That someone had the intent to purchase as they took the step simulating it | Whether they follow through when real payment is required (percentage of users always drop-off at that step) |
5- Get design partners B2B SaaS, problem-led AI | That someone is invested enough to co-create with you and give serious time (ideal if this is a paid engagement) | Whether the design partnership will convert into a paying customer when it ends |
4 - Heavy discount (e.g. $50 for something priced $1,000) All business types | They are ready to put real money behind solving this problem with your solution | Whether they, or others like them, will ever pay full-price |
3 - Warm contact pays your full price All business types | They are ready to pay full-price to solve this problem with your solution | Whether a stranger with no prior trust would reach the same conclusion |
Real validation someone is willing to pay you: | ||
2 - Stranger pays you full price, is happy with the outcome, and wants to continue / refer friends All business types | That you’ve got a clear customer segment (who) and problem, and a strong hypothesis for the positioning (why you over their status quo). | Whether this is replicable beyond one customer |
Real validation this might be replicable: | ||
1 - Multiple similar strangers pay full price for the same problem with the same positioning All business types | That you have a replicable Happy Paying Customer i.e. you know who they are, what problem you solve, their broken status quo, why you over it, and the right-fit solution (yours). | This is what a validated business idea looks like. Now you build the repeatable Playbook to grow to 100+ Happy Paying Customers. |
The verdict on what each of these means for your business validation
See the labels to the right of each of the validation signals for whether they do indeed provide validation for your business in the real world.
Ranks 1-13 such as collecting waitlist signups, or even if you have strangers paying you for different problems that require custom solutions, you do not have strong enough signal that you’ve got a replicable and sustainable business that will make you meaningful money.
You’re likely wondering, how might you get strangers to pay you before getting some of the other signals?
The key is to have the right type of conversations with strangers about your idea, which can begin even before you ever build anything. This ensures you build a business where there is willingness to pay from a segment of the market. That’s why, what I call, Research-Sales Methodology is a signature part of my Happy Paying Customers™ System.
If you know founders tinkering with their new idea, forward this newsletter to them so they don’t waste time and energy chasing the wrong type of validation.
And if you know any founders who are ready to turn their idea into a multi-million dollar business with real world validation, I’ve got 3 spots open for April starts for my small group coaching program, and 1 to work with me privately. Founders can learn more about the investment options, and get started here.
Is there a validation method that I missed? Let me know via email so I can add to the ranking.
Rooting for you!
Sweta
P.S. In this free sneak-peek at the Happy Paying Customers™ System I go over the 5 stages of building your business from scratch. Spoiler: the first two stages are all about the right type of validation if building a money-making business is a priority for you.
