🧠 How to validate your SaaS idea (Building 101 #2)

Hey all,

Welcome to #2 of the (almost…) new “Building 101” series 🎓 running over the next 6 - 8 weeks with a full rundown of the practical steps involved in building and growing your own tech products.

If you didn’t get a chance to read part 1 all about how to generate your own ideas, then make sure you catch up! And you can refer back to any part of the series, at any time here.

This week, we’re looking at how to start validating product ideas.

Let’s jump in… ⬇️

🧠 How to validate your product ideas

Everyone talks about validation as the most important step in building (or not building…) any product. This is much to the dismay of anyone with some programming skills - we just want to get stuck in and solve the problem!

The reality is, spending weeks building an awesome product to solve a problem no one has isn’t a very good way to go about starting a business.

Before we get hands-on keyboards (and don’t worry, we will…) we need to know if our time investment is going to pay us back dividends in the future.

There are 3 things you have to understand before you can decide whether to take an idea forward or trash it altogether:

• Your problem

• Your market

• Your competition

Write these down, and tick them off as you go through. First, start with understanding the problem you're trying to solve.

Know your problem intimately

Could you explain the problem clearly to a 10-year-old child? If not, then you don’t know your problem well enough. This sort of raw understanding rarely comes from just having the problem yourself.

Don’t get me wrong - having the problem yourself gives you a massive upper hand but in order to truly validate it as a business - you have to talk to users.

The classic example is The Mom Test. You should never ask your family if something is a good idea - their response will always be “It’s amazing… because you're amazing!”.

In reality, this is true of anyone we ask. We’re all so scared of upsetting people that we often hide our true thoughts and feelings. So how can we judge if our ideas are worth pursuing?

Instead, explain the concept to your customers and ask leading questions like “How do you solve this problem currently?” and “How often do you have this problem?”. This instantly relaxes people as we’re all more confident talking about something we understand and will likely raise follow-up questions.

It also gives you a feel for where your problem sits in this plot:

The golden zone is where all the ‘best’ problems are - high pain and customers encounter them very often (hopefully daily…). Almost all major technological advancements going right back to the wheel sit in this zone - it’s still true now and always will be.

If your idea is solving a problem in the golden zone - stick a tick in your first box!

Know your market

What’s also true of these problems is that you’ll never be the first to address them - there’s likely some competition. As part of validating your idea, you have to understand the forces at play in your chosen market.

This starts at the industry level, and to begin with, it’s useful to think of industries involved in technological development as falling somewhere on this plot:

You can debate where exactly these points should sit but the general trend is that the more complex a problem, the less competitive the solution marketplace will be. And over time as technology becomes more sophisticated the dots tend to shift right and downward creating more opportunities for solo builders.

As we’re looking to build products of our own, we have to be realistic about what we can achieve. If you want to create a new social network or revolutionise the insurance industry, then that’s great - but you're going to need a lot of help!

Therefore great validation is to plot your own product onto the chart above. If you're less competitive than ‘e-commerce’ and less complex than ‘work management’ then stick a tick in your next box!

Although this is a general trend there are plenty of great problems lurking in other areas of the chart. The bottom left quadrant for example contains many relatively untapped niches that may have yet to fully undergo a digital transformation and therefore have minimal competition.

However, stay away from the top right quadrant - these problems will have you working your butt off in both solution design, and in winning customers.

Know your competition

You should now hopefully have two ticks against some of your ideas. Now for the more labour-intensive part - making a list of competitors.

Here are 3 places to look:

• Google (obviously!)

• G2 - a review-based platform with thousands of listings

• SimilarWeb - analytics platform for competitor analysis

There are likely more than 5 solutions, but we need to know what ‘high-quality’ looks like so now collect the following information on each:

• Year they launched

• Price point

  If tiered, note down the lowest, highest and average of all plans

• Number of customers

  This can be difficult to find if it’s not advertised on a website, especially for small businesses - a cold call can work 😉.

• Average organic Google rank for a specific search term

  Try things like “Software to manage [X]”. This gives you an idea of how successful their digital strategy is. Check for any paid ads they might be running.

• Average organic Google ranking for business/product name

  This gives you an idea of general brand recognition. Check the paid ads here too as often other competitors will pay to rank for a competitor’s brand name.

• Number of features released in last 3 months

  Get a feel for this from blog posts and other social content. And if you can’t find anything - that’s an opportunity for you to differentiate already…

• Quality of support

  Check what SLAs are claimed and check responsiveness by making use of any free trials and submitting dummy requests. Check reviews to get an idea of general system health.

Then, importantly, check their tech stack. There are numerous ways of doing this but the easiest way is to install Wappalyzer and run this on the platform, making use of any free trials.

This is important as a modern tech stack can dramatically improve the speed of execution.

This can be highly industry-dependent and isn’t a hard and fast list, but in most cases, here are things to keep an eye out for:

Combine this with a gut feeling for how ‘dynamic’ the business comes across - the more so, the more likely they run a tight ship from a technological standpoint.

Once you start collating and comparing all this data, it quickly becomes clear what ‘high-quality’ is for your specific problem.

If you’ve successfully compared your competitors and can start to see areas where you might be able to differentiate, then give yourself your last tick!

Congrats! You’ve just validated your first set of ideas. Hopefully, at least one or two look promising and can be taken forward. This is something you should continue to revisit throughout your building journey.