Validate Your New Service Idea in 6 Simple Steps

1. Write down the problem your service solves

Home service idea: try it on one client, or ask a hundred people first? Number one sets three tests before you commit; easiest first. Number six: write down the problem your service solves, and for whom. Try to explain it in one or two sentences, one portal says.

If it won't solve a problem or meet a need, another says, start again. No one buys what they don't want or need, a third guide says. Name your target market: the people you want to sell to, the portal says. Try to sell to everyone, it says, and focusing your marketing gets very hard.

Be specific, a small business agency says: your business will not be for everybody. A short profile of each customer covers two things, one portal says: who they are and what they care about. Another guide's personas ask four things: where to find them, what they value, what worries them and what they need. One local enterprise office asks three questions: who will buy, why, and how much they'll pay.

Needs aren't always obvious, a third local guide says: lawn care can also be about saving time or adding value to a home. One portal's example customer for a service: small businesses that need technical support but can't afford a full-time expert. By our count, that one sentence names three things: who, what they need, and their limit. If practical guides like this help you, subscribe.

Every step and rule in this video comes straight from the official guide pages linked below.

2. Check that people need it

Number five: check that people need it, with free or low-cost research. Testing helps you understand who your customers are, what they need and how they behave, one guide says. One portal names four customer research methods: surveys, one-on-one interviews, feedback from buyers, and talking to visitors. For a product, it adds focus groups and watching people use it.

Surveys, interviews and direct observation are popular, another guide says. Formal research often uses a specialist, one portal says, but simpler, lower-cost steps can save time and money. Four existing sources can help first, it says: government data, industry reports, news and trade associations. Existing sources save time, a small business agency says, but may not fit your audience exactly.

A simple first step, one portal says: ask friends and family if they would pay for it. But go beyond them for honest answers from people like your future customers, another guide says. Friends may tell you what they think you want to hear, a third adds. Find out if your target market would buy, and how much they'd pay, one regional agency says.

Surveying just a few people isn't enough, one guide says. How many to ask differs: that guide quotes experts on at least 150 responses. Another aims for at least twenty builders for a steel supplier, or a hundred customers for a salon. By our count, in that one guide, the salon's hundred is five times the twenty builders.

Avoid yes or no questions, the first guide says, because badly phrased questions give wrong answers. People may also say they'd buy if it were cheaper, hoping to change what you do, it adds.

3. Look at who else offers it, and what they charge

Number four: look at who else offers it, and what they charge. Unless your idea is brand new, you'll compete with other businesses, one portal says. Find out what they charge, and how much customers will pay for yours, it adds. One portal also asks what annoys customers about similar products.

Role-play as a customer, one guide says: make a purchase, use the service and contact their customer service. Collect their flyers and price lists, another portal says, and consider buying from them to see how they deliver. That first guide sets four aims: their prices, how they advertise, how they deliver, and what makes you different. A third portal suggests visiting their business in person, or signing up for their email list.

If they're online, one guide suggests asking for a trial of their service. Or ask for a price list, and whether there's a discount for volume, it adds. When reading reviews, one portal suggests short ones with a mix of star ratings, since some reviews are fake or bought. It says to be wary of long stories with only one or five stars.

By our count, that leaves the two, three and four star reviews in the middle. Work out why customers would buy from you instead, one regional agency says: a better product or a lower price. One portal names three examples of an edge: free home delivery, a money-back guarantee and personalised service. Another guide asks four questions: how many competitors, how many direct, how easy you are to copy, and how you differ.

A small business agency adds their strengths and weaknesses, and any barriers to entering the market. If there are too many successful competitors, one portal says, a new business may not find enough customers.

4. Work out the numbers before you spend

Number three: work out the numbers before you spend. List what you'll need, like equipment, supplies and services, and estimate each cost, one local enterprise guide says. One small business agency splits one-time start-up costs from monthly expenses. It says to count at least one year of monthly expenses, and five years is ideal.

By our count, that's twelve months at least, and sixty in the ideal case. New businesses often take time to make a profit, one portal says, so build some running costs into your start-up money. Work out how much you need to cover your costs and monthly overheads, another guide says, with realistic estimates. Overstate rather than understate your estimates, it adds.

That guide adds twenty to 30% for costs you haven't thought of; two others use 10%. To find break-even, the small business agency divides fixed costs by what each sale leaves after its own cost. Your operating expenses should include the pay you take yourself, another portal says. Then forecast your cash flow for your first twelve months, another guide says.

If it shows no profit for some time, see if you have funds to support you, it adds. If you charge more than others, it says, better quality or service can justify it. Our earlier seven-step guide to starting a business is linked on screen. Halfway there: four steps, from the problem to the numbers.

5. Test it small

Number two: test it small, and quickly, before a bigger commitment. Starting lean helps you check if a business can work while keeping costs, time and resources low, one portal says. Start with something you can develop and test quickly and cheaply, it says, to see the demand first. Another guide calls it a minimum viable product: the most basic version of your business you can bring to market.

It lets you start out with just one client, or a basic version of your product, it adds. You can also develop it part time while keeping other paid work, that guide says. Its advice: set a budget for that first version, and don't go over it. Speak to the people who use it, find out what worked and what didn't, and improve.

A prototype doesn't have to be perfect, another portal says, just something that shows the main idea. Test the prototype to deal with any issues before you show it to customers, a third portal adds. One guide's product process has eight stages, with testing at five and six. By our count, four stages come before testing, and two come after it.

Give your prototype to potential customers, the second portal says, watch them use it, and ask what they'd change. Don't be afraid to change things, it adds: that's what prototyping is for. Ask a group of potential customers to test it and give feedback, one guide says, and use it to develop the product. A test market survey of your likeliest groups can separate real markets from unlikely ones, one regional agency says.

Viability improves with a series of tests and changes in between, rather than a one-off test, the first portal says. Pilot your questionnaire on a few people first, one local enterprise guide says, before spending on printing. Draft a basic business plan to help test whether you have a viable idea, another guide says. So far: five steps, from the problem to a small test.

6. Decide with three tests, adjust, and keep records

Number one: decide with three tests, adjust, and keep records. One guide's three tests: the idea can make money, there's space in the market, and your finances can last the first year. By our count, that's three yes answers to get before you commit. Before starting, one regional agency says, evaluate your idea and your chances of making a profit from it.

Investigating your idea isn't about convincing yourself it's good, one portal says, but about finding its chance of success. Don't be afraid to change your idea based on that review, it adds. One portal suggests a short report with four parts: what you wanted to find, your methods, the insights and your actions. Sometimes, deciding not to invest more time and money could be the right decision, the first portal says.

Stop work on ideas that don't meet your criteria before committing a lot of time, another guide says. Don't ignore negative feedback, a third guide says, and be ready to change your plans based on all the data. Good planning has three stages, another portal says: plan, track and learn. You can start with a one-page plan, one guide says, or a lean plan if your business is simple.

Keep records of all sales and income, and all business expenses, one tax agency says. Records show whether your business is improving, what's selling, or what you need to change, another adds. Keep records of cash and non-cash sales and expenses through the year, a third tax agency says. Good records show whether you're making a profit, a fourth says, and help you make sound decisions.

And revise your cash flow and profit forecasts every quarter, one local enterprise guide says. To recap: the problem and who has it, proof of need, the competition, the numbers, a small test, and three tests to decide. Number six was the easiest step, and number one gives three tests that tell you whether to go on. A small first step: write your idea in one or two sentences, with who it's for.

Each guide's numbers are its own, and rules differ where you live. Which step will you start with? Tell us in the comments. Subscribe to see the next official guides we check.

Your next step is in the video on screen now: six steps to set your rates. Information only; results vary. This is Extra Income Explained.