start up idea

How do you know if you have the right idea for a startup?

Is it really possible to ever know?

Most startups fail. The better job you do validate your business idea the more likely will you succeed.

And, you might wonder:

Which metrics can I measure to prove that my startup idea is right?

The most important idea is that – The answer is not within you.

This is so important, so I must repeat.

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“The answer is not within you.”

Talk to people

How do they react to your business idea? Do they ask you for more information? Do they show genuine interest, or are they listening politely?

When you talk to people pay attention to the following:

Is it interactive or are you talking? – There has to be a back-and-forth between you and your customer or potential customer.

You can’t be talking at them. You have to mostly listen. Don’t pitch. Interact.

Are you solving any of their problems?

Are you saving them time?

Do you help them make more money?

Here is what you measure:

  • How many people want you to keep them updated about your startup?
  • How many of them are willing to meet with you to find out more?
  • How many of them are helping you by spreading the word about your startup?

“You have nothing unless someone is willing to pay for it.”

I can hear you yelling at your screen.

What about Facebook and WhatsApp?

Who is paying them?

I mean in the real world now where we are building businesses to pay your bills.

You have to get paid.

I think it’s admirable if you want to go out and build the next Facebook, but most of us can’t afford to build a business that may not generate any money for years.

So, back to reality now.

Your next metric is sales.

I know it’s hard, but sales is the only thing that really matters in business. If people are willing to pay, you have something.

Sales is good, presales is great.

Presales is one of the best startup metrics

You might ask yourself. How can I sell something that I don’t yet have.

It happens all the time.

You have something. You have a business idea.

Can you get others to believe in your business idea?

If your prospects really believe in your product, many of them will buy before you even made it.

Here is what you measure:

How many people are willing to pay you before you actually have a product. Kickstarter and Indiegogo are a couple of great examples of this, but you can do this on your own.

A “maybe” is not a sale. You are looking for a “yes” or a “no”. Don’t accept a maybe.

Find out what works

The best way to do that is through your conversion rate.

conversion-rateConversion Rate = Outcomes / Unique Visitors or Meetings or Phone Calls

What are possible outcomes?

  • Leads
  • Prospects
  • Sales
  • Downloads
  • Demos
  • Signups
  • Emails
  • Visitors
  • Bounce rate
  • Facebook likes
  • Twitter followers


Measure customer retention

It’s hard to sell a customer.

It’s even harder to keep a customer.

You might have a great sales funnel, but it won’t help your startup in the long run.

“Only great retention will help you succeed in the long run.”

How do you calculate Customer Retention Rate (CRR)?

CRR = # of customers you keep with respect to the number you had at the start of your period. This doesn’t measure new customers.

Retention is so important because it shows recurring revenue. Recurring revenue is one of the most important factors during the sale of a business.

Here is what to measure:

CRR = ((CE-CN)/CS)) X 100

CE = # of customers at end of period

CN = # of new customers acquired during period

CS = # of customers at start of period


Trusting your gut makes for a great headline, but it’s a bad idea.

If you want your startup to succeed, you must measure everything you do.

Take your assumptions out of the equation.

Measurable metrics will help you prove that your startup is working.

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photo credit: Kris Krug Yancey Strickler- CEO/Founder of Kickstarter: Enlightened head shot 2015 via photopin (license)