Total time: 5mins quick read
This is my latest version of my business building system, im giving the credit of coming up with it too noah Kagan he was featured on Tim Ferriss blog link below
Step 1: Find your (profitable) idea: 3 hour’s
(This is by far THE best way I have found for finding a niche market why you ask? Simple because you can do it NOW not sometimes take 5mins and bam.)
Lets say you like Chihuahua of course we use the below to find a target market:
Review top sellers on Amazon. Find products that already have guaranteed customers, then build something complementary. A good example of this is Dodo making a gorgeous $60 case to buy for your iPad (which costs over $500, and over 5 million sold).
Think of all the things you do on a daily basis. Anything done more than once has potential for a product or service to improve the process. For me, one of those products was a mirror I could hang in the shower. It saves me tons of time while shaving, and now I don’t know how I ever lived without it.
Be cognizant of products you use and frequently complain about. Before Gambit, we were constantly asking our payment tool partners for certain features, yet our requests were always rejected. That was the impetus for us to create Gambit for our own games.
Check completed listings on eBay. This allows you to see how well certain products are selling. It’s also an easy way to measure sale prices of items and gauge the overall percentage of the market that’s receiving bids (i.e. in demand).
Look for frequent requests on Craigslist gigs. These listings are from people actively searching for someone to give their money to in exchange for particular services. Try searching for certain keywords (e.g. marketing, computers, health) and keep track of the total number of results displayed. Evaluate the most popular keywords and see if you can create a product or service around those requests.
Browse the Q&A on LinkedIn. On average, LinkedIn users are worth $134, so there is a good chance they’ll have money for you if you can provide solutions to their problems.
Step 2: Find $1,000,000 worth of customers: 1hr
Here is my thoughts on step 2(Now Noah used the Chihuahua as you can see that give you 84,260 people. Score. Which if you X by say $100 you get $8426000 max)
1. Search Google Trends for the term “chihuahua” and other similar words (e.g. poodle, dogs) for comparison:
(Click image to expand)
We can see that the word “chihuahua” has a decent search volume (relative to “dogs”), and that “poodle” isn’t as popular. It also looks like the number of searches for “chihuahua” has been relatively stable for the last few years.
2. Double-check on Google insights:
Google Insights is great, because it breaks down the search data by location (i.e. what regions the searches are coming from), by date, and what they’re searching for (news, images, products). Click here to see the full report for the above chart.
3. Look at the total number of people available on Facebook for dogs:
3.1 million. Not bad, not bad.
And for Chihuahuas:
84,260 people. Score.
Then I just look at the my successful competitors on google, facebook etc and I save those pages for later use
Sub-goal: Step 3: Assess your customer’s value: 1hr
Here is my thoughts on Step 3 (This is really simple math that it nothing to complicated (Number of available customers) x (Value of each customer) = TAM and that is lets say you dont want a million dollar business lets say you want 10’000 a month this will tell you that before you start)
Here’s how we do that:
1. Find out how much it costs, on average, to buy a Chihuahua (about $650). This is the base cost.
2. See how much it costs to maintain a Chihuahua each year (i.e. recurring costs). Looks like it’s between $500-3,000. For this example, we’ll call it $1,000.
3. Look up their life expectancy, which is roughly 15 years. This is the number of times they’ll have to pay those recurring costs.
Therefore, a Chihuahua’s average total cost of ownership is:
[$650 + ($1,000*15)] = $15,650
Damn… you could buy a lot of burritos with that kind of cash. Silly dog owners.
Here’s the TAM formula for estimating your idea’s potential:
(Number of available customers) x (Value of each customer) = TAM
If TAM > $1,000,000, then you can start your business.
Let’s plug in some basic numbers to see the TAM for our Chihuahua information product:
(84,260 available customers) x ($50 information product) = $4,213,000
We have a winner! (NOTE: 84,260 is from the facebook information before)
Sub-goal: Step 4: Validate your idea timetable of one week:
Here is my thoughts on Step 4
(for me personal this is the hardest part of the process WHY? Because you need to find a product to test to see if it will generate the money you need)
(did not find a combo pack that I could resell, will look at this later)
From Noah thoughts:
By now, you have successfully verified that your idea has that special million-dollar-potential. Feels good, right? Well, brace yourself — it’s time to test whether people will actually spend money on your product. In other words, is it truly commercially viable?
This step is critical. A lot of your ideas will seem great in theory, but you’ll never know if they’re going to work until you actually test your target market’s willingness to pay.
For instance, I believed AppSumo’s model would work just on gut-feeling alone, but I wasn’t 100% convinced people wanted to buy digital goods on a time-limited basis. I mean, how often do people find themselves needing a productivity tool (compared with, for instance, how often they need to eat)?
I decided to validate AppSumo’s model by finding a guaranteed product I could sell, one with its own traffic source (i.e. customers).
Because I’m a frequent Redditor and I knew they had an affordable advertising system (in addition to 3 million+ monthly users), I wanted to find a digital good that I could advertise on their site. I noticed Imgur.com was the most popular tool on Reddit for sharing images, and they offered a paid pro account option ($25/year). It was the perfect fit for my test run.
I cold-emailed the founder of Imgur, Alan Schaaf, and said that I wanted to bring him paying customers and would pay Imgur for each one. Alan is a great guy, and the idea of getting paid to receive more customers was not a tough sell The stage was set!
Before we started the ad campaign, I set a personal validation goal for 100 sales, which would encourage me to keep going or figure out what was wrong with our model. I decided on “100″ after looking at my time value of money. If I could arrange a deal in two hours (find, secure, and launch), I wanted to have a return of at least $300 for those two hours of work. 100 sales ($3 commission per sale) was that amount.
By the end of the campaign, we had sold more than 200 Imgur pro accounts. AppSumo.com was born.
Here is how Noah Suggest to tested it:
Here are a couple methods for rapidly validating whether people will buy your product or not:
Drive traffic to a basic sales page. This is the method Tim advocates in The 4-Hour Workweek. All you need to do is set up a sales page using Unbounce or WordPress, create a few ads to run on Google and/or Facebook, then evaluate your conversion rate for ad-clicks and collecting email addresses. This is how we launched Mint.com (see one of our original sales pages here). You are not looking for people to buy; you are simply gauging interest and gathering data.
[Note: With Facebook advertising, $100 can get you roughly 100,000 people viewing your ad, and about 80 people visiting your site and potentially giving you their email addresses.]
Email 10 people you know who would want your pseudo-product, then ask them to send payment via Paypal. This might sound a bit crazy, but you’re doing it to see what the overall response is like. If a few of them send payment, great! You now have validation and can build the product (or you can refund your friends and buy them all tacos for playing along). If they don’t bite, figure out why they don’t want your product. Again, the goal is to get validation for your product, not to rip off your friends.
Of course, there are other techniques for validating your product (like Stephen Key leaving his guitar pick designs in a convenience store to see if people would try to buy them). However, I’ve found these two methods to be super efficient and effective for validating ideas online.
No need to get fancy if it does the trick.