π© - The Zappos Method - Always Validate Your Idea
~ 3 minute read
Before you build ANYTHING, before you launch your product, before you even put together an MVP, read this.
The stats will tell you that 90% of start ups fail.
In the first year, 20% fail.
By year 5, 50% are out of the game.
By year 10, 70% hang up the towels.
If you do the Google deep dive on this, you'll see reasons for the failure coming up as
- Lack of market need
- Running out of cash
- Not the right team
- Competition
- Pricing / Cost issues
- Product issues
- While all of those are legitimate, it'd be safe to say that a majority of these reasons originate from the same initial failure; A lack of validation.
I'm not just talking product research, I'm talking about "will people actually buy what you're selling?"
This is easily a college level course and it can apply to both starting a business as well as buying one (i'll explain that in a second), but in the next few minutes, I'll break down this highly underused method to outsmart the majority of your competitors and VALIDATE your idea before wasting any money or time.
TL:DR:
- Validate your ideas before doing anything
- The framework I'm describing is how one of the most successful shoe - companies of all time did it
Zappos was founded in 1999 by Nick Swinmurn.
By 2001 they had $1.6M in revenue
By 2003 $70M in annual sales
In 2007 $840M in annual sales
In 2009 Amazon acquired Zappos for $1.2 Billion... π€―
But HOW?
Nick had a problem that he was trying to solve for himself.
This is already a good start. Nick had a problem and wanted to create the solution for the problem.
The next part here is SUPER important, so pay close attention...
He validated his theory before doing anything else.
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The Theory:
Other people (just like Nick) who were frustrated with the basic selection at local brick and mortar shoe stores would buy shoes online.
This was a wild theory at the time. First, ecommerce was no where near the size that it is today. When you shopped, you DROVE to the store to shop. Second, would people be ok buying something that you typically try on... WITHOUT trying them on?
The Test:
Nick went to local shoe stores, took pictures of the shoes they had in stock and then posted them on a site. When people bought the shoe, he went back to the shoe store, bought the shoe from them and then shipped the shoe to the customer. That simple.
β Through the validation of the test, Nick was able to determine that people WILL pay for shoes online even without trying them on. β
It was off to the races from there for Zappos.
The idea is simple, but we often get caught in the "this is the best idea ever" trap. It solves an imagined problem that we think people are having, then the good idea fairies come in and it all snowballs. Next thing you know, you have this massive service of some kind that hasn't EVER been tested. uh-oh.
How to use this method with buying a business...
I could talk for hours about this, but when you look at this from an acquisition standpoint, you've already passed the start up phase. The company already exists and now they are wanting to sell it. What you want to ask yourself is "will this company last".
There are so many variables you can look at with market trends, new tech, labor regulations, etc. But the general rule of thumb is "The Lindy Effect"
This is the idea that the future life expectancy of the business (or a book, movie, work of art, technology, idea etc) INCREASES with their current age. What this means is that the longer the biz has already survived, the longer they are likely to last.
BASICALLY-- Will this business work? If you're reading the CIM on the biz and it's only been around for 3 years, it's a hard pass for me.
Last thing i'll leave you with is that I know you won't fall victim to this.
The reason I know this is because you're HERE and you're learning from the mistakes of others that have come before you.
As much as I possibly can, i'll share with you the lessons I'm learning and the mistakes that I'm making so that you'll come out on the other side even better.
Like all these lessons from Ryan Holidayβ
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Until next time...
Stay in the fight,
P.S - here's a recent tweet of mine that might be one of the main reasons why so many people prefer the "if you build it, they will come" mentality over the Zappos Method