How to Critically Analyze an Idea before Starting Out
Framework for Idea Validation
There are many nuances to critically analyzing an Idea. In this article, I walk you through the process of doing so with a real example.
Backstory - While walking to a salon in Bangalore, I wondered why there was no app to book an appointment without calling the salon. The days of calling restaurants for food and taxi operators for cabs were long gone, but somehow salons still operated on this archaic method.
My hypothesis was that there needs to be an app to book any grooming service from a neighbouring salon (Salons that charge upwards of 1000 INR for a service) with the option of choosing your preferred stylist and time slot.
To put this to the test, here are the four things I did -
Used Competitors’ Products to understand the user journey better.
Competitor 1 - Google has this in-built feature of booking an appointment at certain salons. I tried it, and surprisingly enough, the appointment was successfully booked! On going to the salon, I realised the appointment was booked at another outlet 2.5km from my house when the one I wanted to go to was barely 500mt away.
Competitor 2 - Urban Company allowed me to choose the grooming service I required at home at my specified time slot. In all, it was a very positive experience.
The third option was not to call at all and just walk in. The well-known salons were usually booked out on weekends, but the smaller ones usually had a slot open up in 15 mins of wait time. The weekdays almost always had a slot open.
Spoke to ~15 potential paying customers to understand their pain points better. (But it is suggested to speak to at least 30 people for a statistically significant outcome)
Here’s what I observed:
Customers were ok to call a salon they regularly visited because they have identified a stylist that works for them.
Didn’t find a pressing need for alternatives to their current solution.
Some customers complained about not getting their slot but ended up planning in advance for the next time.
From this, it was clear that the core customers actually facing a problem might be far smaller than imagined.
Estimated the size of the Servicable Obtainable Market (SOM) -
For this calculation, I have only taken the two relevant sections - Walk-Ins and Call N Book. Assuming they spend 1500 every 35 days, we get the following:
Walk-Ins = 3.25L x 10 Months x 1500 INR = 487 Cr INR
Call and Book - 5.2L x 10 Months x 1500 INR = 780 Cr INR
Out of this, as a company, if we were to take a 10% commission per booking from the salons for these two segments, we would get an annual turnover of 126.75 Cr INR.
Although this seems lucrative on paper from just one city alone, there would most likely be a lot of pushback. A 10% commission per booking may result in salons once again asking customers to call them directly for booking.
Thus the best possible way to overcome this scenario could be to have a backend module for salons to manage their bookings and point-of-sale payments. (Check Squire’s Business Model). This would result in higher expenditure not just from marketing but also from setting up the Infra required and Capex costs. Long story short, this will require VC funding!
Nonetheless, in the long run, this could become a highly scalable model generating profit margins of 30% + due to the high repeat ratio of customers.
Introspected hard if I have an inherent motivation/passion for solving this problem.
My initial conversations with potential paying customers all seemed like venturing out to build something meaningful will require me to refine the USP, business model and customer segmentation. But nonetheless, not being from this industry, I never had any inherent motivation to create an app of this magnitude.
This idea, as of now, just seemed like a solution searching for a problem. I eventually made peace with calling the salon to book my appointments, but I secretly hope somebody builds it someday! 😀