Free Tool To Validate Your Business Idea

Imagine waking up to a larger bank account than you had when you fell asleep. Crazy right?

It's a reality for a lot of people who have created a passive, online (usually) business and it can be a reality for you too. WARNING: it takes some hard work in the beginning, but the payoff will come! People around the world are pursuing what they love and turning into a full-time, sustainable business that generates enough revenue to support their family.

The best part is that you don't have to go pro right off the bat. Growing a business takes time and you can start off by just earning an extra $500-$1,000 per month to give you some extra spending money (or capital to grow your business!).

Here are the first four steps to testing your business idea - you can do these in 10 minutes or less using the tool that I'm giving you guys at the bottom of this post. Hopefully, this will at least show you the feasibility of starting a business.

NOTE: This is assuming you already have a general idea of a product/service to sell.

 

Step 1 - Determine your desired net annual income

When building anything, you have to begin with a cornerstone. This cornerstone is the baseline that everything else is measured by. When you're reverse-engineering the financials of a business, it's the desired net annual income (what you want to end up with at the end of the year).

Let's say you want $50,000. That's a comfortable living so let's start there.

 

Step 2 - Determine your anticipated monthly expenses

The second step is to figure out how much money this business is going to cost you each month. Are you hosting a website, ordering raw materials, paying employees or traveling? Write these expenses down. Grab your calculator and determine how much you're spending per year on each of these expenses and then divide that number by 12 (months). Let's just assume that the number comes out to $105 per month.

 

Step 3 - Calculate your incremental income

Your incremental income is how much you need to make each month/week/day in order to end up with your desired annual net income by the end of the year.

Since your desired net annual income (see STEP 1) is the total you want to end up with, you will need to earn the $50,000 (desired net annual income) / 12 (months) + $105 (expenses per month) = $4,271.67 (per month).

 

Step 4 - Calculate price OR customer base

Now that you know what your target income per month is, you can begin to figure out what you need to charge each customer to achieve that goal. You can do this in one of two ways depending on your known variable (customers or price):

1. How Much to Charge?

Let's assume that you reached out to your family and friends and came up with 50 people who you know will buy your product/service. The math is easy: $4,271.67 / 50 = $85.43. You will need to charge each of your customers $85.43 per month.

2. How Many Customers?

The second way you can calculate sales is by determining the number of customers that you need to persuade to buy your product/service. The known variable in this instance is how much you want to charge. If you are dead set on selling your product/service for $25 per month then $4,271.67 / $25 = 171. Figure out how you can get 171 customers each month to buy your product/service and voilà!


All of this calculating can get confusing after a while, even if it is simple math. To help you guys out, I've created an Excel Spreadsheet to help you. All you do is plug in your personal variables such as desired income, monthly expenses, etc. and the spreadsheet will do the rest!