You’ve confirmed people want your solution. You’ve validated that you can build it. But the ultimate question remains: Will enough people pay enough money to make your business viable?
Many founders focus so intently on product development and desirability that they neglect to test the financial foundations of their business model until it’s too late. According to CB Insights, 29% of startups fail because they run out of cash – often because their initial assumptions about pricing, customer acquisition costs, or revenue potential were fundamentally flawed.
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Beyond Desirability: The Viability Imperative
Viability testing addresses three critical questions:
- Will customers pay for your solution? (Revenue potential)
- Can you acquire customers at a reasonable cost? (Customer acquisition)
- Will your revenue exceed your costs? (Sustainable profit)
Without validated answers to these questions, even the most desirable product with perfect technical execution can fail as a business. Let’s explore powerful experiments that test viability before you fully commit your resources.
Five Powerful Viability Testing Methods
1. Mock Sales: Testing Price Sensitivity Without Fulfillment
A mock sale lets you test pricing and conversion rates without actually delivering a product, providing critical insights into price sensitivity and willingness to pay.
How to implement:
- Create a compelling landing page with your value proposition and pricing options
- When visitors attempt to purchase, show a “coming soon” message with an email signup
- Track which pricing tiers generate the most interest
- Analyze conversion rates at different price points
- Follow up with interested customers to gather additional insights
Key insight: This approach allows you to test multiple price points simultaneously without committing to any single pricing strategy.
Case Study: Joel Gascoigne, founder of Buffer, used a mock sale to test pricing for his social media scheduling tool. He created a simple landing page with three pricing tiers: Free, $5/month, and $20/month. When users clicked on any option, they saw a message that the product wasn’t ready yet with an email signup form. The $5/month option generated the most signups, providing clear direction on initial pricing strategy. Today, Buffer generates over $1.5 million in monthly recurring revenue.
2. Presales: The Ultimate Commitment Test
Presales involve accepting actual payments for your product before it’s fully built, generating both validation and early revenue.
How to implement:
- Create a detailed product description with clear delivery timelines
- Set up a payment system for full payment or deposits
- Offer incentives for early adopters (discounts, exclusive features, etc.)
- Be transparent about the development status and timeline
- Document conversion rates from visitors to paying customers
Key insight: Presales provide the strongest possible validation because customers are voting with their wallets, not just their words.
Case Study: Before manufacturing their first batch, Allbirds shoes used a presale approach to validate demand. They offered a limited number of their wool runners for presale at a slight discount from their planned retail price. The presale sold out quickly, validating both their product concept and pricing strategy while generating capital for initial production. This approach reduced inventory risk and created a foundation of eager early customers.
3. Crowdfunding: Validation at Scale
Crowdfunding platforms like Kickstarter and Indiegogo offer a structured way to validate market demand while raising capital for development and production.
How to implement:
- Create a compelling campaign with clear product benefits and production timeline
- Set a funding goal that reflects your minimum viable funding needs
- Develop a variety of reward tiers at different price points
- Produce a high-quality video demonstration of your concept or prototype
- Plan your marketing strategy to drive traffic to your campaign
Key insight: Beyond validation and funding, crowdfunding creates a community of early supporters who often provide valuable feedback and word-of-mouth marketing.
Case Study: Pebble’s iconic Kickstarter campaign for their smartwatch sought $100,000 but raised over $10 million from nearly 69,000 backers. This massive oversubscription not only validated their product concept but also demonstrated the existence of a much larger market than they had initially targeted. The campaign’s success attracted attention from retailers, partners, and eventually led to their acquisition by Fitbit.
4. Letter of Intent: B2B Validation Approach
For B2B startups, securing non-binding letters of intent (LOIs) from potential clients provides strong validation of business viability before building a complete solution.
How to implement:
- Identify 10-15 potential customers who fit your ideal customer profile
- Develop a clear value proposition with projected ROI for these customers
- Present your concept through meetings or detailed proposals
- Request a non-binding letter of intent indicating interest in purchasing when available
- Document conversion rates from pitches to signed LOIs
Key insight: While LOIs aren’t binding contracts, they represent a significant commitment from potential customers and provide strong validation for B2B concepts.
Case Study: Enterprise AI startup Cognition IP used letters of intent to validate their AI-powered patent search and drafting solution before building the complete platform. By securing LOIs from law firms and corporate legal departments, they demonstrated market demand and refined their pricing structure based on feedback from these potential customers. These LOIs later helped them secure venture funding to develop their full solution.
5. Split Testing: Optimizing Price Points
Split testing (A/B testing) allows you to systematically test different pricing strategies with real customers to determine optimal price points.
How to implement:
- Create identical landing pages with different price points
- Randomly direct visitors to different pricing versions
- Track conversion rates for each price point
- Calculate expected revenue at each price (conversion rate × price)
- Identify the price that maximizes total revenue
Key insight: Higher prices may reduce conversion rates but increase per-customer revenue. Split testing helps you find the optimal balance for maximum revenue.
Case Study: When launching their monthly coffee subscription service, Trade Coffee tested three different pricing tiers with identical product descriptions. They discovered that their middle-tier offering ($18/month) actually converted better than their lowest tier ($15/month), suggesting that customers associated the slightly higher price with better quality. This insight allowed them to optimize pricing for both conversion and revenue.
Building a Financial Model Based on Experimental Data
As you collect data from viability experiments, incorporate these insights into a financial model that addresses:
- Customer acquisition costs (CAC): How much will it cost to acquire each customer?
- Customer lifetime value (LTV): How much revenue will each customer generate?
- Conversion rates: What percentage of prospects will become paying customers?
- Fixed and variable costs: How do your costs scale with customer growth?
- Cash flow projections: When will you achieve positive cash flow?
The goal is to create a model grounded in experimental evidence rather than optimistic assumptions. This evidence-based approach dramatically increases your ability to build a sustainable business.
Adjusting Your Business Model Based on Viability Testing
Viability experiments often reveal that initial assumptions about pricing, market size, or customer acquisition need adjustment. Rather than seeing these as setbacks, view them as opportunities to refine your business model before significant resources are committed.
Common adjustments after viability testing include:
- Repricing: Adjusting price points based on customer response
- Customer segment refinement: Focusing on segments with higher willingness to pay
- Value proposition enhancement: Adding features that justify premium pricing
- Channel optimization: Prioritizing acquisition channels with lower costs
- Business model pivot: Shifting from B2C to B2B (or vice versa) based on validation results
Avoiding Common Viability Testing Pitfalls
When testing business viability, be vigilant about these common pitfalls:
- Testing unrealistically low prices: Artificially low prices may show strong conversion but won’t validate a sustainable business
- Focusing only on early adopters: Early adopters often have higher willingness to pay than mainstream customers
- Neglecting customer acquisition costs: Strong initial sales may mask unsustainable acquisition costs
- Overestimating market size: Extrapolating from small samples can lead to inflated market projections
- Ignoring unit economics: Ensure your business model works at the individual customer level before scaling
Case Study: How Dropbox Validated Their Freemium Model
When Dropbox was developing their go-to-market strategy, they needed to validate their freemium business model. Would enough free users convert to paid accounts to sustain the business?
Rather than launching with their planned freemium model and hoping for the best, they ran targeted experiments. They offered limited free accounts and tracked conversion rates to paid tiers when users approached storage limits. They also tested different premium feature sets to identify which capabilities drove conversions.
These experiments revealed that while overall conversion rates from free to paid were relatively low (around 4%), the massive scale of free user acquisition and the high retention rate of paid users created sustainable unit economics. This validation gave them confidence to pursue their freemium strategy, which has since become an industry standard.
Moving From Validation to Execution
When you’ve validated your business viability through multiple experiments and built a realistic financial model based on evidence, you’re ready to move toward execution with confidence. This doesn’t mean all risk is eliminated, but it does mean you’ve validated the core financial assumptions that will determine your business’s sustainability.
Remember that viability testing isn’t a one-time event – continue testing pricing, acquisition strategies, and other financial elements as your business evolves. Markets change, competitors emerge, and customer preferences shift – ongoing validation ensures your business model remains robust amid these changes.
Join our Founders Meetings to learn how M Accelerator can help you design and implement effective viability experiments tailored to your specific business
