So, you’ve decided to start a rental business, but you’re not sure if it will be successful or not? This is something that troubles many entrepreneurs who want to create their own company. It can be challenging to answer with assumptions and little data, but there is a way to validate the demand for your product or service.
You may have been thinking about starting a business for a while, but something has been holding you back. Investing a lot of money in an idea without knowing whether it will be successful is scary. Especially when it’s something you’re passionate about. However, you can do market validation without investing a single cent into your business.
If you’re looking for a rental business to start, please read our blog post on the most profitable rental business ideas.
What is market validation?
Market validation is a process every entrepreneur should go through when looking to start a new business. It is used to determine a need for a product or service within the target market. For example, by validating your rental business idea, you can predict whether people want what you’re offering and if it will be profitable for you to start.
It’s essential to get this validation early in the process of creating a business, so you don’t waste time or money on something that isn’t a good fit. In addition, market validation will help instill confidence in your idea and allow you to move forward, knowing that there is room for your new rental business in the world.
It also helps you gain a deeper understanding of your business idea and the pain points of your potential customers. This will help you to not only create an offering that addresses your target audience’s needs but also ensures you’re heading in the right direction.
Here’s how you can determine the market validity of your rental business.
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How to validate your rental business
1. Write down your assumptions and goals
The first step in validating any business idea is writing down what you hope to achieve. By articulating the vision for your rental store, you can figure out any assumptions you might have and provide an end goal.
It would help if you asked yourself questions like:
- What’s the value of the products I am renting? (both monetary and for your customers)
- Who’s the target audience, and what are my assumptions about them?
- What differentiates my business from existing ones in my area?
- What’s the plan for my business in terms of product, pricing, and business model?
- What’s the expected return on investment for your rental products?
- How much do you expect the maintenance costs to be?
Answering these questions, among others, will allow you to communicate the value and differentiating factors of your rental company. It will also give you the assumptions that you need to test and verify with your market validation.
2. Assess the size of your market
Of course, something that every entrepreneur should determine before moving forward with an idea is the size of their target market. This will help you gauge the potential of your rental business and whether it it is worth pursuing further. To do this, you need to assess the market size of your products and compare your differentiating factors to potential competitors, for example, this could include offering more enthusiast-grade equipment.
Some things to look into are similar businesses to your own, their performance, what is missing from your target market, and how cost-effective renting the products is. The answers could be something like they get 10,000 monthly website visits and rent electric bikes for higher than your assumptions, so the potential for the business is quite significant.
You can also look at similar rental stores in other cities to see how successful they have been. It can be good to compare ones in a similarly sized area to your own to get a relative comparison to your own. This can be helpful when validating an idea that hasn’t already taken off in your own city or country.
3. Research search volume for terms related to your business
Something often missed when validating an idea is researching the monthly search volume for terms relating to a business. When a customer needs to rent a product, they will usually search Google to see what the market offers.
For example, if someone were looking to rent a bike while visiting Brooklyn, they would search “bike rentals Brooklyn” and other similar search terms.
You can use several tools to look up monthly search volumes, such as Moz and Google Ads. These will allow you to input your assumed search terms and give you the volume of that term and similar terms that people use to find related results.
You also go beyond basic terms like “camera rentals Austin” to include ones that express user intent. This could consist of “camera equipment for music videos” and limit it to your local area to see how often people are searching for terms related to the products you want to offer.
4. Testing your rental business idea
Now comes the most exciting part, actually testing your rental business idea with real people and not just theories. You’ve determined there’s space in your local area for your rental store, but now you need to conduct a test to see if your research and assumptions are correct.
You can do this without actually buying the equipment you plan to rent. You can do this by adding the products you intend to rent to a dummy store and start accepting bookings immediately. This means that you can share your business with people to gauge their reactions.
There are a couple of ways to go about this. First, you can share a link in your local community groups on Facebook and capture a small segment of your potential audience. Or, you can run a small Google Ads or Facebook Ads campaign where you spend a small amount to see how your rental business performs.
You can also take this one step further by registering your company with the chamber of commerce for a small fee and registering your business on Google Maps. This will help you appear in search results and you can track how many people see and click on your business’ profile.
When users making a booking through your dummy store they won’t need to make a payment. This is because you don’t have any products, so you can’t charge people when they make a booking. However, you can let them place an order and email them saying you’re fully booked for their requested dates.
This will allow you to monitor the number of orders being made over a given period and give you a good idea of the market for your business. After that, it should be pretty easy to determine whether it is worth pursuing this idea any further or if you should look elsewhere.
What to do next
Once you have completed your testing and determined the market validation for your rental business, you will know if you can move forward with the idea.
Congratulations, your idea is valid, and it’s time to start your new rental store! You can start investing in equipment, building a website, and marketing your new business. Remember to start small and build up as the customer base grows to prevent unnecessary losses.
On the other hand, if you determine that your idea will not be successful, you need to look back at steps 1 to 3. It would be best if you analyzed why it wasn’t successful and what assumptions you made were wrong. It may be that there isn’t space for another rental company like your own. It’s time to head back to the drawing board.
