Find Your First

PROFITABLE
IDEA The proven, step-by-step guide to finding ONE profitable
idea – and turning it into instant side income

1K
ON
THE
SIDE

by Ramit Sethi

1K ON
THE
SIDE

Part of the Earn1k series to help you earn thousands of dollars of side income — every month.
 Step 2: Validate Your Ideas 33

Step 2:
Validate Your Ideas

By now, you should have a long list of business ideas written down, and
you’ll definitely come up with more over time. Let’s talk about the next
step: idea validation. You might think an idea is good, but how can you be
sure? How can you know that an idea is worth pursuing?

step 1 step 2 step 3

Generate Validate Get Your
Ideas Your Ideas First Sale

The Critical This is the step that really separates the methodical, strategic
entrepreneurs from the ones who just jump in and hope for the best.
Step that I’ve seen it over and over: entrepreneurs who, months after starting
Virtually their businesses, are still trying to figure out why they’re not making any
Everyone progress. And the answer is usually the same: because their idea wasn’t
feasible to begin with.
Misses
It’s not easy to hear, but it’s true. Most people could have saved 9 months of
heartache with 2-3 weeks of work up front.

In fact, I’ve learned this lesson the hard way. A while ago, I spent several
months developing an eBook on how to write effective emails that I never
ended up selling. The reason? There is no market of people who will pay
a premium price for a product on writing effective emails. People simply
didn’t value it enough to pay for it. I got overexcited and jumped into the
project headfirst, when I should have done the research up front. I could

Find Your First Profitable Idea

The proven, step-by-step guide to finding ONE profitable idea – and turning it into instant side income
 Step 2: Validate Your Ideas 34

have saved myself a lot of wasted time and money — and put that time
into something more productive.

You’re not going to make the same mistake. Instead, you’ll invest just a little
time up front to get 99% certain your idea is a winner before pursuing it
any further.

YOU vs. THEM: Validating Ideas

What most people do What YOU will do

Don’t do any research on their field, industry or Do your homework before seeking out clients,
target market. so you know what the field looks like before
you try to play in it.

Don’t talk to real, qualified people about their Talk to the experts who’ve already been there,
ideas. Brainstorm ideas in a room, alone, never whose insights could potentially save you
sure if they’re right. weeks or months of wasted effort.

Why Don’t When you explain the idea of validating your idea before you invest
significant time, you can hear the same reaction: “Yeah... that is interesting.
People Do Maybe I should do that.” It’s like telling someone they should lose weight.
This? They “know” they should... but they won’t.

Find Your First Profitable Idea

The proven, step-by-step guide to finding ONE profitable idea – and turning it into instant side income
 Step 2: Validate Your Ideas 35

In our research, here are the most common reasons people don’t do
customer research:

·· Afraid of discovering their one idea will be proven to be

unprofitable... and then what? (In reality, the idea is not your secret
sauce, the validation process is.)

·· Not sure how to actually do customer research

(so they avoid it entirely)

·· Worried about having to talk to people they don’t know

(“What will I say?”)

·· Not sure if they are serious enough about the project to do things
like customer research

Notice how every first word of those bullet points is negative? That’s
because avoiding customer research is never a reasoned, logical, conscious
decision. It’s driven by fear and nervousness.

And that is what you will avoid.

how to validate By the end of this section, you’ll have taken all your ideas and identified
your ideas which ones are good and which ones aren’t. We define “good” very simply:
A “good” idea can get you 3 paying clients. Simple.
The “Pay
Certainty” See, the problem with having so many ideas is you’re just not sure which
will pay off. And nobody wants to spend 9 months pursuing a futile idea
Test — only to discover you’ve made $ 0.46 in Adsense money — so we get stuck
before we even start.

To do this, we’re going to use something I call the “Pay Certainty” Test,
a technique that will let you eliminate half your ideas in less than 15
minutes.

When you apply the “Pay Certainty” Test, you can quickly “score” ideas to
see if they have any real possibility of ever paying off — before you ever
spend any time developing them.

Find Your First Profitable Idea

The proven, step-by-step guide to finding ONE profitable idea – and turning it into instant side income
 Step 2: Validate Your Ideas 36

Here’s how it works.

Take each of your ideas and write them on a piece of paper. Next to each
idea, write down who would pay you for your service.

You should have a page that looks something like this:

Idea Who would pay?

Social media consultant for law firms Law partner

Motivational consultant 20-somethings looking for new jobs

Freelance nonprofit fundraiser Nonprofit executive directors

Music instructor Parents of ambitious children

Great. Now apply the “Pay Certainty” Test.

For each person who would potentially pay you, ask yourself:

·· Is my prospect willing and able to pay me for this service? Do they

have money and do they want to spend it on my service? (The
Demand Question)

·· Am I willing and able to provide this service to my prospect? Am

I knowledgeable enough to provide this service? (The Supply
Question)

Prospect Me willing
Good
willing and Ideas and able to
able to buy provide

Find Your First Profitable Idea

The proven, step-by-step guide to finding ONE profitable idea – and turning it into instant side income
 Step 2: Validate Your Ideas 37

This lets you instantly eliminate half of your ideas... that would never have
earned you a dime.

Example: The “Pay Certainty” Test in action

Social media consultant for law firms

·· Does a law firm partner have the ability to pay? Of course. Law firms
have more money than god

·· Does a law firm have the willingness to pay for social media? Hell no.
Law firms don’t care about social media. They recruit and market
through other means.

·· verdict: eliminate idea

Motivational consultant for 20-somethings looking for career change

·· ability to pay; No. Most 20-somethings don’t have a ton of extra

money to spend, especially on a motivational consultant. (Except for
rare people like you, who are willing to invest in self development.)

·· willingness to pay: No. Even if they have money, when was the last
time you had a 20-something friend say, “I really want to pay for a
motivational consultant?” That’s right, never.

·· verdict: eliminate idea

Music instructor for ambitious children — client is mother

·· ability to pay: Yes. Parents of ambitious, successful children tend to

be more affluent than those of average children

·· willingness to pay: Yes. Parents will spend virtually anything to

ensure their child is successful, well-rounded, and gets into a top
college

·· verdict: great idea. pursue!

The “Pay Certainty” Test lets you rapidly eliminate bad ideas that would
have never earned you a cent, and focus on the most promising ideas...
ones that will almost certainly earn you significant amounts of money on
the side.

Find Your First Profitable Idea

The proven, step-by-step guide to finding ONE profitable idea – and turning it into instant side income
 Step 2: Validate Your Ideas 38

The “Pay Certainty” Test lets you rapidly

eliminate bad ideas that would have never
earned you a cent, and focus on the most
promising ideas... ones that will almost
certainly earn you significant amounts of
money on the side.

Here are a few more examples of how you might evaluate an idea using the
“Pay Certainty” Test:

·· You have a great service that you’re willing and able to provide, and
your prospects love the idea too. The only problem is, they have no
money to pay you for it. They’re willing but not able to pay, so the test
fails.

·· You would love to do personal fitness training, and your prospects

are willing and able to pay for such a service. Unfortunately you
have no knowledge about personal fitness whatsoever. The test fails
because you’re not able to provide the service (at least not yet).

This is so important to do, and yet it’s often glossed over by people who
instead spend time worrying about other things, like whether they should
register an LLC. Don’t skip this step!

Find Your First Profitable Idea

The proven, step-by-step guide to finding ONE profitable idea – and turning it into instant side income
!
Step 2: Validate Your Ideas 39

The “Pay Certainty” Test:

A Closer Look

Again, the “Pay Certainty” Test means that in order for an idea to
be good, both you and your prospects have to be willing and able
to do business on it. Let’s look at each of these parts in detail:

The prospect must be willing to buy.

This is probably the most important piece of the equation, and

unfortunately often the most overlooked. I bet you could throw
out a lot of your initial ideas by just carefully thinking through
this one question.

For example, I recently had someone ask me for help with his
idea: He wanted to pitch well-known bloggers and offer to help
them fix minor errors on their blogs (typos, formatting issues,
etc.) on an ongoing basis. A noble service, and as a blogger, I’d say
it’s definitely something that would be nice to have. But I asked
him, “How important of a problem is this to your target market?
Is your service something they’d care a lot about, or are they
doing just fine without it?” When I framed the question to him
like that, he quickly agreed that it wouldn’t make much sense to
pursue.

Any time you have a business idea, ask yourself: Do people want
to buy this? Do they want to buy it enthusiastically, urgently,
even desperately (intense desires = more money)? And finally,
what type of people (read: niche) wants to buy it most of all?

Find Your First Profitable Idea

The proven, step-by-step guide to finding ONE profitable idea – and turning it into instant side income
!
Step 2: Validate Your Ideas 40

The prospect must be able to buy.

All this means is that the prospect has to have money. This
sounds obvious, yet I still get stuff like this all the time:

“I want to help low-income families with their

personal finances.”

“I want to work with students to get them more

financial aid.”

“I want to write grants for non-profits. They like

the idea but can never pay me. Help!”

Don’t get me wrong. I’m all for helping the disadvantaged, but
they’re not who I’d target if my main goal was to make money. If
you never get paid, you don’t have a business — you have a hobby.
If your goal is to earn money, I recommend you avoid doing work
targeted at non-profits, undergraduate students, bootstrapping
startups, teenagers, people going through bankruptcy, or any
other group that has little to no extra spending money.

Is it possible to make money by serving one of these groups?

Could you catch a fish in the Sahara desert? Maybe, but it’s
better to go fishing where the fish are. So go where the money is.
Clients are easier to work with and the difference in pay can be
dramatically higher – in some cases 10-100x more.

You must be willing to provide the service.

This is probably the easiest question to answer, and can be

rephrased as: Would you enjoy doing this? If you think you might,
that’s often good enough.

Find Your First Profitable Idea

The proven, step-by-step guide to finding ONE profitable idea – and turning it into instant side income
!
Step 2: Validate Your Ideas 41

If you’re not quite sure, just go for it. One thing people don’t
realize is that one of the quickest ways to enjoy something is
to win at it — so if you start earning thousands/month doing
something, you’ll probably like it a lot. Counterintuitive, but true.

Also, chances are any idea you choose will have its ups and
downs anyway, so I wouldn’t sweat it too much. It’s not like you’re
picking a career for life – your service can and probably will
evolve, and you’ll enjoy it more as you work with better clients
over time.

You must be able to provide the service.

This part throws a lot of people off, because we tend to second-

guess ourselves. After all, we think, I’m decent but I’m not really
an expert. Aren’t there a bunch of “real” experts out there who
can do this way better than me?

Answer: Yes, but it doesn’t really matter. The truth is, there’s
always going to be someone more skilled than you. Don’t worry
about it – what matters is that you can deliver to your clients
the value you promise them, not that you meet some arbitrary
measure of expertise.

That said, you do need at least a basic level of competence

before you start selling your service. Try to figure out what that
minimum baseline is before deciding whether or to move forward
with an idea. The nice thing is, just because you’re not able to
provide a service today, doesn’t mean you won’t be some time in
the near future.

Find Your First Profitable Idea

The proven, step-by-step guide to finding ONE profitable idea – and turning it into instant side income
 Step 2: Validate Your Ideas 42

Remember the two questions: (1) Is the

prospect willing and able to pay? And (2)
Am I willing and able to provide?

the “pay You’re actually going to run the “Pay Certainty” Test twice: First you’re

certainty” going to do a preliminary gut check to quickly eliminate your “bad” ideas
and choose the one you think is best. After that, you’re going to talk to real
test
experts in order to validate and refine that idea. That’s because you have
First, Do a 50+ ideas right now, and you want to cut it down to just 1 best idea. Let’s do it.

Gut Check The gut check is simple: Run the “Pay Certainty” Test against your whole
list of ideas and separate the good ideas (the ones that pass the test) from
everything else. Remember the two questions (1) Is the prospect willing
and able to pay? And (2) Am I willing and able to provide?

Most of my students can instantly eliminate half their initial ideas using
this simple technique. Think about how much time you just saved on
futile ideas: If you spent 6 months executing each, you just potentially
saved years of missteps. Is this exact? No. Is it a very, very rough
approximation? Of course. Sure, you’ll be doing some guesswork, but that’s
okay. We’re going for speed here, not total accuracy.

Action Step #1: The Gut Check (20 minutes)

Do The “Pay Certainty” Test now, using just your gut. Then write down
the ideas that pass onto their own, “good ideas” list. Don’t worry about the
other ideas, they’re not permanently rejected - they just didn’t make the
cut today.

When you’re finished, you should hopefully have at least 3-5 potentially
profitable ideas. Now pick the one idea you think is best. That’s highly
subjective – maybe one idea is the most profitable, while another idea

Find Your First Profitable Idea

The proven, step-by-step guide to finding ONE profitable idea – and turning it into instant side income
 Step 2: Validate Your Ideas 43

would be the most fun. At this point, there are no wrong answers, so just
pick one to try for the time being.

If none of your ideas passed, try being a little more flexible, especially on
the supply side (i.e., which idea you would be able and willing to provide a
service for).

For example, let’s say you want to help businesses set up new blogs on
Wordpress. The only problem is you don’t know how. Well, how long would
it take you to learn this? A few weeks? A few months? If it’s anything less
than 2 months, I’d pick this idea, take a month to learn it and then start
selling it right away.

the “pay At this point, you’ve selected a single good idea. At least, you think it’s
certainty” good. Now it’s time to find out for sure. You’re going to do this by talking
test to 20 qualified experts on the subject. Start with 3. These experts can be
either people who would buy the service (prospects) or people who provide
Now, Ask it (service providers).

the Experts Why is this important? First, so you can validate your assumptions about
supply and demand are correct. But also because right now, you probably
don’t know what you don’t know. Right now, you’re a newcomer who’s
operating from a very finite point of view. By talking to just a few experts,
you’ll get a much clearer view of the big picture and you’ll see what you’ve
been missing. A conversation like this can seriously be the difference
between thousands earned or lost.

Talking to other experts can be nerve-wracking, but I’ve got you covered.
First, let me share some case studies of students who validated their
ideas — including how they did it. Then I’ll give you specific steps to do it
yourself.

Find Your First Profitable Idea

The proven, step-by-step guide to finding ONE profitable idea – and turning it into instant side income