Every entrepreneur dreams of launching their business idea to success, wealth, and a positive impact on their target audience.
But, not all entrepreneurs have the capital and resources to turn their ideas into reality.
Here’s where the minimum viable product (MVP) comes into play.
The MVP is a way for you to validate your business idea before you commit to it long-term. What’s even better, is that you could build and test an MVP on a limited budget.
In this blog, I’ll show you one of the most powerful methods to build your MVP without draining your wallet.
And here’s a hint.
This exact method helped launch a business that was sold for $1.2 billion just ten years later.
Let’s dive in.
Building a Business Without Capital
A lot of us have brilliant ideas for starting a successful business.
But very few people actually act on it.
It’s likely you get stuck thinking something along the lines of: “It’s a great idea, but can I really build a business without capital?”
You should know that ClickFunnels was built for people exactly like you.
Russell Brunson, the co-founder, started every episode of his influential Marketing Secrets podcast with this message:
“So, the big question is this. How are entrepreneurs like us, who didn’t cheat and take on venture capital, who are spending money from our own pockets, how do we market in a way that lets us get our own products and our services and the things that we believe in, out into the world, and yet still remain profitable?”
This approach took ClickFunnels to $100 million in revenue within three years—without a penny of venture capital.
The answer is clear: yes, you can build a business without capital.
And ClickFunnels exists to help you do just that.
Testing Your Business Idea With an MVP
If you’re reading this, it’s because you’re aware of the concept of the minimum viable product (MVP).
And in particular, how it’s a way for you to test your business idea without breaking the bank.
First, let’s look at what the purpose of the MVP is.
What’s the Purpose of an MVP?
An MVP is a basic version of your product with just enough features to test your concept with real users.
Unlike the traditional route of fully developing a product before launch, an MVP lets you get early feedback from users to refine your idea.
It’s the perfect way to see if your concept resonates with your market before spending time and money on a full-fledged launch.
The 5 Main Different Kinds of MVP
There are many different ways to create a Minimum Viable Product (MVP).
Each of them allows you to gauge interest, gather feedback, and refine your product idea before diving into full-scale development.
But they do it through different methods.
Let’s dive into five of the most common MVP methods, highlighting their benefits, drawbacks, and some real-world examples.
1. Product Explainer MVP
A product explainer MVP is one of the simplest and most cost-effective ways to test a product idea.
With this method, you create a compelling video that presents your product concept to a targeted audience and asks for their interest. Usually, you collect responses in the form of pre-orders, sign-ups, or feedback.
This approach allows you to gauge demand without even building out the full product or even having a website.
You can also track viewer metrics and responses to see how well your idea resonates with your target market.
Benefits: Quick to implement and low-cost. Allows for easy A/B testing of different product ideas or messaging.
Negatives: Not full validation, as you’re not always charging at this stage, this getting feedback or sign-ups.
Famous Example: Dropbox used a product explainer video to test its concept. Before the product was fully developed, founder Drew Houston created a short explainer video and emailed it to potential users. The response helped validate the idea and secure funding for further development.
2. Single-Feature App MVP
A single-feature app MVP focuses on developing just one core functionality of a product.
Instead of building an entire, feature-rich product, you hone in on one key aspect that solves the primary problem for your users.
This method allows you to release the product faster, gather focused feedback, and iterate on the single feature before adding more complexity.
Benefits: Allows you to test an important feature without getting bogged down in developing an entire product. Speeds up time to market and reduces development costs.
Negatives: This can result in a narrow view of customer needs if only one feature is tested.
Famous Example: WhatsApp began in 2009 as a simple app designed to display statuses in a phone’s Contacts menu, showing whether a person was at work or on a call. However, when push notifications were introduced by Apple, users started using the app to send quick status updates, which evolved into instant messaging. Over time, the app expanded its features to include group chats, voice calls, and video calls.
3. Concierge MVP
With a concierge MVP, instead of using technology to automate services, you manually provide the service to your customers.
This MVP method is ideal for testing service-based products where the personal touch is important.
By manually handling every part of the customer experience, you gather insights into customer preferences, problems, and opportunities for automation or scaling later.
Benefits: Allows for personalized customer experiences and deep insights into their needs and pain points. Helps build a loyal customer base.
Negatives: It’s time-consuming and labor-intensive, so it can’t scale quickly.
Famous Example: Airbnb started with what you could consider a concierge MVP. Founders Brian Chesky and Joe Gebbia manually rented out air mattresses in their apartment to test if people would pay for short-term lodging in strangers’ homes. The positive feedback from the guests validated the idea before they started working on the full platform.
4. Preorder Campaign MVP
A preorder campaign MVP is a powerful way to validate a product idea by asking customers to pay for it before it’s even built.
This approach works particularly well for physical products or new product lines.
It allows you to gauge demand while securing upfront funding.
If people are willing to pay for something that hasn’t been built yet, it’s a strong signal that the market values your idea.
Benefits: Generates immediate revenue and validates customer demand before you spend time and money on product development.
Negatives: If you fail to deliver on your promise, you risk damaging your reputation and losing customer trust.
Example: Pebble Watch, one of the early successes on Kickstarter, used a preorder campaign MVP to raise over $10 million in funding. They tested demand for their smartwatch by asking customers to preorder it through the platform, using the funds raised to build the product.
5. Wizard of Oz MVP
The Wizard of Oz MVP involves creating the appearance of a fully functioning product, but everything is done manually. The goal is to present the illusion of automation and a seamless product experience, while you handle the work yourself. This method allows you to gather valuable feedback on how customers interact with your product without committing to building out a fully developed system.
Benefits: Allows for quick testing and iteration without heavy development costs. You get to understand customer behaviors and needs before scaling.
Negatives: Not scalable in the long run, and customers may feel deceived if they learn that the product isn’t fully developed.
Example: Zappos is the classic example of a Wizard of Oz MVP. Founder Nick Swinmurn tested the idea of selling shoes online by posting photos of shoes from local stores. When a customer placed an order, he would personally go to the store, buy the shoes, and ship them. Over time, Zappos built the infrastructure needed to scale into the billion-dollar company it became.
In this post, we’re focusing on the Wizard of Oz MVP.
Why?
Because it’s the best method to create an MVP on a budget that also fully validates your business idea. Customers buy believing the product comes from a fully operational business.
Once validated, all you need to do is scale.
It’s a personal favorite of thousands of ClickFunnels users—this is because our plug-and-play funnels help you build a professional-looking website & product in a question of hours.
Let’s explore how it works below.
7 Steps to Building Your MVP Using the ‘Wizard of Oz’ Method
Below, we’ll look at how Nick Swinmurn founded Zappos in 1999 using the Wizard of Oz MVP strategy.
Just ten years later, he sold the company to Amazon for $1.2 billion. This method is perfect for founders working on a shoestring budget.
Here are the four steps that helped Nick bring Zappos to life.
1. Find a Compelling Problem to Solve
The first step in the Wizard of Oz method is identifying a real, pressing problem.
You might already know what this problem is for your own business idea. But let’s dig into Nick’s story.
In 1997, Nick took a job working at Autoweb which was an online car-buying service. He specifically took the job because he wanted to start a business that could capitalize on the growth of the Internet.
Two years later he saw the opportunity.
Nick went to the mall on the hunt for a pair of brown Airwalk Desert Chukka boots.
Here’s what happened:
- One store had the brand, but not the size
- Another store had the size, but not the color
- A third store was out of stock
This sparked the idea of an online shoe store.
Nick realized that, like him, thousands of shoppers must be frustrated by the limited selection in physical stores.
Tips for Finding A Compelling Problem
- Look for frustrations in daily life
- Focus on limitations that traditional vendors in the industry can’t overcome
- Identify markets with high demand and limited supply
- Listen to your own needs – often, if you want it, others will too
2. Analyze the Competition
Before jumping into a solution, Nick needed to understand the landscape.
He looked around and realized that no one was effectively solving the problem of limited shoe selection in physical stores.
At the time, shopping for shoes was still primarily an in-person experience. But malls carried only a small variety of styles, colors, and sizes.
So Nick discovered an intriguing fact: 5% of all shoes sold in the U.S. were already being bought through mail-order catalogs.
This meant that 1 in 20 sales happened without a customer trying them on first.
If shoppers were willing to buy shoes through mail catalogs, there was potential for a more modern, efficient solution.
This realization laid the foundation for what would become Zappos.
Tips for Analyzing Your Competition:
- Look for market gaps where consumer needs are unmet.
- Research alternative solutions that already exist, even in low-tech forms.
- Pay attention to small but telling data points – like Nick’s discovery of the 5% mail-order shoe sales.
- Talk to potential customers to learn about their frustrations with current solutions.
- Identify industries that are resistant to change and innovate within them.
3. Play to Your Strengths
One of the key reasons Nick Swinmurn succeeded with Zappos was that he played to his strengths.
Before launching Zappos, Nick had already worked at an Internet startup called Autoweb, an online car-buying service.
This experience gave him invaluable knowledge about selling products online.
When the opportunity came to solve the problem of limited shoe availability, Nick’s skills aligned with the task.
It’s important to note that Zappos is an extreme example of everything going right. Not every MVP or startup will see such a smooth path to success.
Often, startups fail because the founder lacks experience in the industry or with the product they’re trying to launch.
Tips for Playing to Your Strengths:
- Choose an industry or product that aligns with your existing skills or experience.
- If you don’t have experience, partner with someone who does.
- Leverage past work experience to give your MVP the best chance at success.
- Be honest about your limitations and seek out mentors or advisors to fill knowledge gaps.
- Focus on industries where you have inside knowledge of customer pain points and market needs.
4. Come Up With a Valuable Solution
Once Nick understood the gap in the market, he came up with a solution that harnessed the power of the Internet to solve this problem in a more effective way.
The Internet was still relatively new in the late 1990s.
So Nick’s idea was simple: instead of forcing customers to drive to multiple stores and settle for whatever was available, he would build a website where they could browse a vast selection of shoes from their homes.
By leveraging the Internet, Nick could offer more variety than any physical store ever could.
Customers could easily find the shoes they wanted in the right size and color, and have them shipped directly to their doorsteps.
This approach solved a major problem for consumers and provided the convenience they didn’t even know they needed yet.
Tips for Coming Up With A Valuable Solution:
- Use emerging technologies to solve problems in a way that current methods can’t.
- Focus on convenience – how can you make life easier for your customers?
- Offer variety or personalization that physical or traditional businesses can’t match.
- Think about how your solution can meet customers where they already are – whether online or elsewhere.
- Create a seamless customer experience, from discovery to purchase, to keep them coming back.
5. Validate the Idea at Little-to-No Upfront Cost
Here’s where the magic of the Wizard of Oz MVP comes in.
You give your target audience the illusion of a fully developed product, even though you’re handling everything manually behind the scenes.
Nick went to Footwear Etc. in Sunnyvale, California, and proposed a deal: He asked to photograph and sell the store’s shoes online. If someone bought a pair, he’d come in and purchase them at full price.
A win-win situation.
The store agreed and Nick soon started getting orders.
He was sourcing the products, posting them online, handling shipping and customer service all by himself.
Validating Your Business Idea
- Don’t invest in inventory – validate first
- Test on a small scale to reduce risk
- Get feedback from customers as soon as possible
- Track key metrics to see if demand is real
- Keep it simple and low-cost at first
6. Set a Goal for Validation
As orders started coming in, Nick Swinmurn realized that his idea had crossed an important threshold: The order volume kept growing.
Nick proved that people were willing to buy shoes online.
Validation is one of the most critical milestones in building an MVP.
For Nick, the increasing number of orders was proof that his concept worked. He knew he was on to something when he saw consistent demand from customers who trusted an online platform for their shoe purchases.
This was a clear signal that it was time to take the next step: scaling the business.
Tips for Setting a Goal for Validation:
- Set a clear target for what constitutes product validation (e.g., consistent sales or repeat customers).
- Use feedback from early customers to refine your product.
- Focus on validating demand before scaling up operations.
- Track key metrics like customer satisfaction and return rates to ensure your model works.
- Be prepared to pivot if early feedback suggests changes are needed.
7. Scaling Your Revenue
Once Nick realized his MVP was validated, the next challenge was scaling the business to meet growing demand.
He couldn’t continue running the business by himself.
To scale Zappos, Nick raised money from personal sources, including friends, co-workers, and even his chiropractor.
However, the real turning point came when he pitched to the VC firm Venture Frogs, where he met Tony Hsieh. Tony saw the potential in Zappos and eventually became the CEO, helping Nick take the business to new heights.
The result?
A company that grew so successful it was acquired by Amazon for $1.2 billion.
Nick’s Wizard of Oz MVP method not only validated his product but also laid the foundation for scaling in a way that didn’t require upfront capital.
Tips for Scaling Your Revenue:
- Use early profits to reinvest in growing the business.
- Pitch to investors only after you’ve validated your product.
- Scale only when demand justifies the expansion.
- Maintain your focus on customer satisfaction as you grow.
- Diversify your funding sources – start with personal networks before seeking venture capital.
How to Save Time & Money in Making a Website and Taking Payments
We’ve just seen a powerful way to build an MVP and validate your business idea.
But you might be asking yourself.
If you don’t have web design knowledge, how are you going to create a website that accepts payments on a budget?
Enter ClickFunnels.
It’s one thing to come up with an idea and figure out the logistics, but you still need a professional site that can take legal, and secure payments quickly and effectively.
With ClickFunnels, you can set up a fully functional website in hours.
Here are some of the benefits of using ClickFunnels:
- Set up a sales funnel and start accepting payments within hours
- No need to hire developers or web designers – everything is drag-and-drop
- Integrates with major payment gateways for secure transactions
- Customizable templates for any type of product or service
- 14-day free trial to get started without risk
Try ClickFunnels Free for 14 Days
Final Thoughts: Building an MVP On a Budget
Nick Swinmurn’s Zappos story is a perfect example of how to launch a billion-dollar business starting with little more than an idea.
This was possible by using the Wizard of Oz MVP strategy.
It demonstrates that you don’t need a huge budget to get started – you just need the right process.
By validating your idea and growing smartly you can build something big.
To help you test your idea and start taking payments as soon as possible, don’t forget to check out ClickFunnels.
Click below to take advantage of ClickFunnels’ free 14-day trial and launch your MVP today.