I meet many smart, talented startup founders at various events I attend. I love their energy and passion. The first question I ask is “tell me about your business.” Too often the response begins “we are building a product that…” and I’m treated to a few minutes of excruciating product details. My follow up question is “how do you make money doing this?” I’ll hear “we’ll sell subscriptions,” “advertising,” or some other response that suggests they haven’t thought through their business model.
Founders, if you want to attract customers, capital and talent to realize your vision, you have to begin by selling your business, not your product. Here are a few things to try:
Don’t Do Market Research on Your Friends and Family
Many first-time founders start their market research by asking people they know about their idea. They get jazzed by the response because everyone loves it! This is the response people who care about us are supposed to give. If you want to test their genuine enthusiasm for your idea, ask them to invest or become a paying customer. Better yet, ask strangers about your business concept. Those responses from people who are actually willing to pay money is the most valuable market research you can get.
Solve a Problem People Will Pay For
Filling a niche is a great way to start a company. The problem is that there are plenty of niches that just won’t sustain a business. I’ve seen a fair number of software app ideas aimed at students, coaches and busy parents. Yes, there are problems to be solved here but is your solution really worth paying for? Will enough people buy it to sustain a business?
If you are an app developer there is a simple way to test demand for your software. Sell it on your website as if it exists. Track visits and people that come to your purchase page. When they get to the purchase page, inform the prospect that the app has not yet launched and serve up a form to fill out to inform them when the product is launched. Think of what you’ll learn from this approach:
- How to drive interested prospects to your website (lead generation)
- How to induce an online purchase (close deals)
- What data people are willing to share with you on the signup list
You can do lots of A/B testing simply and cheaply to refine your idea. This is how great businesses do market research… they get objective data that objectively informs the offering, tailoring it to real market demand.
Be Realistic About Competitive and Substitute Products
I find too many founders are focused on their competition and not on substitute products. There are many different ways to solve a problem, both in the online and offline world. I recently saw an interesting pitch to make restaurant ordering easier. The problem was that adoption would require a change in a consumer’s behavior. This is too much to ask… it takes years of repetitive messaging and retraining to get enough consumers change a long-held behavior.
Act Lean and Involve Customers From Day 1
Anyone who has read the latest startup books is familiar with lean principles. The idea is to come up with the minimum product offering you can, then test it in the marketplace and refining the product until demand is proven.
Too often I see startups focusing on lean product development and not lean business development. Lean applies to effectively deploying marketing resources to capture leads, sales resources to close deals and delivery resources to satisfy the promises made to customers. The best way to satisfy customers is to get them involved at the start of your business. Ask them if your solution solves a problem they would pay for. You’ll need to ask at least 30 to get a statistically significant sample size. Make sure they are not all related to you!
As you build your business, pay attention to the nuances of people you encounter. I’ve always believed that people communicate their true priorities one of two ways – how they spend their money and how they spend their time. We all have these in limited quantities which forces us to make trade offs. If your idea is not attracting the customer time or investor capital it needs then you need to revisit your offering to make it more compelling.