Off to the Races, Part 3
Without a market, you won’t have a business
No amount of passion or technical knowledge can get around that simple fact. Of the 90% of startups that failed, 42% did so because of a lack of product/market fit. Even if you avoided every other failure mode, you still died because you didn’t have enough customers.
In my prior installment of “Off to the Races,” I talked about the race against Burnout; the difference between motion and progress, and why you need a well-developed action plan to develop your concept. Your next step is market research and verification. Sounds straightforward but nearly half of those that failed waited too long to find out.
Honest, unbiased market research is a challenge for most new founders
Initial market research is simple, but most founders struggle with it. Their solution is so embedded in their thinking that they can’t separate their solution from the problem. If the problem boils down to the lack of your solution, you’re in denial.
This is when your passion, personal motivations, biases, and prior experiences might work against you. Founders are optimists. Why else would they enter an arena with 9:1 odds of failing? Do the work to understand your market size, target customers, and a general view of your competition. Plan it out carefully and make the customer survey calls WITHOUT letting your hopes, wishes, dreams, passion, excitement, desires, biases, and ego cloud your vision.
When validating your market, determine what problem your customers have. The approach is simple, but be prepared to accept results that might conflict with what you were hoping for.
Make a list of the questions to cover in a ten-minute call. This isn’t a sales call; make that clear at the start, tell them you value their input, be quick, and focus only on your expected target customers. Don’t ask them if they have the specific problem you want them to have, ask the general question first. If you lead the witness, your data will only support your biases.
Find out how they are currently solving it, even if it’s not exactly the problem you were hoping for. Confirm their pain:
- Any reasons related to your concept
Many will volunteer cures they wish existed. If so, that’s valuable information; jot it down. Connect with another 99 customers. Friends and family don’t count; replace them with potential customers who have never heard of you.
Tabulate the survey results
No amount of passion, money, time and hard work will let you to succeed without a market. If you keep your biases in check, you’ll know the problem exists if a large percentage of your respondents confirm it. If it doesn’t save your money and time and find a better problem you could solve—either way, you’ve taken a significant step forward.
New founders often purchase data and surveys. These are valuable in a macro sense, but only if they closely relate to the specific answering your question. Often they are too general. There is no substitute for talking with customers.
Market timing is critical
Why is this the right time to launch your company? Is the problem expanding or in decline?
- Has a major player announced an added feature to a product your target already uses that replaces your solution?
- Will changes to data privacy laws limit your ability to deliver and support your product?
- Will your solution require the acceptance or development of complementary technologies to work?
Research possible market changes. Some could grow your market others can make you obsolete before you start.
You can only fake it until you make it; until the day comes, you have to make it or go broke. Are you the person or team that will succeed? Does your team have experience related to the problem? If not, identify the gaps and develop a plan to mitigate them. Pick your team wisely.
If you want to make it big, identify a big problem, be the solution, and build a team that can execute.
Too many founders live in a bubble they’ve built for themselves. Get out and talk to customers. Ask the right questions, but be prepared to accept realities you didn’t expect. Take whatever answer you get and use it to make your go-no-go decision. You might conclude there’s no market – better now than after you’ve spent a year working on your solution and burning through cash.
Investors want you to grow fast and generate a solid return. If you don’t solve a big problem, grow fast, and demonstrate you have a team that can execute, their money isn’t available to you.
Stop thinking in terms of ideas. Customers don’t care about your ideas; they want you to solve their problems. Investors don’t fund ideas because without a big market and a team that can execute, you have no value.
Are you spending time and money on the right priorities? Until you understand your market, you can’t know.