How to Know If You’ve Nailed A Niche (3/100)

Throughout 2023, I’ll be posting and updating the ‘From Impossible To Inevitable’ book in small chunks here, with new observations at the end on what’s changed or not since it came out.

When you’re a startup getting to your first million or launching a new product, lead generation program, or marketing campaign — one of the indicators that you’ve Nailed A Niche is that you are able to find and sign up unaffiliated, paying customers.

Unaffiliated. Paying. Customers.

We don’t mean friends of your investors, or your old coworkers or boss. They aren’t past customers, partners, or part of your LinkedIn network. They weren’t referred to you; they didn’t hear about you from a group. They started out “cold” without the advantage of prior relationships.

Whether they found you by coming in through the ether, or whether you went out and pounded the (physical or virtual) pavement to source and close them.

And now they’re paying you — profitably.

Here’s the thing: 10 customers may not seem like much. We called these guys “beer money” in the early days at EchoSign (which Jason Lemkin founded in 2005, then sold to Adobe in 2011, while growing it past $100 million in revenue). Ten customers were $200 a month, which didn’t come close to paying the bills for four engineers and three other guys — it barely paid for the beer. But 10 clients are actually amazing. Yes, you may still fail, of course, because of cash-flow issues. But 10 is the first sign of success — even though it’s very likely that more than one will turn out to be a dud, while you’re learning which customers you can make successful. Because it means three things:

1. Since you have 10, you can definitely get 20. . . and then 100. If you can get 10 unaffiliated customers to pay you (no small feat), I guarantee you can get 20. And if you keep going at it, you will get at least 100. And then 200, at least. At a minimum, you can keep doubling and doubling. I’m not saying it’s easy, but it’s possible.

2. More importantly, it’s amazing you got those 10. Ten is not a small number! Because why the heck should they trust you, and pay for your product? It stands on its own without you needing a prior relationship to add extra trust and credibility. It’s a huge vote of confidence. Maybe you were on TechCrunch, Reddit, Bob’s Insurance Newsletter, or some blog — great. But in the real world, with Mainstream Buyers, no one has ever heard of you. You’re not “the thing” all their friends are buying, making them feel that without it they’re being left behind.

3. This means you built something real. Something valued. Most importantly, it’s something you can build on. These 10 customers will give you a roadmap, feedback, and indeed, the path to 1,000 more customers if you listen carefully. You won’t heed all their advice, of course, but the feedback from these first 10 customers won’t be from outliers. It will be transformational. We guarantee it.

Because your 1,000th customer most likely will be just like your 10th, in concept and spirit, in category and core problem solved.

At EchoSign, the first unaffiliated customer was a distributed sales manager of a telesales team. The exact industry she was in was unusual (debt consolidation), but digging deeper, the actual use case was exactly the same, in spirit if not in workflow, as 80% or more of the customers came later. The same as Facebook, Twitter, Groupon, Google, Verizon, BT, and Oracle. The same as all of them. The same core “goodness” that you’ve built attracts all of them. Of course, you’re going to need to build tons more features, mature your product dramatically, and so forth. But the core will be the same goodness as customers 1–10 experienced.

Trust us. Ten customers may not pay the bills. But if you got them from scratch, you have a seed of organic lead flow, a key message or lead generation process that you can grow and replicate. That’s special, and something you can build on.

So this is your first time to double down, after Customer 10, even if it seems way, way smaller than your goals and vision. Forget 1,000. Think small: first double them to 20, then to 40, and so on. Compound that month after month, year after year, get the flywheel cranking, and you’ll make your big vision inevitable.

Even though it will take years longer than you want, but we’ll get to that in the “Do The Time” section of the book :)

Observations: this post encapsulates the entire goal of Nail A Niche: finding ways to start conversations with customers who don’t know or trust you yet. So you can escape the limited pond of word-of-mouth dependency. Maybe you did this accidentally. Maybe intentionally. Lots of companies NEVER accomplish this and must rely 100% on word of mouth.

Hey we LOVE Word Of Mouth (WOM)! More is better. But there’s differences between between:

• Getting WOM (great to start!!)
• Scaling WOM (amazing if you can do it, few can)
• Depending exclusively on WOM (you don’t want to be here if you can help it)… someday the phone won’t ring as often as it used to, and if you haven’t figured out how to go out and start relationships with customers, you’re in trouble.

Finally: this isn’t just a small company problem. Having worked with many of the biggest software companies in the world, they ALL suffer from it too, to different degrees. Cisco, Red Hat, IBM and SAP…they’ve all leveraged (as they should) their products, brands and big marketing budgets to grow huge. but along the way, they let the organizational and tactical “go get customers” muscles atrophy.

They’re so used to letting their brands speak for themselves, that they lose the skill to “earn” customer trust by talking to them in their language. While SAP doesn’t need to nail a niche, but individual product lines and marketing and sales teams and people do.

COMING NEXT: Achieve World Domination One Niche At A Time (4/100)

PRIOR POST: Painful Truth №1: You’ve Been Struggling To Grow Because You’re Not Ready To Grow (2/100)