The golden rule of entrepreneurship
Sell your vision before building the product
Startups and entrepreneurship are “trending” right now, there’s no doubt about it. In recent years powerful economic and social forces have cultivated an explosion in the number of companies being created. A moribund global economy has undermined the security of employment and free online platforms have slashed the cost of kickstarting a company. It’s now easier than ever to attract capital, build a prototype and tap into vast channels for distribution.
While these forces have made it easier to start something, they’ve done very little to improve the chances of creating anything profitable and sustainable. Frameworks for thinking like Lean Startup, Agile Development, Customer Development and the Business Model Canvas have rushed to fill this void. And affordable cloud platforms and technology stacks like AWS, Heroku, Parse have made it much easier to scale a validated concept.
Yet there’s still one statistic that has barely moved; the number of startups that fail. It’s still around 80%, or a similar number. It’s natural to wonder why. I don’t have the answer, but I’ve got a few thoughts. First, some entrepreneurs are missing the savvy to size-up the market and objectively assess the merits of an opportunity. These are creative and courageous people, but they struggle to target their efforts appropriately. This is the spray and pray model of entrepreneurship.
This leads me to what I think is the golden rule of entrepreneurship. The golden rule is to “sell the vision before building the product.”
The biggest priority for any entrepreneur must be making the first dollar. In creating a business it’s easy to get distracted by the fun stuff; for example, hiring a talented new engineer or closing a big round of financing. That stuff is fun but the success is illusory. Business is all about profit-making, and that means selling a product or service that fulfils a customer need. If you’re not fulfilling client orders you’re not in business. Lastly, and I think this is an important point, many entrepreneurs miss don’t appreciate that it’s not about whether something can be built anymore. The real question is why should something be built, if at all.
Why is it so important to sell the vision first?
Building stuff is easy, convincing people to care is difficult. Making a product is literally trivial compared to the challenge of getting people to care enough about it to use or buy it.
If you build before selling, you run the risk producing a product that nobody wants or needs. The solution is to carefully and systematically discover and validate your customer’s needs before building anything. It’s impossible to overstate how important it is to know your audience. Once you’ve identified the archetypal member of your audience, you can identify the evangelical power users of your product. Start by telling them your vision, and closely gauging their reaction. Listen carefully to the language they use to describe their problem and how it might be solved. Attentive listening is paramount. Business plans never survive their first contact with customers; accept that market needs and your solution are moving targets. If you’re disciplined, the right product vision will eventually reveal itself as the result of evolutionary processes of testing, iteration and optimisation.
Building stuff can also be a distraction. It’s easy to be lured by the perception of progress that comes from regularly deploying new code and adding features. This kind of development fuels our innate desire for progress, but ultimately this hard-work will prove futile if you’re navigating Chicago with map of New York. You need to know the territory and have an exploration plan. If your initial vision changes because you didn’t do enough due-dilligence, then you will discover bugs in your vision or product at some point. This will mean discarding stuff and rebuilding, leading to frustration and disappointment. Nothing is worse than pyrrhic victory.
What are the benefits to selling first, building later?
Ultimately, selling the vision de-risks your business. You’ll find the people who you initially speak to become you’re patrons. Being personally invested in your vision, they become more likely to buy once you do have a product. But above all, by concentrating on selling first you get the hard work out of the way. Making is easy, persuading is hard.
Another point to emphasise is just how big a gamble you’re taking if you don’t sell the vision first. I mentioned the idea that business plans never survive their first contact with customers. We can thank Steve Blank for this neat aphorism, and he in turn can thank Sun Tsu, author of The Art of War. In any event, some people argue against this iterative Lean Startup view of the world in favour of visionary product role models like Steve Jobs. But what those arguments conceal is that Job’s was not really an exception at all. He made bold calls about products only because he had many years of experience in getting to know his consumers. There’s no substitute for understanding, and no shortcuts to greatness.
Lastly, it’s worth underlining the cost of wasted opportunity. At the end of the day time is the coin of our life. Unlike money, time can only be spent once and your balance can never be topped up or remade. Spend your time wisely, and realise that there’s an opportunity cost to everything. Be honest with yourself, if you’re spending precious time on a dead-end project then quit without delay. There is a real cost to not spending your time on a better idea.
