Wait! Don’t Build Your Business Without Customer Validation
As a small business owner, I have big dreams for my business. While these dreams keep me going even when things get rough, they also keep me up at night as I contemplate how to bring them to reality. The vision may keep me motivated but I also need to see that I am making progress. It used to be that my progress was measured by the tasks I checked off my to-do list. Now I use a better approach, and it is centered in customer validation of my ideas.
Customer Validation is the starting point of the Lean Startup methodology developed out of Silicon Valley where ideas are abundant, but often are useful only to the few who envisioned them. For every Facebook, there are hundreds of technologies created that no one will ever want to use. To combat this, and sort the viable ideas from the flops, the idea of Lean Startup was born.
Customer validation gives you hard evidence regarding the possible success of your business model
The idea is simple, yet powerful. Business teams cycle through stages of building their solution, measuring customer acceptance, and then applying their learning to the next refinement of the solution. This build-measure-learn cycle continues until the outcome of measurement is a solution that is acceptable to the customer. This solution is minimally viable — it provides value to the customer but it can be only the start of a bigger solution.
Pivoting to the Right Solution
Another key concept in the Lean Startup methodology is the idea of a pivot. Customers will often reject a solution because it doesn’t solve the problem or pain point you envisioned. However, you will discover other problems that they do want to you to solve, things that are a good fit with your solution. This is what Steve Blank refers to as “product-market fit” — finding a customer that will pay for the value your product or service delivers.
You may assume that if you have an established small business long past the startup phase, this doesn’t apply to you, especially if yours is not a technology company. However, there are many small businesses that are adopting the Lean Startup methodology because it is a smart, efficient way to operate and improve their business. The tools available to businesses today lend themselves to this incremental approach, allowing you to test a solution for free for 30 days before buying. Just enough time to validate the solution with your customer.
Customer Validation for Established Businesses
A simple example of how this could work for you. A small business that provides towing services writes their invoices on triple copy paper, and accepts only checks or cash for their services. They partner with local service stations who send clients to them, but several times in the last few months they have referred clients to other towing companies because their customers only had credit cards. Moving to credit cards would also require a different bookkeeping system, so it is a big endeavor. And credit card payments come with a fee, so they would need to figure out how to recover that fee.
The owner of the towing business, Joseph, decides he will test credit card payments for one of his trucks. He provides a Square card reader and tablet to his driver, flowing the payments to a separate test account. He negotiates with the payment provider to test the solution for 30 days prior to committing to purchase. In the process of accepting payments, he allows customers to provide an email for a receipt. When he sends the customer their receipt, he thanks them for their business and asks about other services he could provide. To his delight, his customers tell him about other services they have heard about from their friends that he could provide.
At the end of the 30-day trial, Joseph sees that this driver served more clients than his other drivers because his partners referred credit card customers to him but also because the process was faster, allowing his driver to serve more customers. In spite of the credit card fee, Joseph made more money on this driver and was able to identify other added-value services he could provide. As an added benefit, he now has a direct marketing link to his customers, something he did not have in the past.
From this point, Joseph can incrementally implement this solution, deploying the front end before the back end or only enabling a few of his drivers. Similar to the test of the front end, he can test bookkeeping solutions that fit with the credit card solution to ensure they add value to his business.
Measuring Success
In this example, the business owner established some key measurements of success for the solution — more customers and the ability to recoup the credit card fee. These types of measures can keep you on course, ensuring you only adopt solutions that add value to your business. These success measures are the key to sustainability, providing the path to fulfillment of your big dreams.
Want some help with your customer validation process? Send us an email and we can talk through how it would work for you or visit www.inceodia.com.
