The Essential First 7 Steps to Startup Success.

The foundation you need to succeed

I failed my startup because I didn’t address a “must-have-fixed” problem for a big-enough market. And I’m not alone: 42% of startups failed because they didn’t solve a market need. Here is how you can avoid that mistake.

The thing that kills most startups? Not addressing a significant problem for a big enough market.

Imagine you’re building a house. What’s the order, how do you approach it?

You start with the foundation, add the walls and roof, move the interior in and install the essentials. Getting the foundation right is essential for two reasons:

  1. If you don’t pay attention to the foundation, mistakes will only get worse. This is known as compounding defects. You start with a foundation that’s off, so you have to readjust your walls. As you finish the walls, you notice the roof is out of square, so you readjust the roof. Then the final panels don’t fit on the roof, so now everyone can see your roof is off, and the simple mistake in your foundation has ruined the look of the house… Your initial small mistake compounded to a huge hassle.
  2. Your entire house sits on the foundation! This means if you don’t pay attention to getting it right, it’s not an easy fix.

The foundation of your startup? A customer with a “must-have-fixed” problem.

Messing up the foundation leads to compounding defects. These will become more and more difficult to resolve as you continue.

You’ll spend tons of time, energy and cash on readjusting the compounding defects.

You’ll end up stressed, depressed and burned out.

And that hurts — I know.

So let’s figure out how to do that with the least amount of money and time, step-by-step.

“The secret of getting ahead is getting started. The secret of getting started is breaking your complex overwhelming tasks into smaller manageable tasks, and then starting on the first one.” –Mark Twain

Step 1. Determine problem and customer hypothesis

“You just have to pay attention to what people need and what has not been done.” — Russell Simmons

Question one you should ask yourself is: what problem do I want to address? What problem do I or others run into often?

The goal is to write the problem down in a simple statement. Be sure to focus on the problem, not on the solution. For example:

  • It’s intimidating to make a big business decision based on gut feeling.
  • It’s hard to determine how my business can stand out to customers.
  • It takes too much time have quality food for the whole family.

The next question: for which customer segment is your problem a top 3 problem?

Imagine you’re building an online course on marketing, and your target customer is a founder of an early-stage startup. Their main problems are probably something like this:

  1. Get access to the capital required to grow their business
  2. Find a co-founder
  3. Be motivated to work hard
  4. Develop the product
  5. Increase skills in marketing and managing a team

You can see that the online course doesn’t address a problem in their top 3- it’s on #5.

This is important because people are busy. They’re focused on solving the problems that are top-of-mind. This is CRUCIAL to understand! Even if you have the most amazing solution EVER, they won’t have time.

For me, this was the toughest lesson to learn. I thought my product was great, but for my target customers it wasn’t a top-of-mind problem.


Step 2. Focus on the right customer segment

Next step is to figure out which customer segment makes most sense to start with.

I’m a numbers geek, so quantifying whatever possible helps me a lot. For this step, do these things for the table below:

  1. Take the customer segments you defined in the last step, and fill them in in the first column.
  2. Rate the size of each segment on a scale of 1–3, where 1 means that this customer segment is small, and 3 is that this customer segment is large.
  3. Rate the capital available of each segment on a scale of 1–3, where 1 means that this segment doesn’t have a lot of capital available, and 3 means this segment has a lot of capital available.
  4. Rate the ease of access to each segment on a scale of 1–3, where 1 means it will take months to sell to this segment, and 3 means it will take days to sell to this segment.
  5. Rate how much you’d love to work with this segment on a scale of 1–3, where 1 means not so much, and 3 means a lot.
  6. Rate the amount of evidence you already have that this problem is a significant problem for this segment on a scale of 1–3, where 1 little evidence, and 3 means you’re very sure.
  7. Multiply the scores per segment, and write down the total.

After filling in this exercise, you should have your customer segment with the highest amount of points. This segment is the one you should start with.


Step 3. Find people to talk to

There are no facts inside the building: you have to talk to your customer to move forward. — Steve Blank

The way to validate you’re correct about the problem and the customer segment is to talk to real people. The way that’s worked best for me is:

  1. Ask people in my network whether they know someone that fits the profile.
  2. Use LinkedIn to connect to people in the segment you’ve identified.
  3. Add a message in a Facebook group dedicated to this segment.

When you approach people and ask them to talk, I generally advise keeping it personal and short.

The message I use consists of:

  • 1 sentence about them
  • 1 sentence about both of you showing a relation
  • 1 sentence about what you’re doing that explains the problem you’re trying to solve
  • 1 sentence about what you’re offering them (hint that you can solve their problem)
  • Ask for their time in a specific time window

I suggest founders to start with 5 people in a particular segment. This is because you’ll get a strong signal (I’ll elaborate on strong signal below) about whether you’re right or wrong from these five. When you think you’ve got a strong signal, you add 5 more conversations. In total, I’d speak to 20 people from a customer segment in total to validate the problem and the customer segment. This looks something like the figure below.

My tip: to keep yourself accountable, make a schedule like the table below. The numbers are from personal experience. If you want to talk to 5, request an interview with 6x the amount of people — so 30.


Step 4. Prepare interviews

“Wonder what your customer really wants? Ask. Don’t tell.” — Lisa Stone

Way to go! You’ve got your interviews scheduled. But what should you ask?

The exact questions you ask will depend highly on your individual case. The most important thing to know, is what outcomes you’re looking for. At this stage, you’re looking for insights into these:

  • Whether and how they experience your hypothesized problem
  • Whether the problem is in their top 3 biggest problems
  • Current solutions they use to address this problem
  • What they don’t like about those solutions

The interview will differ if you’re building a B2C or a B2B startup.

For B2B, this is generally my template:

  1. How would you describe your role as a (customer segment)?
  2. What does success look like for you?
  3. What are you currently working on? (or) What are you currently trying to get done?
  4. Why are you working on this? (or) What about (answer) is important to you?
  5. Can you show me how you currently do this?
  6. Can you show me what’s frustrating about your current process? (or) What’s the hardest part about that?
  7. Can you tell me about the last time you experienced this?
  8. How did you try to handle it? (or) How do you handle that today?
  9. What’s not ideal about this solution? (or) What do you dislike about your current solution?
  10. I’m exploring a solution to (problem). Can I contact you if we find a solution?
  11. Can you suggest me 2 or 3 people who also have this problem?

For B2C, my questions are somewhat different:

  1. What’s the biggest challenge you’re facing as a (customer segment)?
  2. Can you tell me about how you currently deal with (problem)?
  3. Can you tell me about the last time you experienced that?
  4. Why is it a problem for you?
  5. How do you currently handle that?
  6. What’s not ideal about this solution? (or) What do you dislike about your current solution?
  7. I’m exploring a solution to (problem). Can I contact you if we find a solution?
  8. Can you suggest me 2 or 3 people who also have this problem?

If you’re looking for more about this, I’ve written more extensively about that here.


Step 5. Conduct interviews

The greatest technology in the world hasn’t replaced the ultimate relationship building tool between a customer and a business; the human touch. — Shep Hyken

Go time!

A couple of tips:

  1. Record your conversation. (Ask for permission to record!)
  2. Build rapport
  3. Talk less, listen more. The only talking you should do is either 1) doing the introduction and thanking them for their time at the end, 2) asking your questions and digging deeper into THEIR story, and 3) summing up what they’ve said to check whether you understood correctly.

Step 6. Analyze interviews

Awesome! You’ve conducted your interviews, now it’s time to draw your conclusions.

Now you can make this extremely complicated, but as a first step, I recommend logging results like this:

This way, you can quickly see patterns emerge and check whether you’re on the right track.

The question you want answered at this stage:

Does my solution solve a “nice-to-have-fixed” problem or a “must-have-fixed” problem?

This is where you’re looking for a strong signal. For me, this means that for at least 60% of the people you’ve spoken to this problem is a must-have-fixed problem.

The thing that will tell you whether it’s a “must-have-fixed” problem is

  1. How much effort they’re currently exerting to solve the problem. If they’ve personally hacked together a solution, chances are they experience this as a big issue.
  2. With how much pain they tell you about their problem. If they talk about the problem for a long period with negative emotions, you’re likely onto something.

So:

  • If your answer is must-have-fixed, congrats!
  • If your answer is nice-to-have-fixed, stop. Never build a solution to a nice-to-have-fixed problem. Your signals for usage might be alright, but your customer will NEVER pay for your solution.

Step 7. Determine the next step

When you’ve gone through these steps, you should have:

  1. A clear-cut problem
  2. That at least 60% of your customer segment experiences as a must-have-fixed problem.

If this isn’t the case, no hope lost! Like Paul Graham said:

“Bad shit is coming. It always is in a startup. The odds of getting from launch to liquidity without some kind of disaster happening are one in a thousand. So don’t get demoralized.” — Paul Graham

The good news: You can iterate to a new customer segment, and start the feedback loop again. Even better: you still have all your money, haven’t spent any money, or lost too much energy.

Once you get it right, you’ve got a huge advantage over other startups. You actually understand your customer, figured out what their current pain is and how they solve it. You can start planning for your MVP with your potential customers! That by itself is a whole post, so I won’t go further into that.

Conclusion

42% of startups fail because of a lack of market demand. Getting the foundation right is ESSENTIAL to future success.

That’s because the point of your startup is NOT to make money.

It’s NOT to be famous.

It’s to solve a meaningful problem for other people.

As Steve Blank said, you have to talk to your customers to move forward. Taking a step-by-step approach will accelerate this.


Two last things…

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