“If your startup failed, it’s because it didn’t solve a tier 1 problem for a large enough audience — here’s how to never make that mistake again.”
NOTE: If you’d like to see the step-by-step system I use when launching a new product or service (8 companies so far with $200,000,000 in total sales), check out Successful Launch System.
Validating the demand for your product is more important than ANYTHING. More important than features, your team, design, pricing, etc.
Without market validation you’ll have a product that no one will pay for. You’ll burn a lot of time, energy and cash and you’ll end up stressed, probably depressed and definitely burned out.
And that hurts — a lot.
OK so let’s get to it — here’s how to validate your startup idea before you launch. Before you invest or raise $1. Before you hire anyone.
Step 1 — Write down the problem, not a specific solution
You want to be able to clearly articulate a problem that you or others experience regularly. Notice that you’re only focused on the problem here, not any specific solution — that comes later.
You want to be able to write down your problem in a simple statement. A few examples:
- It’s impossible to follow up with customers once they leave a restaurant
- It’s hard to determine which customers will churn before they actually do
- It’s too hard to design professional-quality graphics for social media
You get the idea — keep it basic and refine the problem until you can articulate it with one sentence.
Step 2 — Determine if it’s a tier 1 problem or not
It’s easy to identify problems — they’re everywhere. What you’re really looking for is what I call a “tier 1 problem” — which means the problem you’re looking to solve is one of the top 3 problems your potential customers are experiencing.
Let’s say your (eventual) target buyer is the CEO of a small business. Their top 5 problems might look something like this:
- Generate more sales
- Get marketing running efficiently (hire a head of marketing)
- Outsource our payroll and benefits
- Increase our product selection
- Get better at social media and invest in Facebook ads
If you’re planning to launch a social media tool, you can see that’s NOT a tier 1 (top 3) problem for the typical CEO of a small business — it’s #5 on their list.
They’ll be so focused on solving their first 3 problems that you’ll never get a look in — EVEN if you have the best product, EVEN if you have the best support, etc.
They simply won’t have time (or budget) for you if you’re not solving a problem that’s top of mind for them — a tier 1 problem.
This is probably the hardest lesson to learn and the one most startup founders ignore — “But my product is so great, once they use it they’ll sign up for SURE!!!”.
So how do you validate that your problem is actually a tier 1 problem? First you need to know who might typically buy your product. You want to build a basic profile, like this:
- Company size: 100–500 people
- Role: CEO or VP of Marketing
- Location: North America
- Industry: Retail, Technology & Hospitality
You then want to come up with a list of 20–50 prospects who meet this criteria. The easiest way to get that list is to jump on LinkedIn and research. Then just connect with all of the prospects you find with a message like this:
We’re hoping to spend 15 minutes on the phone with CEOs who are experiencing [problem]. We’re doing research and have nothing to sell. Would you be available for a quick call tomorrow at 3pm?
A few pointers here:
- Be short and to the point — don’t waste their time
- Include a specific day and time when you want to talk — avoids email ping pong
- Reach out to 3x the number of prospects you actually want to talk to. So if you want to talk to 20, then message 60. Most won’t reply and some won’t be interested, etc.
Great. Now you’ve got at least 20 people ready to chat who are experiencing the problem you’ve identified.
(I realize I’ve dramatically simplified this step — but you’re an entrepreneur, so be creative and put in some hustle. If you don’t like talking to people on the phone then maybe this startup thing isn’t for you…)
Before your first call, you want to come up with about 10 questions to ask them. The entire outcome of the call is to validate:
- They experience the problem
- How painful it is for them (i.e. is it a tier 1 problem?)
- How they solve the problem now
- Would they pay for a solution to the problem
Collate the answers from all of your calls in a Google document, Evernote, etc. After 5 or so calls you’ll start to get a sense of whether this is actually a big problem or just a “nice to have”.
Never, ever build a startup that solves a “nice-to-have-fixed” problem. People will use your product but never pay for it.
Read the rest of this article here.