Starting a business is awesome. I love startups and small businesses in general. Business ownership is a great way to build wealth and also to create freedom and flexibility in your life (if that’s a goal). Starting a business isn’t without risks though – in fact, depending on what you read, the failure-rate statistics can be rather intimidating. According to the US Bureau of Labor Statistics and the Small Business Administration (SBA), it seems that about 1/3 of new businesses will fail within the first two years – many of those won’t even last the first year. More than 1/2 will fail before they reach the five-year mark and almost 90% won’t make it to their ten-year anniversary.
How can you improve YOUR chances of startup success?
Your chances of success are largely impacted on things done before you even launch the new business. While I’m not a huge fan of popular overly-large and complicated business plans, I AM a big fan of business planning. You know what they say – “failing to plan is planning to fail” (no idea who originally said that).
There are a lot of things to think about with your planning process – identification of the ideal customer, marketing strategies to reach those customers, product development, finance, etc. But long before you work on any of those things, you need to perform market and customer validation, and you really need to answer one big question…
Figure out: How big is the pain point?
A successful business needs to solve a problem. And if a customer has a problem, there is likely some level of “pain” associated with that problem. Maybe the pain is literal and something physical; maybe the pain is an inconvenience and your solution will make something easier/faster/whatever; maybe the pain is the customers’ inability to accomplish something – there are thousands (millions?) of pain-points out there that could potentially be addressed.
But just because there is a problem with an associated level of “pain” doesn’t mean that the problem is worth solving. Huh? Yeah, that’s true and something far too many founders don’t properly understand. If the problem you’ve identified is along the lines of a “take an aspirin and push through” type of headache, then you’re going to have a very different market reaction than if the problem is more of an “I have a migraine and would do anything to make it go away” type of problem. It’s the level of pain (“discomfort” or whatever – if you don’t like my pain analogy) that impacts whether a customer is going to be willing to seek out and pay for a solution; and also determines how much they are going to be willing to pay for the identified solution.
Unfortunately you can’t just start asking random people everyone “what’s your biggest problem or pain-point?” (wow, wouldn’t that be nice though!). But there are some steps and a process that can help with this very important first step.
- Identify some potential problems. These will often be ones you are already familiar with and potentially even experiencing yourself.
- Form a few testable hypothesis. Once you know (or think you know) of a problem, you need to validate that issue with as many potential customers as you can. Far too many founders identify a problem, make a ton of assumptions, and start banging away at creating a solution – don’t do that.
- Try to validate (or invalidate) the hypothesis by getting direct feedback from customers.
- Google Surveys is a great way to affordably reach and question hundreds of potential customers. It’s a great way to get feedback, in a totally flexible format, on your problem. Another great option, if it works for your potential customer market, is to literally get out in front of the people and talk to them in person. Note that you aren’t trying to validate a solution – you want to validate a problem first. You want to make sure the problem is even big enough to solve before spending time on a solution.
- Another great way to confirm this is to use an all-in-one tool like QuickMVP or a combination of services like LeadPages and Google AdWords. The goal is to get some people to a landing page and entice them to take action – i.e. click a button. Believe it or not, you can do this without the solution yet. The page can mention the problem and ask a simple question, perhaps something like “Are you ready to take care of this problem and never deal with it again?”. If people are clicking that button, that’s a great sign!
- Will they pay? How much? If you had a potential solution in mind, or if you develop one after some initial customer validation, it’s time to test out whether people will pay for the solution or not – and how much. (Quick note: Ideally don’t mention your specific potential solution on initial customer surveys because you’ll taint the results – trust me). QuickMVP and the landing page service ideas allow you to take things a step further by actually prompting the customer to click a “buy” button. There are a lot of variations on how to handle this, but something along these lines is generally fine: “Click here to solve this problem for just $99”. I recommend a number of different price-points and variations, to allow you to test click-rates at different levels.
BTW with #3b and #4 you can also capture potential customer contact information. So if the idea does prove out, you have a list of likely buyers of your solution on day 1. How nice is that?!? :)
With these steps, and spending a minimal amount of money (a couple thousand perhaps [Can’t spare the cash? Read how important it is to have some emergency funds before starting a business]), you can validate a problem, some assumptions, gauge how large the problem is to customers, and also determine if they’re willing to pay and how much. Spending time on these activities at the start will help you avoid costly business ventures that attempt to solve problems that people don’t really care about, and hopefully will validate other things for you to allow you to move forward with a higher level of confidence.
Taking these steps to identify the pain-point and gauge whether it is a minor headache or a migraine will greatly improve your chances of success – and keep you out of that statistic of business flops!
If you want some specific assistance and coaching on these processes, feel free to reach out to me to discuss whether working together on a project might make sense. I’ll not only help point you in the right direction – with specifics – I’ll give some much-needed honest feedback (as appropriate) on the business. Good luck with your venture!
[Above image courtesy of stockimages at FreeDigitalPhotos.net]