Entries Tagged 'Customer Development' ↓

A Method to Validate Your Business Idea

In this episode I break down a method I use to validate business ideas and then determine whether to move forward with development or ditch the idea.

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Choosing a Business Idea – Podcast Episode 001

This is the first episode of the passiveincometeacher.com podcast.  This episode is the first in a series in which I describe the process I use to come up with business ideas, validate them, and bring them to market.

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You only need a few customers to be successful

If you think about the numbers, you realize you don’t need that many customers to be successful.  Many people are seeking to get loads of traffic and huge list.  The problem is they are focused so much on growing their traffic and list that they miss the point of taking care of a small number of customers and then iterating.

Your focus from the beginning should be to find a person that wants what you are selling and is willing to pay for it.  If you can’t accomplish this with one person, what makes you think it will happen when you have many people coming to your site or on your list.  Now, I am not saying that more eyeballs looking at your offer won’t produce sales, but what will be the cost of acquiring those sales.  Will you have to write twenty blog post, spend $200 on ads, or follow 1000 people to make each sale?  Will it take you a day, a month, or even a year to get to a sale?  Will you be able to sell at all?

It is far better to answer these questions at the beginning of your venture.  Taking what you believe will make you successful and potential customers happy, building a rudamentay product, and getting actual sales, will prove whether you can be successful and in what time frame it can be accomplished.

I am speaking from experience.  I have build a lot of things I thought everyone would come running to and pay me money for.  The worst being the five years I spent developing a restaurant menu and recipe website that was suppose to shock the world.  It wasn’t until I finally decided to give it up that I realized this type of website was the model of what not to do.  The crazy thing is I was reading about the very stuff this article is about and I just kept right on down the path of failure.

Don’t be the guy who takes years or months to figure out if your idea is a failure.  If you think being bullheaded and going against the grain is a top characteristics of successful entrepreneurs, you are half wrong.  Yes, you have to go against Aunt Sally who says you are crazy for trying to start a business when you should stick to a real job, but you can’t go against your market.  They have to want what you are selling.  They may not know they want it because they don’t have it yet, but they have to want it and want to pay for it once they are presented with it.

The good thing about this way of validating an idea is you figure out you don’t need very many customers to be successful.  If you get 200 customers paying you $20 a month, you have an income of $4000 per month.  If you are selling digital goods, then subtracting even a modest overhead cost of $500 leaves you with $3500.  This is a nice income for many and it is attainable.  I know that many people reading this would say they would love to be at this number right now, but have failed to get anywhere close to reaching it.  I would say you need to stop and access what it is you are doing in your business and figure out if you can make it successful in its present state.

Do you have a product that people want to buy and are buying?  If not, you have to find that first paying customer.  Once you find the first paying customer, you will begin to understand if there is a demand for what you have and if there is someone willing to pay you for it.  Then, you look for your next customer, then the next, and so on.  The further you get down this path of acquiring customers, the better you will become at it.  You will start to see a pattern emerge and you will be able to summarize a process that you can scale.

If you can’t acquire customers, then you have to stop and rethink what you are offering.  It is the ability to stop the process quick and at the beginning of your venture, replacing your initial idea with a modified idea or a new idea, that gives you the best opportunity to succeed.  And because you are finding your real customers early, you are able to charge a price that makes your product viable and that only requires you to gather a small group of fans that will pay you.

It took me 12 years to make my first $100 and then…

The headline of this post is a title I used for a Warrior Forum thread.  The thread has been deleted because I got temporary banned; not really sure why that happened, but before it got deleted it had over 800 views and 49 comments.  The interesting thing to me was the responses I got to my simple post.

The post went something like this

“It took me 12 years to make my first $100  and then I started making money by building things that other people wanted.  Previously I had been building large data driven websites, believing that if I threw more pages at the search engines, I would make more money.  Then I realized that was not the right way.

Now I build things that people want and need and I make money.  So, are you building things that people want?”

The point I was trying to make was that we will continue to fail if we don’t identify a customer with a need that wants to solve that need with a solution that we can offer them.  First, yes it really did take me 12 years to make $100 on my own website, but I did not only make $100 in 12 years.

Many  people in the forum were sympathetic toward me and thankful that I had finally broken past the failure.  Some suggested that I should have stopped trying and gotten a real job at McDonald’s.  They even did some kind of calculation showing how I could have made over $200,000 at McDonald’s instead of letting all that time slip away.

I guess it was partly my fault that many people felt that I had only made $100 in 12 years.  The truth is that I had jobs and owned businesses during those 12 years and even had a little bit of success with Ebay.  I agree with them that if I had only made $100 and not done anything else, then I would have wasted a lot of time.

The other type of comment I saw in the thread often, was the “at a boy” and “way to persevere” comment.  These comments had a tone of “we are behind you” and “thank you for carrying the torch.”  I felt like people connected with my struggle; like it gave them hope to continue on.  Some of these commenters mentioned that they took a year to make money and couldn’t imagine how I would work for so long to get to my first $100.

Lessons learned

What I learned from the discussion thread is people are looking for a story.  They want to either offer advice, help, or identify their own struggles in other’s stories.  We all are this way.  It gives us a sense of belonging and of being needed.  I suppose that this is one of the underlying concepts that makes social networks so appealing.