What do you think is the number one mistake entrepreneurs make?
I’ll get to that in a bit. But first, let me tell you about a friend of mine of started a business during the pandemic after the lockdowns started. After doing some initial research, Mark realized there was a “need” in an industry he’s familiar with. He decided to get a domain, web host and created a website in 48 hours. It’s been 3 months since then and he hasn’t sold anything on his website yet. He’s done everything from blogging to SEO to social media, but results haven’t come in.
And then there’s Jane. She also saw a need, but instead of investing on websites and other activities, Jane focused on getting actual orders. She spent time talking to potential customers, getting their interest, asking for pre-orders, and getting paid all before spending anything unnecessary.
And that’s the biggest mistake business owners of all sizes make—not validating their ideas first and spend enormous amounts of money building and launching only to find out no one wants their products/services.
Sales Solve All Problems
Spending money when you have little to begin with is stupid and foolish.
No matter where you look, this story holds true, especially for small businesses who don’t have access to capital like tech startups. And if you really look at it, it’s really simple—the purpose of a business is to create a customer. You get revenues (or sales) from customers. If you can’t do that, then you’ll cease to exist as a business.
From Forbes to Entrepreneur to CB Insights, every one of them has a common theme. And that is the business can’t get customers.
Despite having different industries and offering different products, you’d notice that Jane’s approach is widely different from Mark’s. She follows principles behind bootstrapping and the lean startup.
Instead of spending time and money on things considered a requirement in today’s world, she spent her time getting real customers.
Key takeaway: what’s the next project or business idea you have right now that you want to launch? Make sure you think of getting paying customers upfront, instead of spending on other things.
Quit Making Up Excuses
You don’t need a completed product/service/business before you start selling to people.
When I share this concept with fellow entrepreneurs, they all think I’m crazy. That I don’t understand their business nor their industry. That may be true. But the approach of getting customers first also hold true.
By the time that product is ready to be distributed widely, it will already have established customers. It will have solved real problems and offer detailed specifications for what needs to be built.—Lean Startup
One of the principles of the lean startup is called validated learning. It’s the same thing as I mentioned above. You make sure that you validate your idea and get feedback every step of the way. (I’ll show you how to do this in the next section)
In the original context, startups usually spend years building a product before it gets released. Unfortunately, that is very costly and time-consuming. Remember the infographic above? 42% of startups fail because there is no product-market fit. That means, the startup spent a boatload of money and 2 years building a product that no one wants to buy.
Key takeaway: stop making excuses as to why you have to do build a website first, or hire sales people first, or build a building, complete your online course, or any other excuse. Get the ultimate validation by getting actual customer sales.
Test Your Ideas Using The Stair Step Validation
The goal of validation is to reduce your risk of failure. Early on, you might think that you business is the best and can solve everything. But, without sales, that belief is simply that—an assumption. Unless you get consistent sales, you can’t call that idea successful.
If you’re planning to start a business today, follow this simple 3-step validation. It follows all principles I mentioned above and won’t cost you anything beyond what is needed.
Step 1: Ask for Interest
The first step is to ask if the idea is worthy to pursue.
One of the mistakes first-time entrepreneurs make is to keep their ideas close and not tell anybody about it. But this defeats the entire purpose of validation.
Generating an idea is just the beginning of the process. Creating a sustainable business out of your idea takes a lot of time, effort, and resources, and it opens you up to a lot of risk.—Rani Langer-Croager
No matter how great the idea, you need to execute on it if you want to make it successful. Uber isn’t a unique idea. It’s what taxi operators already do. Someone calls the company to send a cab to wherever you need a ride. But Uber implemented the idea differently.
Going back to validation, if you’re planning to launch a new business, ask for people’s interest first. If people say it’s a stupid idea, then that’s a sign you should not pursue it. If people say it’s interesting or they want to learn more, engage in a dialogue.
The more feedback and insights you get early in the process, the better you can refine your idea. You have more to gain than to lose by sharing your idea with others.
By sharing your idea with people you trust, you might become aware of competitors you did not know about, challenges you were unaware of, or maybe even fundamental flaws in the possible go-to-market strategy. —Hillel Fuld
This step doesn’t have to be difficult. SMS, call, email, WhatsApp, message every one you know if they are interested in this idea of yours.
A simple, “hey, I’m planning on starting a business about ABC. Is this something you’d be interested in?”
If people don’t respond, follow-up. Engage in a dialogue. Find out why they are interested. Find out why they aren’t interested. This will help you refine your idea further. Once you do that, proceed to the next step.
Step 2: Get Buy-in
Getting a yes/no answer in the previous step is easy. By now, you have learned a few things that you originally didn’t consider for your business idea. By engaging in that dialogue, you now have validated whether to pursue your idea or not—without spending anything.
At this point, it’s time to measure that interest. People say things all the time. That’s why the next step is to look at their actions.
Ask for their email and/or phone number so be added to your email list. This way, you can keep them posted on the business idea you are validating.
If you asked for a simple yes/no question in the previous step, this one helps you generate real interest. It’s the same way as lead generation for any business. You ask for their contact information, or more specifically, their opt-in or consent to be sent further communications about the product/idea that you have in mind. You’d then nurture these leads, build a relationship, and increase their trust in you.
Use the same methods as above. Store them in a spreadsheet to keep track of it. By following the two steps above, you have validated your idea and received leads for your business idea—all without spending anything.
Step 3: Pre-orders
The last step is the ultimate validation of any idea—getting customers, i.e. generating sales.
Getting customers isn’t a one-step process. It involves a lot of steps and interactions with your brand before they buy from you.
Take, for example, window shopping. You keep coming back to the same store every other week. After some time, you decide to go for it, you go back to the store, go for the item, buy it, then head on out. If you think that that’s the only customer interaction you should care about, you’re obviously not seeing the big picture.
In our validation example, you’ve already generated interest in the first step. You learned more about problems and issues people are facing. In the next step, you asked for their contact information to be part of your database. This signifies a deeper commitment.
The final step is to get paying customers. No matter how unrefined the idea is, getting actual revenues is the ultimate validation.
Have you read the story of how Zappos started? “He and his co-founders weren’t even sure back in the late 90’s that people would date order shoes over the internet. So they ran a quick test: up goes a website with shoe images taken from manufacturers’ websites, some buy now buttons and watch to see what happens. Cha-ching. Order comes through, one of the guys sprints to the local shoe store, buys the requested shoes at full retail, and then scurries home to ship them out. Did they lost money on every pair of shoes shipped? Yes they did. But did they ascertain whether they had a potentially viable business idea? Yes again. All with zero inventory or fulfillment capabilities.”
This is also the reason why Kickstarter and Indiegogo aim to solve. Because launching a business is costly and you are not sure whether you’re going to get customers from it, creating a campaign in these platforms is a form of validation. If you meed a certain project goal, aka sales, that means your idea will be funded. That means you have generated interest and people are willing to spend money for it.
All that’s left is execution, which is another discussion by itself, but the point remains is that you can validate your ideas using this stair step model. By asking for interest early, you engage in a discussion with other people about the idea. You get the refine and develop it further.
From there, you move to the next step. You ask for buy-in by asking for people’s contact information and their explicit consent to support you by being part of your list.
Finally, once you pass that validation, the next step is to ask for pre-orders. This way, you are guaranteed that people are willing to spend their money on whatever idea you are developing.
No matter your industry, sales solve all problems. In the context of new businesses, getting feedback early on and getting sales is the ultimate form of validation.
