Startup creation scheme that allows you to evaluate your idea before you spend $ 1. Steps 1-3 of 6

Original author: Mitchell Harper
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If your startup fails, it's all because you could not solve the primary problem for a wide enough audience, so I will tell you how not to make this mistake again

Not so long ago, I announced the opening of our new startup studio, Capital H labs, in which I and a whole crowd of talented engineers and designers are working on products that can help companies grow faster and more predictably.
We will release our first product quite soon, and most of the time over the past 5 months we spent on 1) assessing the need for the product and 2) creating the product after assessing the demand.

Today I want to share a simple diagram that we used to evaluate our first idea, in the hope that it will help other entrepreneurs avoid mistakes.

For reference: this is exactly the scheme that we used to evaluate the ideas for Bigcommerce (of which I am a co-founder) in 2009. Today, Bigcommerce has more than 100 thousand solvent buyers, 500 employees and $ 125 million of venture capital.

Estimating the demand for your product is more important than ANYTHING. More important than features, your team, design, price, and more.
Without a market assessment, you will get a product for which no one will pay. You will spend a lot of time, energy and money, and earn stress, depression and a feeling of complete burnout.

And this is insulting. Very disappointing.

So let's get started. I'll tell you how to evaluate the idea of ​​your startup even before launch. Before you invest $ 1. Before you hire someone.

Step 1 - Write down the problem, not a standalone solution

You need to formulate a problem that you or other people encounter regularly. Please note that here the emphasis is only on the problem, and not on a separate solution - it will come later.

You need to write down your problem in simple words. A few examples:

  • It is not possible to keep in touch with customers after they leave the restaurant
  • It’s hard to determine which customers will be unhappy before this happens.
  • It is very difficult to develop professional graphics for social networks

I think you understand me - stick to the basics and simplify the problem until you can formulate it in one sentence.

Step 2 - Determine if This Problem Is Paramount

Finding problems is easy - they are everywhere. What you really need to find is what I call the “primary problem”, which means that the problem you have to solve is one of the 3 most important problems your consumers are experiencing.

Imagine that your (potential) target customer is the CEO of a small company. 5 of its main problems may look like this:

  1. Generate more sales
  2. Make marketing work more efficiently (hire a marketing manager)
  3. Outsource payroll and benefits
  4. Expand the product range
  5. Promote on social networks and invest in ads on Facebook

If you plan to launch a tool for social networks, you may notice that this is NOT the primary problem (one of the 3 main) for the average CEO of a small company - it is only the fifth on the list.

They will be so focused on solving the first three problems that they will never pay attention to you - EVEN if you have the best product, EVEN if you have the best support, etc.

They simply will not have time (or money) for you, if you do not solve the problem that is most important to them - the primary problem.

This is probably the most difficult lesson to learn, and which most startup founders ignore - “But my product is so cool, if they try it, they will definitely buy it !!!”

So how do you check if your problem is paramount? First you need to know who can buy your product. You need to build a basic profile of this kind:

  • Company size: 100-500 people
  • Role: CEO or Vice President of Marketing
  • Location: North America
  • Industry: Sales, Technologies, and Hospitality

After that, you need to make a list of 20-50 possible customers who meet these criteria. The easiest way to create such a list is to go to LinkedIn and do research. Then just contact potential customers by writing them a message, like this:

Hi [name],
We want to talk for 15 minutes over the phone with the CEOs who are faced with [the problem]. We conduct research and do not sell anything. Could you give us time tomorrow at 15-00?

A few points:

  • Be concise and concise - don't waste their time
  • Turn on a specific date and time immediately - this will avoid unnecessary correspondence by mail
  • Write three times as many potential customers as you want to talk to. That is, if you want to talk with the 20th, write 60. Most will not answer, and some will just be uninteresting

Excellent. Now you have 20 people who are ready to talk with you and who have encountered a problem you have discovered.
(I understand that I greatly simplified this step - but you are an entrepreneur, use a creative approach. If you don’t like talking to people on the phone, then maybe this startup is not for you ...)

Before you make the first call, you need to make up about 10 questions that you ask them. As a result of the call, you need to evaluate that:

  1. They ran into this problem
  2. How difficult is it for them (i.e. is this a primary problem?)
  3. How do they solve this problem at the moment?
  4. Are they willing to pay to solve this problem?

Compare the answers for all of your calls in a Google, Evernote, or other document. After 5 or more calls, you will begin to understand whether this problem is really significant or if it just doesn’t hurt.

Never create a startup to solve a problem that "would be nice to solve." People will use your product, but will never pay for it.

Step 3 - Clearly Define Available Solutions

After more than 20 calls, you will learn one thing - how this problem is currently being solved. People can name certain products / companies for you, or they can describe the process in the company, or to whom they outsource this problem, etc.
It is very important to find out during the call. Do not ask, “what product are you using to solve this problem?” Because they may not use a particular product.

Instead, ask, “How do you deal with this at the moment?” and just listen. They can use the product, or they can put together a bunch of tools or processes to solve a problem.

In general, you need to solve a problem that other companies are already trying to solve. In most cases, this will show that the market for your primary problem is quite large - perhaps you have at least one existing competitor that is doing well (he is popular, he has borrowed funds, he has been on the market for several years and has been growing successfully, and etc.).

Be careful if no company is trying to solve the same problem as you. In most cases, this means that you do not understand the market or that your problem is too specific and affects too few people. Specificity is good, but it needs to be balanced with a fairly large market.

Part 2

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