Yesterday I have watched this video about validating your business which has been recommended to me independantly by two Entrepreneur friends:
It shows you how to increase the odds that your business will be successful by focusing on the most important thing first: winning your first real customers, even before building your business and potentially wasting lots of time and money.
Some ideas from the video:
- Don’t ask people whether they “would” buy your product. Ask them to actually buy it for price X.
- Don’t ask people to fill in their email if they are interested in your product. Ask them to buy it or pre-order it for price X by providing your PayPal address.
- Don’t spend time building a website or an online checkout process. Simply call and meet people, and sell manually. Stop dreaming, you won’t have thousands of customers from the beginning. Chances are that you will have zero customers. Be happy to actually find one, two or three customers.
- Don’t assume what people would want. Talk to them. Ask them about their problems. Then solve those problems.
- Build something for yourself. Something you would like to use. That you are passionate about.
- Don’t waste your time producing business cards, incorporating your business or finding an accountant. Focus on winning that first customer. Then try to win five, ten or twenty customers. Once you have validated that you are actually building something that customers want — and most importantly: that you are able to convince real customers to pay for — then start worrying about all the other things.
- Don’t play business. Do business.
What I did right at Trigami:
When starting Trigami in 2006 I actually did exactly that. I called my friend Rouven from Exsila who I knew was interested in our service. Even though he was interested, he would have never told me ‘I want to be your customer, let’s start this first campaign’. I needed to call and ask him. And he immediately said yes. I sent him a manual invoice, and delivered the campaign manually the same day. And as you can read, this day was one of the best business days of my life.
What I did wrong at Trigami:
- I only did it once. This should have been my main task. At least 2–3 times a week. “Pick up the phone and kickstart your business”, this was the clear advice of our first potential investor Morten Lund. He was absolutely right. In the end he didn’t invest because he was not confident enough that we would do those calls. And he was absolutely right. Morten even said that the whole team has to make those calls. Everyone. No exceptions. And he is right.
- We distracted ourselves with building a website and blog, by applying to a TV show, by creating business cards and lots of other things. Instead of just picking up that phone. Yes, I was (and still am) afraid of rejection. Yes, I was (and still am) afraid of picking up the phone or talking to that customer on the street.
- I charged too little. The first campaign was 350 CHF. The second campaign was 172 EUR. The third campaign was 350 CHF. Can you see the pattern? It gets even worse: our gross margin was only 30%, so often we have made less than 100 CHF per client — while spending many hours preparing and delivering the campaign. Some years later — we actually were able to survive until then which was a miracle considering our weak sales approach — we figured out that a campaign that was smaller than 5000 CHF didn’t make any sense for us (nor for our clients). So we started to reject campaigns that were smaller than that. It’s very painful to reject customers, but it’s absolutely necessary in those cases and would have saved us hundreds of unprofitable hours of playing business instead of doing business.
This is the main reason why we were bought by Ebuzzing (and not the other way around). Ebuzzing actually launched a couple of months later than we did. So forget about first mover advantage and all that other blah blah. What counts is your ability to sell and to make a profit (= survive). Ebuzzing’s minimum budget per campaign was 10.000 EUR. With the first couple of campaigns they have already made 50.000 EUR, almost the revenue we have made during our entire first year with dozens of campaigns. The reason why most businesses fail is not competition or the bad economy, it is because they are not able to win paying (and profitable) customers. So forget about playing business. Get that first customer!