There has never been a better time to start a business.
Innovation isn’t restricted to the people in silicon valley as well. People from all over the world are starting business and are targeting a global population as well.
The demographics of the world is wide and varied with tremendous opportunities. But these opportunities bring in their own set of problems.
Who is the audience?
What do they want?
Do they have purchasing power?
There are so many questions to be answered. And answering these questions are very important, because if you don’t go through the exercise of answering these questions, the pitfalls can be huge.
You can waste precious time, resources and money on building a business that nobody wants. A perfect example of a business that hasn’t done its research is Juicero.
Juicero was a silicon valley startup that was founded in 2013. Juicero manufactured this device which was effectively a juice presser. They’d give you these packets that you would attach to the presser and you would get healthy juice out.
People had to pay for the presser which retailed at $699 when it launched. Nobody bought it at that price and because of that they reduced the price to $399.
The presser also came with a downloadable app, that told you the expiry date of the juice within the packet and some nutritional information.
All of this, for some juice.
Juicero got into more trouble, when a report by Bloomberg suggested you could just take the chunk of pieces from the packets and squeeze the juice yourself, effectively making redundant the pressing machine.
The business faced a lot of flak and was eventually shut down in late 2017.
Do you know how much money was raised for Juicero?
All of this gone to waste. The investors lost their money, many employees lost their jobs, the founder lost his reputation. And all of this because they did not do basic tests of a product market fit.
Who would buy this?
Why would they buy this etc?
So if you don’t want to make even a $1000 mistake.
The concept of dating is similar to the product market fit process.
When you go on a date, you are testing the waters. You are checking to see if there’s attraction, compatibility, if the other person finds value in you and vice versa. And most healthy relationships don’t start on the first date. It takes a few dates to find out, if a commitment has to be made.
It’s the same thing with starting a business. You test the waters and see if people are interested in the product and if they find value in it.
This is the first step and the first reality check.
Our parents, especially in Asia, can smell bullshit from a distance and will be able to gauge the potential for a business. Not all of the time, but sometimes.
It’s the same thing with friends. They would be able to give you a fair idea if your business idea is good or not. If your idea is good, they will be able to help with ironing out the finer details.
If your parents and friends reject the idea. It’s a massive red flag.
The second step is to speak to people from the industry. Pitch the idea to them, ask their opinion and find out what they think of it.
Getting insider knowledge is key. They will be able to tell you in very clear terms if your idea is going to work or not. It’s also a great way to attract some possible mentors if the business does take off.
Now that you’ve spoken to close friends and family and industry insiders and if it’s still a green signal. It’s time to test the waters. The best way to do this is try to find out, if people would pay for such a service.
Create a landing page with all the useful information you can find and pitch your product. Also create a form that users can fill, asking their feedback on the idea.
The next step is to drive traffic to this page. Ask your friends and their friends to visit the page and give feedback. It’s important to get as many relevant people as possible.
The other way to get relevant people is to run Facebook Ads, Linkedin Ads, Quora ads and other major platforms. This will give you an idea of how people are reacting.
Find dedicated groups and meetups. If you find your peers and ask them for feedback, they will probably give you the most important information that you need to know about your idea.
If people are signing up(Software) or if they are buying(hardware), then it’s a good sign.
Speak to VC’s
The other good way to check is to speak to VC’s. VC’s are always looking for new businesses and new deals to make. They are also very harsh critics. They try to identify loopholes in the business plan. Even the smallest of issues can be a problem with VC’s.
Theirs isn’t the final say, but you will get a lot of valuable information from them.
After all these marketing efforts and speaking to experts. It’s time to use data. You would have identified your perfect target audience after all this research. Information like age, job title, industry, company size and so on.
Once you are sure about this demographic, run a dedicated campaign targeting these people. Run ads online, meet them offline.
If you get a lot of positive responses, then you are in the right track. But that’s still not proof.
The biggest proof is money in the bank.
When the dollars hit the bank account after a successful sale, that is when you know you have a product market fit.
But that’s also not the be all end all for things.
A lot of companies do try out new offerings to see how it works. Novelty always works, but when it wears off. The truth hits.
At that point, you might have to pivot, or change your target market a bit. But keep collecting data.
For a SAAS business, when you cross $10k in sales a month, it’s safe to say, you have a product market fit.
Talk to us if your keen to validate your business model and to see if we can come in to apply crazy growth hacking. 🙂