Why You Have to Talk to Prospective Customers Before Starting a Company

In the movie, Field of Dreams, Kevin Costner is inspired to build a baseball field (hearing voices that tell him “he will come”). In the movie, we are led to believe that people will want this field and it will be a success. Well, this isn’t Hollywood, folks.

The most important measure of how successful a startup can be is customers, or prospective customers, yet most companies are founded without talking to any.

It sounds illogical and yet entrepreneurs are often inventors, do-ers, or organizers who are not comfortable talking to people because that resembles selling. This is very common in all types of startups including those in the tech sector and services sectors.

Look at the membership of any local chamber of commerce, professional society panel or rocket pitch event from a few years ago and see how many new companies presented/joined and still exist. The majority of startups fail within 4 years.

Why?
#1      No market for product

o       Market was overestimated

o       Product never got to market/ got finished (feature or market creep and then they ran out of money)

#2      Run out of money

o       Overspent (poor capital control)

#3      Poor Team (or not enough expertise)

o       Executive(s) didn’t listen to people

Have an idea?  Go out and talk to people about it. Ask them if it interests them or whether they would buy (and under what circumstances). Worried about your intellectual property or competition getting wind? You can still develop market validation by asking questions somewhat orthogonally, for example:

1.      For a product that would teach people how to set up a DVD player/HDTV, etc. in a novel way ask: who set up their own system, if it is working, how long it took, is the remote control working with every device. If I showed you an online site that walked you through your exact TV/DVD combo with remote and cables, would you have used it?

2.      For a product the turns of the water mains during a flood ask: Have you ever had a flood in your home or business? What happened? How much did it cost to repair? What did you do to prevent it happening again? What would you spend to make sure it didn’t happen again?

3.      For an industrial product that monitors temperature in a novel way so metals are produced to spec with less waste, ask: Do you have wasted production runs? What are the circumstances? What percentage of your metals are ruined and can’t be used? How costly is this in terms of materials? Lost business?

Ask as many people as you can. Don’t just rely on friends, family and business colleagues as they are predisposed to being nice to you. Do not rely on secondary data and market sizing gleaned from web sources and researchers as these do not prove that you have a solution that will be of benefit.

Typical benefits expected by B2B  are usually cost savings, cost avoidance, time savings, provides them a means to do something better/faster/higher quality/ or cheaper.  Ask for letters of intent. If you are lucky enough to spark the interest of a prospective customer, get them in your inner circle. Listen more than you speak.

Companies are built brick-by-brick, getting one customer at a time.