How to Know if Your Entrepreneurial Solution Makes Sense
Part 1 of the series “Risk & Reward: Navigating Your Road to Revenue”
Nov. 10, 2017
Starting a business is always challenging — statistics show that more than half of all companies fail in their first 10 years, and 75 percent of startups never return seed money to their investors. To paint a picture that’s even more dire, nearly 9 in 10 innovations fail in the marketplace.
There are many reasons for these failures, probably as many as the failed ventures themselves. At RevRoad, our team of experts has seen it all. We’ve had a lot of successes, and we’ve failed a few times too.
In this series, we plan to share many of those lessons with you. We are builders by nature, and we believe in entrepreneurs. We are confident that creativity, hard work and innovation are the building blocks of a better world for us all.
Starting from Scratch: Find Your Problem
The best business ideas don’t jump into their founder’s heads fully formed and ready to go to market. Instead, the best innovators spend a lot of time thinking about problems.
It starts with a basic premise: if you want to make money, you need to create something of value. The easiest way to do that is by solving problems for people, by fulfilling the needs they already have.
Fortunately, we are surrounded by problems. Next time you feel annoyed or feel the need to complain, jot it down in an idea book. Do the same when you hear other people complaining. Then, analyze what’s causing the problem. From there, start filling your head with ideas about how those problems could be solved.
Soon, you’ll have more solutions than you know what to do with. The next step is to decide on the right problem (and solution). First, your problem has to be a painful, either physically, financially or in terms of wasted time and energy for your potential customer. Next, it has to be a problem for a large number of people. Finally, it has to be a big enough problem that you can convince people to pay for your solution.
5 Simple Steps to Problem Validation
But how do you know if your problem meets that criteria? This process, known as problem validation, is difficult. But it’s not impossible. Below, I’ve laid out a few steps you can follow to make sure you’re on the right track.
1. Craft a predictive customer persona
This doubles down on the idea of a classic customer persona. It’s more than just a description of who you want your customer to be. Instead, it should describe the kind of person who is suffering from your problem, and suffering enough that they would buy your solution. I really like the way Laura Klein described the idea in the InVision blog.
Note: Don’t feel like you have to take on a large-scale market study here, but spend at least some time on research. Try typing your problem into a search engine to see what comes up. Look for discussion boards and forums, in particular, and read as much as you can.
2. Find at least 10 people who match that persona
This is where the real work begins. Do whatever it takes to find people who fit your predictive persona. Steer away from friends and family, as these people will be biased toward your idea because they naturally want to support you. Instead, find these would-be customers out in the wild. Organizations such as 1 million cups and industry-specific groups on social media can be a good place to start.
Note: If you can’t find at least 10 people with your problem, it may be time to go back to the drawing board. This is a pretty clear sign that your problem isn’t widespread enough. Just don’t give up too quickly — it’s normal to have multiple iterations at this early stage in the problem validation process. Go back to thinking about solvable problems and start over as many times as you need to.
3. Interview your customers to make sure solving your problem is a top priority
The next step is to schedule interviews with your would-be customers. This can be on the phone or in person. Start out by asking them about the problem you have chosen. Make a point of letting them talk; the more you get them complaining, the more information you have about what your solution should be. After they’ve said their piece, ask them if solving the problem would be a high priority for them. Have them rate the pain on the scale of 1-10, with 10 being the most painful.
Note: If you find people who have your problem but rate it below 7 or 8 on their personal pain scale, it might be time to pivot. To grow a successful enterprise, you will need to make sure you’re relieving a significant amount of pain. Think of it this way — you want your solution to be a “need to have” rather than a “want to have.”
Looking for inspiration? Check out the remarkable problem validation story of GoPlug, one of RevRoad’s Champions on the Road to Revenue.
4. Get customers to name a price
When you get your would-be customers to tell you they truly have a problem and that it is a painful one, they will be primed to hear about your solution. Before the interview ends, pitch them your idea. Tell them how you intend to fix their problem. Then, ask them how much it’s worth in monetary terms.
Note: If your would-be customers want your solution but aren’t willing to pay for it, it’s a sign that you haven’t chosen the right problem, or that your solution isn’t quite there yet. Don’t ignore this valuable piece of information. Getting it right before you start building will save you time, tears, and treasure in the long run.
5. Find multiple buyers, or pivot before it’s too late
You don’t need to get all 10 of your would-be customers to commit to spending money on your project. But if you can’t get at least a handful of them to do so, it’s time to go back to the drawing board.
Note: If you can’t get traction at this stage, be sure to ask would-be customers what’s stopping them. Really listening to their objections is your path to a good pivot and, ultimately, to profitability.
Conclusion: Pitch Before You Build
We’ve laid out some pretty specific steps for how to validate your problem, but you don’t have to follow them precisely to ensure you have a good idea (the serial entrepreneurs here at RevRoad haven’t always, anyway). But whatever you do, make sure that you’re solving a real problem and that the market for a solution is big enough. It’s the only way to be confident that your idea will make you money.
About Rebecca Palmer
Rebecca is a seasoned writer, editor and strategic communications professional with 10 years of experience telling important stories. She started her career in journalism and transitioned her skills into marketing, public relations and content management. She believes in entrepreneurs, and believes in the power of research and analytical thinking to propel them toward success. When not helping other entrepreneurs achieve their dreams, Rebecca reads voraciously, runs a small violin studio and is (slowly and awkwardly) learning west coast swing dancing.