Creating a business is easy. Anyone can do it. But what if I told you that great idea you have will likely fail? In fact, 90% of all startups fail within the first year of operation. Even companies with millions of dollars in funding from investors face an overwhelming risk of failure.
So chances are the business idea you have isn’t going to work out. That’s a sobering thought, but it’s a reality check that might help you avoid making the same mistakes as countless other entrepreneurs.
The truth is, there is no magic formula for creating a successful startup. There’s no way to guarantee your product or service will be profitable, and there’s no foolproof plan that will ensure success.
Still, if you’re determined to launch a startup, here are some helpful tips for coming up with ideas and building your business from the ground up.
- Talent vs Genius: How to come up with ideas for a startup
- Embrace Lean: How to turn an idea into a business, quickly
- Step 1. Research the market
- Step 2. Testing your ideas
- Step 3. Create a startup business plan
- You DON’T need to build a product: Replacing MVPs with Minimum Viable Tests
- How to launch successfully (sell it before you build it!)
- The benefits of pre selling
- How to successfully pre-sell your idea
- How to use data from pre-sales to improve your startup
- Key takeaways: How to go from an idea to a business
Talent vs Genius: How to come up with ideas for a startup
There is a lot of discussion about whether or not entrepreneurs are born or made. Are entrepreneurs a certain type of person, or do they come from a particular background?
The truth is, you don’t have to be a genius to come up with ideas for a startup. But you do need to know how to come up with ideas for startups.
A lot of what we call “talent” in the traditional sense is really just a combination of natural aptitude and thousands of hours of practice. Increasingly, the best way to get good at something is to get lots of practice at it.
For example, if you want to become a great basketball player, you should spend thousands of hours practicing basketball over the course of years. You don’t need any special innate talent or abilities to get good at basketball; you just need to put in the time.
A lot of people are unwilling to do this because they’re afraid that they’ll look foolish while trying to learn something new, or that they won’t be able to pick up the new skill after putting in so much time. However, if you keep trying and keep practicing, you can get very good at almost anything – including having good ideas.
Idea generation is a just skill. Like any other skill, it can be learned and honed. You can learn to come up with better ideas faster than most people can. Creativity is not magic, it’s just the application of a few simple principles. And when you understand those principles, then it’s easy to learn how to apply them.
The reason some people seem more creative than others is not because they’re some kind of genius — it’s because they’ve learned how to be creative on purpose.
Fulfill unmet needs
There are a lot of ways to come up with startup ideas, but one of the most useful is to look for “unmet needs.”
The basic idea is that you can turn problems into opportunities. A lot of people have problems, but not everyone has the resources to solve them. If you’re able to fill that void, then there’s a pretty good chance you can create a successful business.
The first step is to define your target customer. What do they want? What do they need? How could you serve them better than anyone else? These questions are all about figuring out what your customers want and helping them get it.
But there’s a catch – don’t assume you know what they want. Instead, ask them – directly – and listen carefully to their answers. If people are getting hurt, in pain, or feeling bad, you can bet they’re looking for a solution.
Whether you’re building a startup or working at an existing company, you can’t ignore customer feedback. There are plenty of startups out there who are killing it because they listened to real customer feedback and acted on it.
Take Airbnb for example.
Built by two guys who couldn’t afford the high cost of hotel rooms at the time of a conference, they scoured Craigslist for potential properties to rent out to attendees. They found an old couch in a guy’s living room that they could use as a bed. Then they added pictures of the couch on their website to advertise it as an available property.
They were able to charge less than hotels because their costs were lower. This is called being “lean” – not wasting money by over-paying for things or having too many employees or too much stock on hand. It’s effective because it cuts down on excess expenses so the company has more money to spend on customer success instead of operating expenses.
Airbnb has over 5 million active listings worldwide; listings can be found in over 100,000 cities; 150 million people use Airbnb to book stays and experiences; and more than 800 million guests have stayed at Airbnbs.
Today Airbnb is worth more than $100 billion dollars; all because they fulfilled an unmet need.
Make people’s lives easier
Great startups are always built around solving a problem, no matter how big or small. Some of the best ideas are the ones that make people’s lives easier, whether you’re addressing an issue in the consumer world or an inefficiency in the business world.
The best thing about starting your own company is that you get to choose what to solve. You don’t have to take an idea from someone else; you can start with whatever problem you want.
If you’re having trouble coming up with ideas, start with what’s bugging you personally. Think about the problems in your life and ask yourself whether anyone would pay for a solution. Then, think about what could be done differently at work or at school. What problems do your co-workers complain about? What tasks do you dread?
Once you’ve come up with some solutions, look for other people who might be interested in them. Are there discussions online about these issues? Are there businesses that could benefit from better solutions? Are there jokes on TV or in movies that hint at real problems that should be solved? Are there forums or discussion groups where people are talking about these issues? Are people tweeting about them?
When looking for ideas, remember not to limit yourself to things that bother only you. This is where doing your research comes in handy — reading industry reports, talking to friends and family members who have similar interests, doing surveys online or even just asking people on the street.
Remember, good startup ideas will solve a problem for people. They reduce the pain of some process or it makes life easier in some way. If you can solve a problem for someone, they may very well pay you to do it!
Save people money
If you’re not getting any good ideas, try looking at what people are wasting their money on.
People spend money on things they don’t need because we either outsource our thinking or we don’t put in the effort to think about an idea critically enough. As a result, we miss opportunities and waste money.
Think about how many hours and cash spent could have been saved if someone had taken an extra moment to think about the problem and come up with a better solution. It’s really easy to just buy something without questioning whether it will actually do the job (especially in B2B).
Try to observe people spending money on “solutions” that either don’t solve the problem at all or solve it in an inferior way.
Be faster, cheaper, or more accurate
Have you ever heard of the Innovator’s Dilemma?
It’s an idea about how incumbents can fall behind new entrants in their markets. It comes from a book of the same name by Harvard Business School professor Clay Christensen. The idea is pretty intuitive. Companies are under constant pressure to innovate or die. The problem is that it’s really hard to predict what customers really want, and even if you’re right, it takes a long time to build something that customers will love.
If they predict wrong, they’ll build something that doesn’t solve the problem well or they’ll build something that solves the problem in an inferior way. If they predict right, but take too long to build it, someone else will come along with a solution that is better and cheaper.
One of the most common mistakes that entrepreneurs make is thinking that they have to come up with a completely original idea. Most successful startups are built on top of someone else’s work, taking an existing concept and improving it in some substantial way.
The best entrepreneurs are great at coming up with new ideas. But they’re also skilled at recognizing opportunities to improve what’s already working.
Consider Google, for example.
Most search engines at the time were extremely complex and filled with advanced features, but Google was designed to be simple and fast. It offered the basic set of search tools that users wanted, but no more than that.
Adapt to changing needs
The most successful entrepreneurs are good at spotting market trends and figuring out how to turn them into moneymaking opportunities. Some buy into existing businesses that are poised for growth, while others create their own startups from the ground up.
Some of the most successful startup ideas seem obvious after the fact, but they represent opportunities that were less apparent for people at the time. As we see above, Google was not the first search engine, but it was the first to do what it did so well that it became dominant. The first MP3 players were clunky and were not much fun to use, but Apple’s iPod changed everything by being smaller, more portable and easier to use.
Simply pay attention to what’s happening in the world around you and you might find that you can come up with plenty of ideas without even thinking too much. And if you’re not actively looking for new business opportunities, at least be aware of what’s going on so you don’t miss a great one when it comes along.
One way to start is to design a simple competitive analysis of your industry. Here are a few things to consider:
What is the historical trend in market size? If costs are going down or technology is getting better, that suggests potential for new products or services that might take advantage of those trends.
Changes in the marketplace.
Who are the major competitors? Are there any new companies that have entered recently? Who are their customers and how do they differ from yours? Are there any signs that any of your major competitors are struggling or not able to keep up with market changes?
Changes in customer needs.
Who are the major players in the market, and what do they offer customers? What needs do your customers have that aren’t being met by existing solutions?
What will happen next?
To make a good forecast about what’s likely to happen, you also need to think about future events that could affect the market—both positive and negative.
Finding opportunities is all about keeping your eyes open to what’s happening around you. The more you look around, the greater your chances of spotting something where you can improve things for the better.
Take inspiration from the market (why it’s okay to borrow from other ideas)
“Steal like an artist,” said Austin Kleon, the author of the book by that name. He was speaking about acquiring inspiration, but that’s also how startup ideas are born.
(Editor’s note: Don’t take ‘steal’ to mean it’s okay to commit corporate espionage, plagiarise, or simply rip off other people’s idea — but do think about how you can study, remix, mash up and transform!)
Ideas aren’t what make successful startups. It’s the execution! And if it’s a good idea, then someone else has probably already thought of it.
This is why I always tell people to come up with a good idea and write it down, but don’t start building right away. Instead, go find 10 businesses based on the same idea and start doing your research.
Chances are you’ll find two or three that are doing really well, one that’s doing OK, and five that are struggling or failing. Study those five flops carefully to understand why they failed so you don’t repeat their mistakes.
But don’t stop there. If you want to succeed, find someone who has succeeded and copy what they do and how they do it. We’ve all heard this, but we don’t always put it into practice.
Let’s say you want to start a business selling pet food online. Go onto Amazon and type in “dog food” or “cat food.” Just pick one, I don’t care which one. Now look at the first page of results and tell me how many people are doing the exact same thing as you. Are there 10 different sites selling dog food? Or maybe 100?
If there are multiple businesses already selling pet food online, that’s a great sign! It shows there’s a large market for it and that people are either not aware of your opportunity or if they’re aware of it, they’re not taking advantage of it yet.
The key here is that if you’re going after an existing market, your job just got 1000x easier because you’re copying what works already.
Steve Jobs once said that “Creativity is just connecting things. When you ask creative people how they did something, they feel a little guilty because they didn’t really do it, they just saw something. It seemed obvious to them after a while.”
Building the next great startup or creating something awesome usually comes down to identifying two or three things that you like and putting them together in a new way.
The best innovators are simply masters of combining existing elements in new ways. They don’t invent anything new in an absolute sense, but rather recombine what already exists in radical new arrangements.
Steve Jobs “stole” from Picasso when he said, “Good artists copy, great artists steal”. Picasso “stole” from T.S. Eliot who phrased it as, “Immature poets imitate, mature poets steal”. Eliot “stole” that from Oscar Wilde who gave us the line, “Talent borrows, genius steals”. Who knows where Wilde “stole” it from…Via Medium
Embrace Lean: How to turn an idea into a business, quickly
Ideas are cheap. Making something great is hard. Making something profitable is even harder.
The process of building a startup is the process of learning how to learn. It’s about figuring out how to figure things out: how to come up with ideas, evaluate them and make things happen.
You learn how to do this by building your ideas. The process of creating something out of nothing and making it successful teaches you what works and what doesn’t.
Your first idea isn’t likely to be your best idea. But as you build more and more, you’ll find you’re able to generate better ideas faster. You’ll know which ideas are likely to succeed or fail, and why.
The steps below will help you turn your idea into a successful startup. This process should take you from initial idea to a minimum viable product in four weeks or less.
If you have more than one idea, you should start with the one that excites you the most. If you can’t get yourself excited about an idea it is unlikely that you’ll be able to get anyone else excited about it either.
Step 1. Research the market
Most startups fail because people don’t do enough research. They jump into the fray with a great idea, put a team together and then find out that the market doesn’t want the product they’re selling.
Product-market fit is critical for startup success. It’s the difference between a successful business and a failed business.
For a lot of founders, building a product is easy. Building a successful company that serves its market well, however, is much more difficult. There are many different reasons why startups fail, but at the core of each failure is a lack of product-market fit.
How do you find product-market fit? The best way is to test your assumptions about what you’re building by talking to potential customers.
Testing your assumptions about the problem you’re solving and the potential solution is called market research . Most founders underestimate how long it takes to do good market research. Worse yet, they often run out of time or money before they get to this stage in their startup’s lifecycle.
The goal of market research is to identify the size and shape of the opportunity your startup might pursue. The more you know about the potential success of your business, the better able you are to make smart investment decisions.
There are wide ranges of opinions on how to approach market research. Some people think that surveys are enough, but surveys are notoriously easy to manipulate. Others insist that customer interviews are key, but that’s only useful if you have an existing customer base to draw from. If not, then it’s time for some good old-fashioned legwork: looking at industry statistics and just talking to anyone who will listen.
Even if you’re working on a passion project, there’s no reason to overlook the power of market research. The most successful entrepreneurs spend time looking for an audience and validating their ideas before they take the plunge and start building.
Research tools for startups
When you’re starting a business, it’s important to do your homework to see whether others are interested in what you’re planning. There are a number of market research tools available to help you discover the viability of your idea, as well as your potential customer base.
There are many ways to conduct market research on Google, but one thing that I love is using Google Trends, Google Alerts, and Google Keyword Planner.
Google Trends is a great tool for comparing search volumes over time, as it can tell you the popularity of any keyword over the past year. This way you can see how often people are searching for a specific keyword and what time of year it trends more.
Google Alerts is great for tracking your company, industry news, and competitors’ websites. You can set up an alert for a particular phrase or word, and Google will send you an email every time they find a new article that matches your query.
Google Keyword Planner is a tool specifically for researching keywords, it shows search volume, cost-per-click data and related terms for specific keywords. You can use this information to make sure there’s enough demand for what you’re selling, or to decide how to position your product in relation to others in its niche.
The Persona Canvas can help us structure our thinking around what kind of person will be using our product.
The idea of the Persona Canvas is to make it easy for your team to share all of the information you currently know about your users, and brainstorm everything that you would like to know.
It helps you identify the problems you should be solving for, and to prioritize which ones you should solve first.
Who are your users? What do they care about? What drives them?
The answers to these questions will determine the features, functionality and maybe even the name of your startup.
Going beyond Personas
Personas are a great tool for helping teams understand customers and what they need. But a persona is a fictional character — a composite of people the team thinks could be customers — who represents the needs and wants of the target audience.
Personas are great for getting inside the heads of your users. They help you envision who they are, what they want, and how they’ll react to different situations.
But personas have some drawbacks, particularly when you’re beginning to develop products or services rather than qualify people in or out for sales or marketing. That’s when empathy maps and customer profiles can perform better.
Empathy map: An Empathy Map is a tool used in the Discovery phase of the Design Thinking process. It can help you understand the perspective of your audience, answering questions like, “How are they thinking? What are they feeling? What do they want?”
You can use an empathy map to generate ideas for your product, improve your current product or service, or to identify opportunities where you can improve.
Customer profile: The Customer Profile is a tool by Strategyzer. It distills everything down to jobs, pains and gains. “Jobs” are what your customer wants to achieve, “Pains” are what stops them from doing it, and “Gains” are the benefits realised if the “Job” is successfully achieved.
Jobs-to-be-Done (JTBD) is a framework for innovation, and it has been embraced by some of the most innovative companies in the world, such as Google, GE, and Procter & Gamble.
JTBD is a customer-centric theory that helps companies understand why customers buy and how to create new products and services that satisfy unmet or latent needs. Understanding what customers want and need is the first step to creating new products and services customers will love.
The basic premise of JTBD is that consumers hire products to do jobs for them. And in order to understand how to create innovative products you must first understand the job that needs to be done.
In other words, customers don’t want to buy a product or service from you — they want to achieve a certain outcome.
The theory of Jobs-to-be-Done was developed by Harvard Business School professor Clayton Christensen, who described the concept as an alternative to product management defined by consumers’ needs and wants.
Consider, for example, how Procter & Gamble stumbled upon the Febreze brand of air fresheners. Because consumers were not cleaning their houses very often, P&G could have devised a better mop or more efficient vacuum cleaner. Instead, they invented Febreze. The product’s ability to eliminate odors—a job that people were “hiring” it to do—transcended its role as a mere room deodorizer.
Their focus on the job allowed P&G to see past the existing technology like mops and vacuum cleaners that were failing customers and instead create an entirely new product category that customers quickly came to love.
This is the same reason that we usually don’t buy a drill because we want one, but rather because we need to hang some pictures or to repair something. The same goes for dishwashers, vacuum cleaners or even smartphones.
It’s the job that needs doing that drives purchasing decisions.
Step 2. Testing your ideas
The path to startup success is littered with the carcasses of companies that came up with a great idea and then failed to sell it.
Before you start building a product or a company, you have to ensure that there’s a real need for it in the market. By having a need validated, you’re also more likely to build something that people will actually pay for.
(It’s definitely possible to create a successful startup without ever talking to your customers, but it’s very risky and very rare.)
If you don’t test with real customers from the beginning, your chances of building a successful startup go down considerably. But your chances of success improve dramatically if you can test your idea before you build it.
Develop a hypothesis. What makes you think people will want what you’re planning to create? Be specific, and try to turn your idea into an experiment that can be tested with real customers.
Find your target customers. Who is most likely to buy what you’re thinking of selling? How can you reach them? What questions can they answer about whether or not they’ll buy from you?
Test your idea with real customers. Find people who fit the profile of your ideal customer, and give them an opportunity to buy what you’re planning to sell. Keep it simple, but make sure it’s something they can’t get anywhere else.
What do they say? Do they want more information? Can they see themselves buying from you in the future? Would they recommend your product or service to their friends?
This is the moment of truth — find out if you’re on the right track with your startup business ideas or if you need to go back to the drawing board.
Essential tools for testing your idea with users
Ideas are easy. Everyone has ideas. The hard part is converting them into successful companies. That’s why it’s so critical to test for viability as early as possible.
The first step is to develop a hypothesis about the idea you’re considering. This will be the basis of your test, and should reflect your theory about what market need you’re addressing and how you plan to do it.
Here are some tools that can help you test your ideas.
The Mom Test (Book)
If you are an entrepreneur, you’ve probably already heard about the book The Mom Test by Rob Fitzpatrick.
This book is one of the most popular books for startup founders and innovators, and for good reason — it teaches you how to ask questions in a way that means even your mum can’t lie to you!
Google Design Sprint
The Design Sprint is a 5 step, highly iterative process that helps startups and businesses go from a vague idea to a testable prototype in just a week. Using the sprint, you will be a few days away from having your first truly validated learning about your customer, by asking them what they want and need. The method is great for startups, but also for established companies who want to get to market faster or bring innovation into their organisations.
The Design Sprint has been used by leading brands such as Google, SAP, Nike and Zappos. The methodology has been applied to problems ranging from increasing sales of cereal bars in supermarkets to building new user experiences for digital products
In the 5-day process you will build wireframes and prototypes based on customer feedback gathered during the last day of the sprint and create an action plan for further development of the solution.
Value Proposition Canvas
The most important element of any startup is the Value Proposition—the unique thing you, the startup, will deliver to your customer to solve their problem. The Value Proposition is also sometimes referred to as your “Unique Value Proposition” (UVP) because it’s the one value you will uniquely deliver to your customer that no other company can offer them.
The goal then is to identify that one thing that you will offer that no one else can. If you do this right, your startup will have a huge competitive advantage in the market.
Strategyzer’s Value Proposition Canvas is a structured and proven approach to writing compelling value propositions. It is a simple but powerful tool for getting everyone in the company on the same page regarding who you are, who you serve, and what you can do for them.
With this canvas, you will be able to:
- Understand your target customer better than ever before
- Create a compelling value proposition that differentiates you from the competition and attracts new customers
Step 3. Create a startup business plan
Anyone who has ever started a business will tell you that the process is not glamorous, but it can be very rewarding. Starting a new business can be incredibly exciting and stressful at the same time. There are so many things to do and so much at stake.
A startup business plan can help you add structure to your idea and determine if it’s viable.
Here’s how to develop an effective startup business plan:
- Start simple. Startups start small. That means they should focus on meeting specific needs. If people are paying for solutions to these needs, there is likely a market for your solution.
- Test the idea. Startups should be able to prove their concept through “minimal viable products” (MVPs). An MVP lets you test the viability of the idea without investing additional time and resources into development. A simple prototype or beta version is often all that’s needed to test the waters before committing larger resources to the idea.
- Define your goals and metrics. What goals will you set to measure success? How will you reach those goals? How much money will it take? This section of your plan should provide an overview of these goals so you can prioritize them as you move forward with development and design.
- Outline operation structure and key personnel roles. Every startup has a different operation structure, but this section of your plan should outline who will do what beyond just founders and other core team members.
The idea of coming up with a startup business plan may scare you, but the truth is it’s not that hard. All you need is a pen, paper and an hour or two of your time. The hard part is doing the research, putting together the plan, and actually executing on it.
While you can learn a lot from a well-thought through business plan, the process of writing it will slow you down. Don’t forget that the most important things to do when starting a business are to test your ideas and talk to users.
Tools for creating your first business plan
Once you’ve got a business idea, it’s time to get to work—but not before you put together the building blocks for your new business.
Even if you are looking at an existing business concept, it’s important to thoroughly assess your idea before you spend money on it. This is where the lean canvas and the business model canvas come into play.
The Lean Canvas is a tool designed to help startups get their business off the ground quickly without having to spend months doing it. It was created by Ash Maurya, who is an entrepreneur himself and has used this method to create multiple startups.
The primary purpose of the Lean Canvas is to give you a quick way to communicate your startup idea with other people – investors, co-founders, potential employees, etc.
There are a lot of things that you need to consider when creating a startup – how you will make money, your value proposition, your customer base – and the Lean Canvas allows you to focus on only the most important elements at first.
Business Model Canvas
The business model canvas is more complex than the lean canvas, but still offers a simple, visual way to describe the components of a company’s business model. It was developed by Alexander Osterwalder and Yves Pigneur and introduced in their book Business Model Generation.
The objective of creating a Business Model Canvas is to capture, structure, analyze and describe the business model of a given company or project team. In doing so it forces one to think about creating value for customers in a structured, comprehensive manner.
You DON’T need to build a product: Replacing MVPs with Minimum Viable Tests
We have a simple rule here at SeedReady: don’t build products, build tests. It’s fine to talk to customers and get feedback, but before you can create something that people will pay for, you must be able to prove that they will.
Minimum viable product (MVP) is a concept popularized by Eric Ries, author of The Lean Startup . The idea is to build products with just enough features to test the main hypotheses behind your product. Then you iterate based on customer feedback.
I love minimum viable product, but I’ve seen it misunderstood in a few ways. An MVP is the most basic version of your product that you can create to test a hypothesis. Commonly it’s referred to as a prototype, but this is not accurate because it implies something physical. An MVP is anything that allows you to test your assumptions about how people will use your product.
How your minimum viable product (MVP) will kill your startup
I’ll explain this definition more in the next section, but for now, let’s get rid of this myth: an MVP is not the thing you build before building the real thing. It’s something you build to test an idea, and it isn’t necessarily an executable version of what you’re trying to build. So while some MVPs are prototypes or mockups, they could just as easily be things like scripted user journeys or even just surveys. And sometimes an MVP isn’t even something you can touch — it’s data from analytics tools like Mixpanel or Kissmetrics that allow you to see how real people are interacting with mockups on your website.
It’s relatively easy to build a minimal viable product (MVP) for your startup, but it’s incredibly difficult to build one that people want. The reason for this is that MVPs are typically functional but not necessarily desirable. They are often missing key features that would allow users to see the value of your product, which makes them inherently inferior to alternatives. This causes users to abandon your product in favor of an alternative that has more functionality, which you may never learn about unless you can effectively communicate its usefulness through testing with real users.
The best way to do this is by using Minimum Viable Tests (MVT’s).
How to use minimum viable tests (MVT) to avoid wasted time and failed startups
Minimum Viable Tests (MVT) are lightweight experiments designed to test risky product and business assumptions cheaply and quickly, minimizing the time and risk involved. MVT’s help you shorten your feedback loop and avoid wasting time building products people don’t want.
MVT’s focus on learning from the results of experiments and failing quickly and often makes them an excellent technique for entrepreneurs and innovators alike. You can do MVT’s at any point in your process, but they work best early on when ideas are fresh and unproven.
An MVT is similar to an MVP, but it is less about having a product and more about validating what you MUST be right about – the assumption that, if wrong, will kill your startup.
An MVT is a test of the essential components of your startup before you try to build or launch anything. It helps you identify your target customer, understand what they want, validate the core problem you are trying to solve, and prove you can build a business.
There are five key elements within an MVT:
- Identify a clear hypothesis of what you expect to achieve from the test
- Choose a metric for testing
- Select your target customer base
- Design your experiment on paper
- Execute the experiment
The results of your MVT will tell you if your hypothesis was correct or incorrect. If it’s incorrect, you can tweak your idea and run another test until you have a valid idea that satisfies real customer needs.
In this way, MVT allows you to complete user research for new products without building anything! This can be a huge time-saver since gathering feedback on an MVP product can take months of development time. In contrast, getting quick feedback on an MVT only requires hours or days of planning and preparation time.
How to launch successfully (sell it before you build it!)
Let’s start this off with a simple statement: the best way to build a successful startup is to sell it before you build it. The reason I believe this so strongly is because, for startups, validated learning is the ultimate goal. Validated learning is when you have a clear answer to your fundamental question: “Is there a market for my solution?”
The best way to do that is to sell your product or service before you spend all of your time and money building it. Why? Because it gives you crucial information that you can use to shape and improve your product or service before you launch.
Put bluntly, preselling your startup idea is the best validation possible. It’s better than customer interviews or surveys because it demonstrates that people will buy what you’re making — before you’ve even built it. Preselling also shows that customers are willing to invest their own time and money in the idea, which indicates strong product-market fit.
The benefits of pre selling
Crowdfunding is a really common approach to pre-selling your idea, and one of the most famous examples is the Pebble smartwatch, which raised more than $10 million on Kickstarter before it even had a product to sell.
Now, you might be thinking, “I don’t have the clout or platform of a Pebble.” But you don’t need it to test your idea in the marketplace. Pre-selling is not just for crowdfunding campaigns, it’s also a great way to validate you’re building something that people want.
There are two really compelling reasons to pre-sell products or services before you build them:
Pre-selling helps you define your product.
If you’re trying to figure out what users want, it’s easy to ask for opinions and suggestions. It’s another thing to have them commit their cash before they ever see the product. That makes them much more invested in the product’s success.
Pre-selling helps you raise capital.
There are many great examples of companies that have used crowdfunding platforms to raise seed funding for their startup ideas. It can help prove there’s an audience for your idea, and it can help raise money to build out your concept on a small scale at first.
Pre-selling helps you generate hype and demand.
Pre-selling helps to build demand for your product before it even exists so when it does become available, there is already a fanbase for it and people will be excited to try out the new thing that they heard about and wanted, and might even pay more than the price that they originally saw because of the anticipation and excitement built up in them since the original announcement of what is coming up.
Creating hype around your product or service can help raise awareness which can lead to press coverage and additional social media followers who will help spread the word about what you’re doing
Pre-selling helps you build trust with customers.
Pre-selling helps you build trust and transparency with your customers. You can share progress of your product or service, get feedback from your customers, and generate sales for future products!
You must be cautious though, if you take pre-selling too far and create too much hype, your customers will feel betrayed when you don’t come through with your promises. Good communication is essential.
How to successfully pre-sell your idea
Pre-selling is a valuable strategy that can be used to test the market for a product, increase customer demand and build a community of brand ambassadors.
To pre-sell a product effectively, you need to treat it as if it were already available, and make people feel as though they’ve bought something valuable by backing your startup. To succeed, you first need to plan ahead.
Here’s how to do it:
Step 1. Start by writing down what you want your pre-sale to accomplish. Obviously, you want to raise money in exchange for something valuable, but what else? What are your goals? Try to outline everything you want out of the pre-sale so that when it’s over, you can check off each goal on your list. For example, is it important that you have early adopters on board so that you feel validated? Do you want to survey people about their interest level in your product or service? Do you need additional feedback before moving forward with development? Are you looking for capital? You might answer “yes” to all of the above, and that’s okay! Once you’ve answered these questions, it’s time to on your target customers.
Step 2: Identify your target audience and what they’re looking for. Who is your buyer persona? What pain points does your product solve? What other products are out there that compete with yours? What will convince your target market that yours is better?
Step 3: Create a sales pitch and use it consistently. Your pitch should be simple and straightforward. The more complicated it is, the more likely you are to lose the attention of your audience. Keep it consistent so people can recognise it when they hear you speak about your product. This consistent message will help promote your brand and solidify relationships with potential customers.
Make the product seem valuable from the start. Obviously, you can’t present a product as if it were finished before you even start building it, but you can still encourage people to buy in early or feel that they’ll be getting a bargain. You can do this by offering an early bird discount or making the first 100 pledges extra special in some way.
Using landing pages to pre-sell your ideas
If the purpose of a pre-sale is to test the market and gather a list of people who are interested in your idea, you might set up a landing page for your product. A landing page is a one page website that has only one purpose which is to get optins from visitors.
 Set up a lead capture form. The most popular methods are the squeeze page, the pop-up and the sidebar optin form.
 Create a video or an audio recording of yourself explaining what your product does, why it is going to be the next big thing and how much they can save by buying it early. Some people prefer written content while others like a video, make sure you offer both in order to reach everyone.
 Design a sales funnel which will take visitors from not at all familiar with your product to being ready to buy it from you. This could mean showing them some videos about the problems it solves or letting them watch a tutorial on how to use it. Or it could simply be letting them sign up for more information via an email course.
How to use data from pre-sales to improve your startup
Pre-sales data is some of the most valuable information you can get as a startup. It’s how you validate your idea and make sure it’s going to work before you spend a lot of time and money on it.
A customer is more likely to buy from you if they know you’re going to deliver a product that solves their problem. And it’s more likely they’ll be satisfied with your product if they know what they’re getting ahead of time.
As a founder, you want to use pre-sales data to inform your development decisions and ensure that you’re building something people will love.
Key takeaways: How to go from an idea to a business
Startups are frequently obsessed with building the “perfect” product before they launch. The concept of pre-launch development is that you can build out your product, get feedback from potential customers and then tweak it to perfection before you launch.
But what’s perfect? Do you want to be number 1 on Product Hunt or should you focus on getting real traction? Are you trying to hit 1M ARR or 1M MAU first?
Here are some ways to use pre-launch development to build great startups:
1) Use Minimum Viable Tests to validate your business model. It’s easy to jump right into coding your product, but think about what features will be included at which price points. You don’t have to nail this down, but having some pricing options in mind will help you plan for which features to prioritise and how much time it will take to develop them.
2) Pre-sell your idea and get feedback early. Do customer development before you even start coding. You can launch an email list with a simple landing page if you need to, so you can start interacting with people who want your product.
3) Start small and grow strategically. Don’t try to build a production-ready scalable platform when you’re not even sure there is demand for the products at all! Focus on reaching your four-fits first. Nothing turns off an investor faster than a business model that doesn’t make sense.