Sunday, February 26, 2012

Follow the Money

Over the past few weeks I've advised a half dozen entrepreneurs at various stages of startupdom. I have a lot less time to chat or review things because I'm working full time, serving on the school board, and developing my own stuff nights and weekends.

So I cut to the chase. "What are you selling, who's buying it, what are they paying for it, and how often?", and change the verb tense depending on their stage. It really focuses the conversation on what the business is.

Ideas are great. I love to hear ideas and shoot the shit about them. But business is primarily about income and expense, and if you have none for the former then the latter is going to stop you in you tracks eventually.

Follow the money. Stop guessing about where it will come from. Figure it out.

So how?

Call potential customers.

Talk about the benefit of your offering, and ask them if they'd be interested, and if so, what they think it would cost. Let them know you're a startup and doing research. Some will be too busy to help you. Others won't want to put the phone down.

Listen to them all, ask probing questions, but mostly let them tell you what their issues are related to your proposed product.

Should I go to this conference? No, I don't think so. You need to sell something and get some early reference customers. Should I go to this other conference? Sure, it will help you sell something and get some early reference customers. Should I hire a PR firm? No, you need to get some early customers first. Should I raise $750k? No it's more than you can put to productive use and you need to show that you can scale sales with half of that.

See where this is headed?

Nothing happens until you make a sale. If you're already selling, you might test higher price points; are you leaving money on the table? Who's looked at you but passed? Talk with them and ask why (in the form of 5 or 6 questions, and be respectful of their time).

We make assumptions all day long--that's part of the risk. But you need to test those assumptions with constant research into prospects, existing customers, and lost prospects. Get into the habit of talking to a few customers or prospects a day.

That's where your answers are.

They aren't here on this blog, they aren't in Lean Startup, they aren't in your business plan, or Techcrunch, or some event, or some meetup, or a call with me.

Start with the customer, and everything else will fall in place.



1 comment:

  1. Sound advice. Working the phones can be tough but I have received a mixed response.

    In these responses I have learned a lot so it is extremely valuable. Gonna press on and secure 3 customers this week.

    Keep the knowledge flowing Charlie!

    ReplyDelete