Starting A New Venture

The pricing process starts here, but pricing is likely to change several times as you go through the steps and experiment with different price points. Identifying specific dollar amounts won’t happen until a bit farther down the road. Ultimately, you want to estimate the lifetime value of an acqu...

The persona you’ve developed is useful, but you need to identify other customers to make sure you aren’t being too specific with the persona. This isn’t too likely to happen if the persona is created correctly, but just in case, identify 10 potential customers that fit the description of your end...

Once you know who will make the decision to purchase your product, you need to understand their decision-making process so you can make your product fit that process. How long will it take for delivery and payment, from the time you present your product to the purchaser? How much will it cost for...

Once you’ve identified a beachhead market, see if you can narrow it down further until you’ve identified a segment that meets these conditions:

• All the customers buy similar products.
• Customers have similar sales cycles and expectations, so they can be served by similar strateg...

After having identified your target market and your end user, you’re in a good position to estimate the Total Addressable Market (TAM). TAM is the amount of revenue you’d make if 100% of the market became customers.

To calculate this, start by figuring out how many people there are who fit ...

Start by identifying your assumptions. Look at each step of your framework. List the places where you’ve made conclusions based on your research. Pay special attention to your assumptions about gross margins. Other important areas to evaluate are your customer lists and the DMU.

Break down ...

It’s good to remember that free isn’t a viable model. Some startups figure they’ll get the users on board first, and decide how to monetize the platform later. Sometimes the idea is that users will ultimately pay for enhanced features. These things are not business models. You need to kn...

You are creating a new kind of business that’s never been attempted before. By necessity, you make a lot of assumptions about your product, your market, your customer. Now, you must systematically go through and test them all.

Start by identifying your assumptions. Look at each step of your...

It’s important to verify that your customer will be able to buy your product, so you need to identify who will make the purchasing decision for the end user.

There are three main roles in the Decision-Making Unit (DMU):

1. The champion is the person who wants to buy the product. Oft...

In this step, you describe what your business gives to customers that other companies cannot provide. This is your company’s core. The core is what differentiates you from everyone else; it’s what you do better than everyone else. Your core is usually something that’s hard or impossible for other...

List up to a dozen of the best, most interesting market opportunities for your product. (A market opportunity includes a specific end-user and one or more applications.) Then, answer the following questions:

• Can the customer afford the product?
• Can the customer be reached direc...

Lifetime Value (LTV) is the average profit you’ll make on a new customer and includes factors such as revenue streams, costs, customer retention rates, and so forth. The LTV, along with the Cost of Customer Acquisition (COCA) can give you an idea of how much is to be made in your beachhead market...

The minimum viable business product (MVBP), will actually be one more step in validating assumptions. It will integrate your assumptions into a single system test to verify the minimal product for which a customer will still pay.

MVBP requirements include:

• The customer gets value...

You might think that after all this great research you’ve done, your product is a guaranteed success. But people aren’t rational beings, and all the research in the world won’t change that. Before you sink more money into it, put the MVBP in front of the customer. See if your assumptions work in ...

A beachhead market is like a beachhead in war, like the invasion of Normandy. The allies picked Normandy; they picked one place from which to launch their attack and spread out from there. In the same way, you want to pick a market and win your early battles there.

So, of the six to 12 mark...

In creating your MVBP, you put some of the features on the back burner. Now you can put some of those features back in. When you add features in, be sure they meet high standards of quality. Of course, nothing is perfect, and new products do tend to have bugs. You want your product to be as good ...

 In the short term, you’re trying to whip up demand for the product and fill existing orders. Your product is new, so you’ll have to spend lots of energy communicating directly with the client, explaining the product to them.

Medium-term sales strategy inc...

Customers are the single most important factor for a business, so build your company around customers, not products. There are limits, however, to letting customers guide your decisions. You needn’t chase after every potential customer on the planet.

Create a profile of your target customer...

When the customer buys a product, they are expecting to receive some sort of value from it. The quantified value proposition measures this value, focusing on the customer’s needs, not on technology or features. In other words, it shows how the customer will get value from the product, expressed a...

If network effect is your core, you will dominate your field by reaching a critical mass so that it doesn’t make sense for customers to go elsewhere. The value of a network is related to how many people are on that network. The company with the most users becomes the most valuable. New customers ...

There are two kinds of follow-on markets:

You can sell new products to your same customers, which is known as upselling. Because you have a substantial amount of information about these customers, it would be cost effective to sell them more products.

The other option is to sell the s...

Through primary market research, learn as much as possible about how your customer will use your product and what they think of it. Start by mapping out how your persona uses your product. It’s important to see this from your customer’s point of view, not just your own.

Do a full li...

Now that you’ve defined and analyzed the customer, you can turn your attention to the product. Some argue that considering the product should come earlier in the process, but if you want your product to be a success it will, first and foremost, have to appeal to the customer. So, even if you star...

With the competitive position chart, you analyze how well both you and your competitor fulfill your customers’ two highest priorities. You want to show that you meet the customer’s priorities better than the competition and better than other existing products. If you can’t demonstrate this, then ...

Start by brainstorming a wide variety of market opportunities. Even at this early stage, start talking to customers to see what they think. Analyze your potential market, and look at the industries where you can market your product. Write a list of people in that industry who might benefit from y...

Each customer has two roles: the end user and the decision-making unit.

The end user is the person who’ll use the product, usually a member of the household or the organization that bought the product.

The decision-making unit is the person or people who make the dec...

Create a persona to serve as an exemplar. The persona represents the primary customer for the beachhead market, making it easier for everyone to think and talk about the kind of customer you are trying to reach.

Use an actual person on which to model your persona. Some companies use a compo...

The Cost of Customer Acquisition (COCA) asks how much will we spend on acquiring new customers. It’s easy to optimistically underestimate this expense, but be as real as possible when you go through this calculation.

There are important factors to include in your calculations: sales staff s...