The startup adventure is tough. As founders, you work hard every day, take risks and try to develop a product or service that the market really needs.
Yet startups often fail because there is no need for their product or service. The entrepreneurs behind the startup set up a business without hard validation of their first customer segment. This leads to uncertainties and risks that can be avoided with a structured approach. So discover our tips to help you startup your business
Data on customer behavior for your startup
When you validate assumptions first as a startup, you are statistically much more likely to find the product-market fit. Data on customer behavior is a basis for making strategic decisions, which is always stronger than just a gut feeling.
With a structured validation approach, you as a founder can minimize risks and increase the chances of a successful startup. In doing so, you can do the first steps of market validation without incurring really big costs. At NOM, we are happy to give you tips and structured steps on validating your startup's first customer segment.
As a startup, how do you find and validate your first customer segment?
A startup's first customers are usually not just users or buyers of a product. They are often people who experience an urgent problem and need an immediate solution to their problem.
Serial entrepreneur Steve Blank calls this customer group an absolute niche. The so-called Earlyvangelists are people with an urgent problem that can be solved immediately. According to Blank, there are five characteristics you can identify these people by:
- Earlyvangelist has a problem: a job to be done;
- Earlyvangelist is aware of the problem;
- Earlyvangelist is actively searching for a solution to the problem;
- Earlyvangelist now uses a solution that does not work sub-optimally;
- Earlyvangelist has a budget to solve the problem and is willing to pay a premium price to solve the problem.
Validating the problem and building your startup in a well-founded way
Many startup founders make the mistake of building a product first, without knowing if there is a demand for it. Then they try to sell the product to potential customers. This often leads to problems. A famous saying in the startup world is, "assumption is the mother of all fuck-ups," meaning that assumptions often lead to big mistakes.
It's smarter to start by discovering what your customers need before coming up with a solution. That way, you create a product that solves the problem and that customers are willing to pay for.
In the meantime, it is important to test and improve your idea based on what your customers are telling you. A practical approach is a target audience analysis in which you compile a targeted list of 20 to 50 people who are experiencing the problem. Then invite these potential customers to a conversation. In the conversation, don't tell anything about your startup or your solution, but listen carefully to understand the problem and its motivations. Want to learn better how to have this kind of conversation? Then watch the video on "The Mom Test," which explains and addresses the challenges.
Getting a handle on market growth at your company's startup
As a startup entrepreneur, you are often very ambitious. You want to appeal to a wide audience, while it is crucial to learn and discover everything about your first customer segment. A small target audience can actually make for faster validations and the first wave of growth. When you have your target audience well in mind, you can reach them more easily and effectively. So it is important to determine your most promising target audience and then focus on them.
The growth of your startup follows when you have stable sales from the first customer segment that also repeatedly purchases your product. The business is no longer dependent on small deals and you have a clear understanding of the sales process. You know exactly what it costs to bring in a customer, how long they stay a customer and what a customer brings in concrete terms.
Investing in growth at the right time
You can test the growth of your business by approaching a set number of leads for a month and measuring their conversion rates. If the results of this are not stable, then it is not yet the time to grow. In practice, we see startups investing in growth too early, without the certainty that their product or service actually matches the market need. The result is often skewed growth in the market, high costs relative to low revenues and the wrong focus within the company.
Data as an important startup help
Data is an important part of making strategic choices. Companies that use data typically grow faster and more efficiently in the marketplace. Structural measurement prevents costly misses, blind investments and scaling up in the market too early.
It is important to collect customer data, such as interviews, test campaigns, pilots, churn rates and conversion rates. This will help you make better decisions in the longer term.
The startup adventure begins at NOM
Starting, building, validating and scaling a startup is challenging. That's why it's important to find experts, mentors and other startup founders around you that you can learn from. Want to learn more about how to validate and successfully grow your startup? Contact NOM and find out how we help startups in the Northern Netherlands. Sign up today for the NOM Startup Program with your startup and get started today!