Business plan. Business model canvas. Business case. Etc. They all sound really important.

And they are. But I argue they're a distraction from the two key points you're looking to nail before committing years of time and capital into something  that isn't going to fly.

Instead of getting stuck in the weeds, you’ll be cutting straight through them.

The benefit of just a these two points is they’re easy to remember and give a clear starting point.

Let’s get to it.


1. Do potential customers want this product?

As I type this out, it reads like a bit of a no-brainer. But it's the critical question to answer as soon as possible.

No amount of stuffing about with planning, development, sexy design assets or positioning workshops is going to help here.

You need to cut to the chase- ask your best-guess customer base if they want what you're putting down.

It's the number one reason businesses fail. Just check out the product graveyard (AKA Producthunt) to see the plethora of apps that never got off the ground. These are mostly very early stage businesses having their first launch-And there are a TONNE with next-to-no engagement.

Likely, products were built without understanding if others wanted them, or it was a distribution challenge.

Right, so what are we looking for then?

For a great write up on knowing if customers actually want your product or service, check out this inspiring collation of examples from Lenny's product newsletter, written by seed-stage investor Todd Jackson- Read it here. But if you can't be bothered reading it, I got you. Here's an uber quick summary that was common across all startups:


  • Run customer interviews to validate lean mockups
  • Ensure the opportunity you think you've found isn't just with a select few- you want to see a trend in the research.
  • Anything short of an enthusiastic 'I want this!' is really just a 'no'.


(P.S.For tips on asking the right questions in customer interviews, take a read my article here.)


Let's say you've done all this and have a strong hunch customers are hungry for you yet-to-be-built solution. What's next?

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2. Can you acquire customers profitably?

If it's not your first rodeo, you've probably got the ‘speaking to customers’ point down pat.

The next big question, which requires a different approach, is the viability of getting customers in the door.

Exploring this a little Further, we need to ensure the money we put into our marketing efforts with results in more revenue per user.

What you’re looking for is channels where acquisition costs are not totally put of whack for your product pricing.

(Eg. If you’re selling a $20 ebook using keywords in the insurance space (~$55 CPC)  you’re not going to have a very fun time.)

It is of course an ever evolving target as the business continues to grow, but early research and getting those first few paying customers though potentially viable channels is the goal.

Three steps to do this include:

A) Research:

  • Research competitions in the space- how are they acquiring customers?
  • Use aHREFs to understand competition, keyword costs and ranking difficulty.
  • Take note of the positioning and messages that are resonating in your industry. It will help with the early creative.

B) First few customers:

  • Find clever ways to reach this audience in the early days. Groups, partners, Shared audiences, affordable advertising channels.
  • Try to do it cost effectively, the cheaper (or even free) the better.
  • Do things that don’t scale. Keep chatting with those critical first few customers. Use learnings to iterate (product & marketing) and find more like them.

C) Assess the viability at scale. Start to calculate acquisition costs over a longer term horizon. Looking at CAC vs. LTV and ROAS are places to stat.

By researching your domain, choosing the right channels, and assessing acquisition costs over time, you’ve put down minimal time and investment to understanding if this might just be a profitable venture.

Summary:

Chatting to customers, and understanding if you can acquire them profitably is a simple two step process that anyone can use to validate the potential of a new idea.

It de-risks the new venture while also jumping you right into the day-to-day challenges of finding customers before it’s even off the ground- like a crystal ball into the future!


Before you go brainstorming another great business name that has an available .com domain, you’ve now got a process that will help you understand if it’s ever even going to be a business.

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