Mike Taber – Idea Validation and Customer Development – MicroConf 2017

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Why is validation important?
- How to launch a product, v1.0
  - 1. Find an idea
      - Talk to people
      - Go out on the internet
      - Or you can’t find a tool to do something
  - 1. Build the product
  - 1. ???
  - 1. Profit
- THIS DOESN’T WORK
- Why?
The biggest risk / difficulty isn’t building the product, it’s finding the customers
- - Those 4 steps: you’re deferring the risk - Deferred risk is like technical debt
    - You build, you put it out there, and then things turn against you
    - Your response to why?
      - “Because it’s the beta”
      - That’s not right at all
      - It’s because you’ve deferred the risk
      - Deferred risk only gets worse as time goes on
  - How to launch a product, v2.0
    - 1. Find an idea
    - 1. Talk to customers
        
        😮 CUSTOMERS?
        
        I want to sit behind my keyboard. It doesn’t yell at me
    - 1. Ask them questions
        
        Find out what’s important to them, and why
    - 1. Get commitments
    - 1. Build the product
    - 1. Profit
  - Instant Cashflow by Bradley J. Sugars
    - You find out what people want, you go get it, you give it to them. In that order
    - The problems your product solves are not necessarily the ones customers are interested in solving
  - Pizza
    - Fulfills a need (hunger)
    - Would you buy a pizza, then bring it in to everyone, and then charge people $10 for a slice?
    - Every told your kids what’s for dinner and then asked if they want it?
      - They might even tell you what they want, and then not want it when you put it in front of them
        
        They’ve asked for a solution that doesn’t really solve their problem
Built a tool to solve a problem a client had with Excel spreadsheets
- Put a landing page online to see if I could sell it
  - Was very difficult to find customers / get people to talk to me
  - The customer development being difficult meant that growing the business would be difficult, too
Had a problem doing event sponsor follow-up
- Could turn into a product
  - Ran ads. Didn’t work
  - Went to my network
    - Only one person even said “I think I would pay for it”
  - Knew that wasn’t going to fly
Bluetick.io
- Presale results
  - Pre-code
    - Nov-Dec
    - 11 prepayments
    - $600+ MRR
    - $1,480 in revenue
    - Before a single line of code
  - Within 5 months
    - 20 prepayments
    - $1k+ MRR
    - $2,645 in revenue
    - No marketing at this point. Organic word of mouth
      - Good indicator
  - The length of time here is important. It’s not an overnight process
Identify people to speak with
- Where?
  - LinkedIn
  - Twitter
  - Facebook
  - Forums (vBulletin, phpbb, Discourse)
  - Paid ads – not ideal, but can be used
- Start with warm leads. People already in your network
  - People who will give you the time of day
  - If you can’t find people in your network, it’ll be exponentially harder when you try to find them cold
- Having a huge audience doesn’t matter
  - Seen people with 10k subscribers where 5 of them say they’re interested
- People who…
  - 1. You know
  - Then people who 2. Know you
  - Then people who 3. Will introduce you to people they know
  - Then people who 4. Have no idea who you are
  - Can hone your messaging as you talk to each group
- Most people don’t even talk to people
  - Or they talk to 3 or 4. They don’t go to friends of friends
Validating the idea
- Not the same as validating the customer
  - Are you actually solving a real problem?
  - If your main competitor is Excel, you probably don’t have a great business model
    - Because everyone you talk to already has that
    - Hard to compete with
  - Initial contact to pitch the concept
    - “I have a question for you. I’m in the process of validating a new business idea and thought it might be applicable to you. No worries if it’s not, but if it’s a problem you’re having, I’d love to get on a Skype call to discuss in the near future.”
    - “As of right now, I’m simply trying to validate this idea and have conversations and get verbal commitments. If I reach a critical mass of people interested, I’m going to go back to those people with mockups & an implementation plan, get financial commitments from people and start building.”
    - “Does this problem resonate with you? If so, let me know and we’ll set up a time to chat. If it doesn’t resonate, do you know of anyone who might be having this problem that you’d be willing to introduce me to?”
  - First call
    - Important to get on a call / Skype
      - You hear their voice
      - Intonation
      - Pauses
      - You hear them say something and then say “let me take that back-“
      - People are more meticulous when sending email. Less authentic
    - 15-20 mins
    - Recording it is useful
      - You can tell them, or not. Whatever you’re comfortable with
    - “How are you solving this problem today?”
      - Gives you an idea what they’re doing
      - What other tools are out there
      - If they don’t have any solution, it presumably isn’t that painful
      - If they’re paying for something to solve it, that’s some validation
    - “What have you tried?”
    - “What worked? What didn’t and why?”
      - Tells you what’s lacking elsewhere
    - “Would you pay for a tool that solved this problem?”
    - “Can we have a follow up call to discuss this further?”
      - Helpful disqualifier; data point; if they don’t want to talk more about solving it
    - “Do you know of anyone in your network who might have a similar problem?”
      - Ask for 3
      - I got 5 from somebody, complete with introductions
      - Can give them a template to pass on
        
        Summary of who introduced you, what the problem is you’re looking to solve, ask if it resonates
Find out what they want. Go get it. Give it to them. In that order. MAYBE…
- AuditShark
  - Sometimes things do not go as planned
    - I spent 2 years and $50k on building AuditShark
    - I had better domain knowledge than anyone
    - Had prior connections
    - Long story short… did not work out
  - “An MVP is not a minimal product. It is a strategy and process directed toward making and selling a product to customers.”
- Bluetick
  - Demoed it with…
    - Built Balsamiq mockups of every screen
    - Google docs, and spreadsheets
    - A lot going on
    - Wanted to demonstrate all of that
  - Because didn’t want to make the same mistake again. Wanted people to know what they were getting
  - Didn’t want to waste time – it’s the most valuable resource we have
During the demo
- Look for disqualifiers. Reasons why you shouldn’t waste your time building it
- Record the audio
- Write down every question
- If someone asks for something. Don’t say “I can do that”. Ask “Is that important to you?”
  - Amazing how often someone will say “Nah, I was just asking”. “Not particularly important”
- Actively overcome objections. Remember this is a sales demo
- You don’t have to build a 90 page deck like I did for Bluetick
- Ask for the sale!!!
  - Ask them to pay for it
  - Huge difference between “would you pay for this?” and “will you?”
    - I had a bunch of people (about half) fall out at this point. A little concerning
  - Payment form
    - I chose to leave the price box of the form blank. Asked what they wanted to pay, and how many months they wanted to prepay for (between 1-6, defaulted to 3)
      - Everyone but 2 payed for 3 months
      - One person: $100/mo
      - Two people: ~$40/mo
      - Everyone else $47-50/mo
      - Eventually fixed it to $50/mo as a result
    - Charge them immediately, with a liberal refund policy
  - Prepayment disclaimers
    - Not all demos will convert to sales, even if they said yes before
    - Some prepaid customers will ask for refunds
      - Sucks, but it’s ok
    - Not all prepayments will convert to paying customers
    - The money is a proxy for a vote of confidence
      - It’s not a guarantee
      - But it’s way better than nothing
“Good customers”
- Are currently solving (or attempting to solve) the problem
  - If they’re not, you now have an education problem as well as a product problem
- Experience the problem on a recurring basis
- Use the product regularly
- Will achieve far more value than the time and money it costs
- Will pay you to solve their problem
Validation mistakes
- Targeting the wrong people
  - If you’re not talking to the decisionmaker, it’s going to be difficult
    - Low purchase amount to someone lower down with a credit card, may be OK
    - But needs to be someone with authority to make the decision
  - People who aren’t actively making an effort to solve their problem
    - You don’t want to be educating an entire audience
- Prepaid customer myths
  - “It means you’re doing the right thing”
  - “They’re paying for a solution”
  - “It’s the same as if they’re paid customers”
  - “Being your guinea pig is a priority for them”
- Thinking you’ve promised them you’ll build it. If you don’t end up building, you refund, everyone will be cool with it
- Offering an indefinite beta period until it provides them value. Put a timeframe on it
The lies we tell ourselves
- “It’s not done until it ships”
  - You can totally charge before you launch
- “Can’t launch until certain features aren’t done”
  - The password reset doesn’t work? They’ll tell you. It’s not the end of the world.
  - You can do things manually
  - You can put the button there. Measure if anyone clicks it. If they do, tell them it’s not ready yet – ask if they’d like it
- “Can’t launch, I don’t have enough traffic”
- “I don’t have time”
  - Nobody is too busy, it’s all about priorities
Most of the things in your life that are worth doing are scary
Things are trending upward with Bluetick, but it’s not definitive yet
- Cautiously optimistic
- It can be a very slow path
  - “The long slow SaaS ramp of death”
  - There are exceptions
- No silver bullets
- But aim to win
@SingleFounder
https://www.bluetick.io
mike@singlefounder.com
Resources
- Balsamiq – 4 months free of Balsamiq Cloud for everyone in the room
- WP Simple Pay Pro – 50% off a 3-site business license for everyone in the room
- Email scripts from Bluetick – http://bit.ly/mc17se-emailscripts
- Single Founder Handbook – free for everyone in the room
- Start Small Stay Small – free for everyone in the room
Q&A
- “Asking for pre-sales. Would you do it differently if the monthly price were higher? Say, $800/mo”
  - You can absolutely do it with that approach. I’d lean more towards invoicing at that point. People have absolutely used this methodology to take prepayment for high ticket items
- “Did you send those initial pre-customers your first attempt at a prototype?”
  - I ask them whether I can add them to the email list at the time
  - You can email them and ask if you can add them
    - A no is actually a good data point to have
- “Balsamiq. How much are you iterating from call to call?”
  - Depends how many minutes I have between each call!
    - A couple of calls even went 2 hours long
      - One was actually a competitor. But we figured we’re not really in competition, we’re in it together against the bigger guys. If you’re in a situation like that with someone in this room, I’d recommend treating it similarly
  - If it comes up several times, you can talk around it

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