Finding a Product-Market Fit

Every entrepreneur believes they have the product that will revolutionize the world and attract venture capitalists who will bath them in piles of cash to achieve their dream. But venture capitalists don’t back products, they back winning business models. Companies with winning business models have the potential to generate lots of revenue with easily scalable, repeatable and profitable sales and marketing strategies. And none of that will be truly determined until you successfully test and optimize your product market fit with potential customers.

What is Product-Market Fit?

Product-market fit is the point at which you have identified the best target industries, buyers, and use cases for your product. At this point, sales become repeatable and scalable, and your product is flying off the shelves. It is the Holy Grail for most startups—one that dictates whether they are on the path to being the next 1-in-10 “10x” investment return companies for their investors or the next 3-in-10 flameout that crashes and burns out of business.

How to Identify Product-Market Fit

There are several distinct phases in the search for product market fit. An entrepreneur needs to:

  • Have a basic understanding of the market landscape and the key pain points being solved by your products
  • Research the various industry verticals and potential buyers where your product may sell
  • Take your product to market to validate your hypotheses, and begin to optimize your target clients, use cases, messaging, price points and go-to-market strategy
  • Close your first clients, and learn your conversion funnel metrics and marketing economics (e.g., CAC and LTV)
  • Learn user behaviors like product engagement levels, utilization rates, and lost customer churn rates
  • Optimize the above to make your sales process repeatable and scalable in a large market vertical, including optimizing your hiring, employee training, customer onboarding, and sales-to-operations handoff
  • Validate your ability to scale is profitable and that your churn rates are low and will result in a material size business

The Right Way of Gathering Market Intelligence

The best way of doing market research is actually talking to your potential customers. A few dozen will give you some initial understanding, but seasoned entrepreneur and McCombs Business School professor Rob Adams recommends a minimum 100 phone calls with potential customers. Adams emphasizes that these interviews have to be an actual face-to-face or phone meeting instead of something passive like an email survey.

A phone call or face-to-face meeting is interactive so you can see how the conversation evolves in real time. During these conversations, ask your interviewee what their current pain points are around your industry, products or competition, or how much they would be willing to pay for a solution. You would be amazed what great insights come out of their mouths. They’ll tell you exactly what you need to build to make their lives materially better.

Besides talking to potential customers, seek insights from your employees, especially your sales and operations team. Your sales people are in the market everyday talking to customers, and your operations team typically sees all the problems with the product and hears complaints from your customers. Develop a process to get those insights to senior management. Any customer-facing complaints need to bubble up to management and the product team so they can quickly fix them. But of course, make sure you have a large enough data sample. The opinion of one person, is just that, an opinion. But hearing the same points over and over again from multiple stakeholders is something you most likely need to jump on fixing.

Gray High-rise Building

Test, Test, and Test Again

There is no one correct answer for determining product-market fit. You have to tinker and test all the inputs throughout the product lifecycle. For example, try three different price points and see how far you can push it before the customers start complaining or your conversion rates fall. Or, as another example, A/B test various sales pitches, emphasizing different aspects of your product to figure out which specific feature is the one that gets your customers the most excited. Then double down on the winners after each iteration along the way.

Focus on One Vertical at a Time

It is very easy to think your product appeals to many different industries and many different use cases so let’s go out and sell our products to them all. That line of thinking is a recipe for disaster. When startup budgets are limited, it is always better to have a much more narrow focus to start, and go really deep in that one narrow vertical. That will make you the clear industry expert in that domain, which will help spread the viral word-of-mouth and stimulate growth materially faster. In other words, it is much better being the master of one domain than being a Jack of all trades.

After you have built scale and profitability in your first vertical, you can then expand to the second and third tangential verticals. But before doing do, make sure you have documented your process, learnings, and framework from the first vertical so you can apply them to the next verticals. At all times, make sure you stay focused on the long-term vision. Don’t get swept up in the whims of the market that can having you chasing rabbits into unprofitable holes.

Create Buyer Personas, and Customize Accordingly

As you will learn, the behaviors of one industry, buyer role, or use case may have a materially different rhythm than another. You can’t assume what worked in one vertical will work exactly the same way in the next vertical. Everything could be different from your go-to-market strategy to your sales cycle to your sales funnel metrics. For example, let’s say you are selling a new marketing technology platform. The needs of an enterprise level chief marketing officer (more strategic), will be different from the needs of lower level enterprise marketing manager (more tactical), will be different from the needs of a marketing agency serving that same enterprise client (more service oriented). Thus, customize your pitch accordingly, depending on who you are pitching.

Important Business Considerations to Maximize Product-Market Fit

First of all, you need to calculate your total addressable market size (TAM) to make sure you have a realistic chance of materially scaling your revenues. Second, you need to make sure you have a product that can withstand the onslaught of competition that is guaranteed to follow you into this market, if you are successful. Third, think through your lifetime value of your revenue stream. You’d want a product that is consumed frequently, to drive high repeat purchases, and solve major pain points for your customers. You need to be building painkillers for your customers, not vitamins to have any chance of materially scaling your business.

How to Measure Product-Market Fit

You can’t manage what you can’t measure, and the same holds true for your product-market fit. Figure out what key data points will help you track your success. Some of those data points are pre-transaction like sales cycle, unit-level economics, and conversion rates. Other data points are post-transaction like repeat buyer percentage, lost customer churn rates, and average daily usage of your product by your customers (e.g., how much engagement and interaction they have with the product). After you determine those data points, track and manage them continually.

Rinse and Repeat the Process

Even after you find the Holy Grail of product-market fit, it doesn’t mean you will keep it. You need to constantly be re-learning the market conditions and talking to your customers to learn how their needs may be changing over time. Constantly stay paranoid of losing your customers to keep your competitive edge at all times.

Types of Entrepreneurs

Knowing what type of entrepreneur you are will help you in the long run. You’ll be able to maximize your strengths, continue to develop your skills and increase your confidence.

You can also take the pressure off yourself to be every type of entrepreneur at the same time, as if that was even possible. You can be yourself as an entrepreneur, but you need to know the pros and cons – the upside and downside – of your particular type. One of the benefits of knowing yourself is that you can bring in people on your team with strengths and skills that complement yours or fill in for your weaknesses.

The following are brief descriptions of the different types of entrepreneurs that are common:

The Innovation Entrepreneur:

If this is you, then:

  • You come up with big ideas that are true innovations
  • You are extremely passionate about your ideas
  • You have a whole new way of thinking
  • You love to stand out from the crowd

Challenges associated with this type:

  • You need a lot of capital
  • You need a lot of patience
  • You need to be totally committed to bringing your innovation into reality, no matter what

The Working Hard Entrepreneur:

If this is you, then:

  • You are focused on working hard
  • You start small and think about effort to grow (not about raising capital)
  • You are motivated by your dreams and will work hard for them
  • You roll up your sleeves and do the work yourself

Challenges associated with this type:

  • Limited too much to you as an individual and your effort (albeit you do the hard work)
  • Not usually scalable
  • Not investable (more like the owner of a small business)

The Serial Entrepreneur:

If this is you, then:

  • You are always looking for the next big thing that is going to redefine the future and enable you to launch a new startup
  • You are adept at brushing off past negative experiences and just see them as part of your journey
  • You are excited to start and sell multiple companies
  • You look closely at trends and will change direction on a dime
  • You are excited about making money
  • You are comfortable with high risk

Challenges associated with this type:

  • You may not be in a business for the long haul
  • You may conflict with other types of entrepreneurs
  • You may be impatient

The Continuous Improvement Entrepreneur:  

If this is you, then:

  • You are seeking ways to imitate other successful businesses but to improve on the ideas
  • You are always seeking to make a product better
  • You aim to gain an advantage in an existing market

Challenges associated with this type:

  • You may always be compared to the original company with the original idea that you emulated
  • You won’t necessarily be seen as “innovative,” although you do have an innovation streak in you, and you can still have a very successful business with product enhancements that meet customer needs

The Analyzer Entrepreneur:  

If this is you, then:

  • You need all the information about something
  • You have analyzed an idea from all possible angles
  • You will not launch a product until it’s nearly perfect
  • You need deep understanding before taking action
  • You rely more on data than intuition or your “gut”

Challenges associated with this type:

  • You tend to move slowly
  • You could suffer from ‘paralysis by analysis’ in your thinking
  • You are not comfortable with ambiguity or high risk

The Intuitive Entrepreneur: 

If this is you, then:

  • You rely on your intuition and your instincts – your gut feeling
  • You effectively zero in on opportunities that others may not see yet
  • You have the courage to defy conventional thinking to listen to your intuition

Challenges associated with this type:

  • You are more impulsive
  • You may not look at data as much as you should to make sound business decisions

Other types exist as well, but are less common, including:

  • Wealthy entrepreneur who buys promising companies
  • World-changing entrepreneur who thinks at a global, macro scale (less about making more, all about making global impact)
  • Jack-of-all-trades entrepreneur who needs the perfect partners and investors to succeed
  • Wannabe entrepreneurs who like to talk about it but never really become an entrepreneur

Clear Distinctions

Besides knowing what type of entrepreneur you are, you should also be clear about whether your company is a small business, an investable and scalable startup, or a social entrepreneurial endeavor. You can have a team and a staff of 25 people and be a small business because you lack the ability to scale. It’s more about making a living for yourself, not about making investors money.

You can also have a team and a staff of 25 people and totally be a startup that has an investable and scalable idea for a growing market that will make investors a boat load of money. And if you are aiming to solve a social issue to make the world a better place, then you are engaged in a social entrepreneurship endeavor. You are not interested in or planning for profits. You are basically a non-profit in the works.

The One Quality

No matter what type of entrepreneur you are or where your company falls on the scale, the one quality that is consistently found in successful entrepreneurs is self-confidenceIt doesn’t mean you don’t get butterflies in your stomach from time to time or that you feel the mojo 100% all the time. But your confidence may be derived from the power of your ideas, your experience, your intuition or your research. Whatever fuels your confidence, continue to strengthen it. Yet, you should also not be afraid to admit you don’t know something and have to learn something new. There is a difference between confidence and arrogance. Once you accept what type of entrepreneur you are, your confidence will flow naturally.

Using Public Info on Publicly-Listed Companies to Leverage a Better Market Position

Information that can help you better understand any industry of your choice is publicly available through companies that are publicly-listed on stock exchanges. The value of the information is that it gives you insights about the needs of the market, what customers are using or expecting, the ups and downs of the market, and what are the opportunities for change.

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For example, if you have an idea to create a new WiFi-enabled sensor that can be used in smart cities, you can find openly available information online about the big company called Cisco, a networking giant, to see what they are doing in WiFi. As a public company, Cisco produces annual reports; financial analysts write about it in market reports; and various SEC filings exist to share critical information equitably with its investors and would-be investors.

Furthermore, when you understand the market positions of the major companies in the market you are thinking of targeting with your potential startup, you are better able to think about where you could imagine your potential startup being positioned in the market.

Future customers need to be able to understand your focus as a company, and this is called positioning. You will have to position your future startup against other companies and explain why your idea for a company is different, unique, complementary, viable and sound. To create this kind of credibility, you need to understand the market itself.

To summarize, a great starting point is the publicly available information about public companies; it’s not the end-all be-all, but it’s one way, among many ways, to acquire free information, not just about other companies, but about the market or industry you are thinking about entering with your future startup company. You can learn about market trends, evolving customer requirements and spending dynamics in a segment.

Let the big, public companies do some of the heavy lifting for you. Get to know companies on the New York Stock Exchange and NASDAQ that are relevant for the market segment you want to better understand, adding fuel to your idea. You can use this online tool to browse for public companies.

Image result for public companies infographic

Source: Visual Capitalist (https://www.visualcapitalist.com/the-biggest-public-company-in-every-u-s-state/)

Tips & Strategies for Finding Bias and Validating Assumptions

Once you have identified the assumptions that you are using as a foundation for making a business decision for your startup, you need to examine the assumptions for bias. In society, most people commonly think of “bias” in terms of favoring one group over another (i.e. biased against different nationality) or one political party over another (i.e. biased against liberals). But when you talk about bias within assumptions for business decisions, the range of biases are so much broader.

Man With Hand on Temple Looking at Laptop

There is something called cognitive bias: it’s essentially your brain trying to simplify information.

Here are some examples of the type of bias that could sneak into your assumptions and, thereby, undermine your basis for making decisions for your startup:

  • Social Pressure   ̶ Your assumption is influenced by the fact that you feel pressure from peers to think a certain way
  • Personal   ̶ Your assumption favors people who love Macs and hate PCs because you grew up in a family of Mac lovers
  • Geographical   ̶ Your assumption is limited to Silicon Valley because you are biased against any areas outside northern California
  • Historical   ̶ Your assumption is limited to analog products because you have been studying stories from the 20th century of how to build a success product (information needs to be taken in historical context)
  • Educational   ̶ Your assumption may be too slanted in one way because you had a teacher in college who hated a certain course of action
  • Philosophical   ̶ Your assumption is biased against minimalism in product development because you think minimalism (which Steve Jobs embraced, by the way) is only for hippies from the 1960s

All of these biases can steer you off track. An entrepreneur’s cognitive bias can create unnecessary problems. We will delve more into “Fallacies & Biases” in the next article.

Grayscale Photo of Woman Wearing Eyeglasses

How to Recognize When There Might be a Bias

One way to find the biases in assumptions is to ask a trusted advisor to play “devil’s advocate” for every assumption you have made. Allow them to speak as openly as possible, arguing the opposite of your assumption. You may not like everything they have to say, but you should listen respectfully. This exercise will do wonders to unearth the hidden biases in your assumptions.

Ways to Validate the Assumption

  • Ask a diverse group of trusted people with relevant experience in the same area of your idea for their feedback
  • Use objective data to back up the assumptions
  • Ask the question, “How objective is it?” (If still too subjective, refine it.)
  • Carefully analyze all aspects of past events. Don’t only rely on your own interpretation of facts.

It is also advisable to increase your own self-awareness about what areas you tend to potentially have a bias in due to your past experiences, personal preferences and educational background. Apply your self-knowledge to each assumption to see if you have inadvertently injected bias. Be aware of your own fears and categorize them in how they may be influencing your decision-making.

As a founder, you would be wise to embrace and accept negative feedback because they will help you get stronger and improve your ideas. Don’t try to be a perfectionist. Your flexibility, transparency and honesty will serve you well as an entrepreneur.

Startup Lifestyle & Hardships

It is better for you to pursue the path of entrepreneurship with your eyes wide open to the challenges of founding and managing a startup company, rather than wearing rose-colored glasses, thinking that as soon as your start your company, everything will go smoothly; investors’ money will roll in; customers will love your product; your bank account will be bursting with money; and the media will be celebrating you as the next “rising star” entrepreneur.

It’s nice to dream, but if you get carried away into an unrealistic, hyped-up picture of the entrepreneurial life, you could be setting yourself up for disappointment, frustration and failure.

Man in White Shirt Using Macbook Pro

Be honest with yourself. As you work through this entrepreneurial preparatory course, observe carefully and think deeply about how your mind and emotions react to the lifestyle and hardships of entrepreneurship.

But just because you may feel an emotion of concern or fear, it does not mean you should not be an entrepreneur.  Everyone feels concern or even fear at times when you are facing uncertainty. The real question is whether you have the commitment, the drive, the purpose, the willingness to sacrifice and the ability to “pay now, play later” to do it, no matter what.

Pursuing the path of entrepreneurship in pursuit of such ends entails endless sacrifice, dedication, and relentless commitment to a business that will feel like it’s dictating your life.

The following are five major challenges of doing a startup, but the good news is that, after your read this reality-check information, you will see a summary of why this hard work would be worth it:

[1] History shows that most entrepreneurs face failure early on. (It’s almost like a rite of passage.)

  • How do you handle failure? Do you have what it takes to hit a roadblock or obstacle (failure) and keep on going with your business?

[2] Very few reach the top of entrepreneurship.  Very few get a chance at a blockbuster merger or acquisition – let alone an IPO.

  • Can you put in the hard work for a startup company that may only be just getting by for a long time and may never reach the pinnacle of the “startup dream” that gets played out daily in the media?

[3] You will work morning, afternoon and night, on the weekends and possibly holidays.

  • The grind of working at a startup is intense.  It’s not a 9-5 job. You don’t waltz into the office at 9:05 and cut out at 4:55. You may have to show up at 7 a.m. and work until 11 a.m. You may have to work all day Saturday and half of Sunday. How will this affect your family (or future family)? How will this affect the social life you envision for yourself in the years ahead? Can you make sacrifices for the goal you desire to fulfill? Would your commitment be relentless?

[4] A fast-paced, constantly-changing, chaotic-like work environment dealing with ambiguous situations

  • Not everyone likes working in managed chaos every day. Do you thrive in a disruptive environment, energized by the thrill of change and new ideas? Or do you like structured work plans and predictable projects with set outcomes? One of the things you will have to deal with is the potential for burn-out. You could get yourself so run-down, tired and frustrated if you aren’t careful. This is why *mindset* is important. You will need to motivate yourself every day and focus on the positive things to keep going, reminding yourself of the ultimate purpose.

[5] Work for very little money or no money, especially in the beginning years.  

  • Sacrifice includes financial sacrifices – not having the material things that others with corporate jobs may have. Are you ready to make that trade-off? Do you value accomplishing your entrepreneurial goal more than acquiring material things? How would the financial tightness affect you and your family?

However, the potential rewards to be attained in this process are unlike those found in few other paths. The possible financial freedom, independence, and influence one can attain are significant.

Dramatic Photograph of the Ocean

You will have the satisfaction of achieving your dream. You won’t have to deal with the nonsense and corporate politics in the corporate world, building something for someone else and virtually nothing for yourself. You will be giving your life to something you care about and build amazing relationships with like-minded people. You will push the boundaries of what is possible and prove the naysayers wrong.

As with anything worthwhile in life, there is a price to be paid before you can reap and enjoy the fruits of your labor. It’s no different in the entrepreneurial life.

Solution Development – Refining Your Product Idea

As a leader of your own startup company, you will need to set the approach for developing products and solutions. Some people have mistakenly thought that “products” and “solutions” are separate, unrelated things. The Product Development team works on products, while the Marketing team works on solutions that fit a market need (more spin than substance).  But this is a dangerous way of thinking, and it’s actually backwards because they put the product first and then try to retrofit the “solution” to fit the product.

High-angle Photography of People in Ground

The optimal approach is to set the mindset of the entire company to develop solutions that continuously refine product ideas in order to drive value creation for customers.  

Steps to Do It

Step 1: Identify the problems / pain points / unmet need(s) in the market you are aiming to be successful in.

Step 2: Brainstorm, develop and test solutions to those problems / pain points / unmet needs.

Step 3: Develop product ideas out of the “solution” that you have come up with for the problem / paint point / unmet need you have identified.

Step 4: As the problem / pain point / need evolves over time (and it always does), you stay agile to continue to refine the product idea so that any product you develop is always solution-oriented, solving a potential customer’s problem in some unique way.

You create value for customers by delivering a product that solves their problem. This alignment of product and problem starts with a mindset to be this solution-oriented.

Mistakes Startups Make

Too many startups create products for the sake of the product or the technology or the “cool idea.” Or they start out being solution-oriented but then drift away from it because of internal politics, lack of focus, loss of touch with the market or simply falling in love with their own product to the point where they stop refining it and they just want their sales team to sell more of it.

Fortunately, when you are developing solutions, you can use the bigger picture concepts of the “solution” to continuously improve upon product ideas at your startup. Let the solution development guide the product development. As the problem evolves, the solution has to evolve, and then the product must evolve. If the product doesn’t, it will become outdated in a relatively short period of time, hurting your business.

Man in Train Standing

This is why you need to think about how flexible and modular your product will be over time. For example, you’d need a platform that can accommodate software updates on a regular basis or can accept new modules to expand or change capabilities over time. This reflects a solution mindset.

Think solutions development and then your product ideas will be perfected and rooted in the reality of real customers with real problems or challenges that need to be solved.

Social Impact Startups: How Much Do You Sacrifice Returns for Positive Impact?

Startup companies are famous for growing fast and delivering positive returns – in other words, money – to investors. However, with the rise of a new generation of more socially-conscious forward-thinkers, the social impact that a startup can make in the world is much more appreciated today than ever.

Yellow and Black Butterfy on Top of Orange Daisy Flower

Your core purpose in starting a company may even be able to make a meaningful social impact. Traditionally, some people with a “me-money-first” mentality may have criticized you for not maximizing every opportunity to make all the money possible, but an interesting shift has happened over the past decade or so – buyers and investors have been increasingly interested in partnering or buying from startup companies that share their same values and have a mission that transcends themselves. The group of buyers and investors who value social impact is only expanding.

If you’re a clothing company that refuses to use child labor and will not use material that hurts the environment, then you will attract people who share this same value and same perspective. Your reputation gets stronger for staying true to the “DNA” of your company. You do not risk alienating your customer base (or future customer base). You reduce the threat of lawsuits or accusations of compromising quality for profits. By staying true to your mission to make a social impact, you can actually gain in credibility, attracting more investors and more customers.

People know you deliver value and high quality, while also valuing people, their freedom and their rights, as well as the environment.

Another example is to start a company that aims to reconnect homeless people to their families – and identities. Such a company would be making a social impact, but also generating income in order to invest back into the business for growth and to reward investors who took the risk to invest in the first place.

Body Of Water

As a founder of a startup focused on social impact, you will face the challenge of balancing profits and social impact in the future. It may be easy to say, “Profits mean nothing. I’m all about social impact.” But when you cannot pay the payroll or investors are breathing down your neck aggressively about “returns” on their investment in your business, you cannot ignore your financial responsibility to the business and the shareholders. It can be a delicate balance.

Some investors may not like that you may be constrained by ethical and socially-conscious issues. But if an investor does not like that you act in a socially impactful way, do you really want that person as a major investor anyway? It’s best to be true to your vision. You can have a positive social impact.

Realities of Entrepreneurship

For centuries, people have been admiring, emulating and exalting their heroes. Today, one of the types of heroes are entrepreneurs who are wildly successful, such as Jeff Bezos (Amazon), Mark Zuckerberg (Facebook), the late Steve Jobs (Apple), Bill Gates (Microsoft). Richard Branson (Virgin), and Elon Musk (Tesla and SpaceX), among others.

These business titans make the calling of entrepreneurship undeniably enticing for anyone motivated enough to pursue a dream. Building up the hero worship, the media has portrayed entrepreneurship as a sort of mythical life path for those who seek to become immortals and “gods of business.”

Photo of Person Standing Across the Mountain

However, the actual reality of entrepreneurship is far different than the overnight success and rags-to-riches stories and fables that mass media portrays. Therefore, it’s essential that anyone seeking to embrace entrepreneurship understand its realities – both positive and negative. One can achieve massive wealth, power, and influence through entrepreneurship, but it all comes at a significant cost and sacrifice.

Let’s explore some of those trade-offs that must be accepted in order to succeed as an entrepreneur: 

Chaotic, fast-changing work environment vs Calm, stable, predictable corporate environment

  • When you choose to go the startup route as a career decision, you have to accept that the environment is ultra fast-paced, characterized by sudden changes, high pressure (to survive as a company), ambiguity and uncertainty. It’s in contrast to the stereotypical office environment where you come in, do your assignments at a slower pace, see changes implemented relatively slowly, and feel fairly “certain” about what is planned for tomorrow, next week or next month. It’s slower and offers less opportunity for growth, less opportunity to create wealth, and less opportunity to make a real impact.
  • Trade-off for the entrepreneur: Trades in the regimented and rigidly “boring” nature of corporate life for the freedom, excitement and creativity of your own startup. 

Wearing many “hats” to do everything in a startup vs Having a narrower, defined role in a corporate environment

  • As the founder of a startup, you will need to do a wide variety of things, ranging from hiring top talent around you to renting office space and fixing the printer to creating the website and ordering lunch for everyone at the office. You will wear many “hats” in a startup, keeping you busy at a level that can be shocking to some people in the beginning. In contrast, in the typical established company, each employee has a defined role – in essence, only wearing one “hat” as an expert. The Real Estate manager is responsible for evaluating properties for new office space. The head of Marketing works on the website. The facility manager handles fixing the printer. An admin may order lunch. Your identity is pre-defined for you by others. The corporate machine tells you what you can and can’t do. You are like a cog in a wheel.
  • Trade-off for the entrepreneur: Trades in the limitations of defined roles enslaved to the vision of the corporation for the broader experience and freedom of doing many different things tied to your vision for your company.

Sacrifice time and money working weekend and forgoing a suitable salary vs Making a “good” suitable salary in a 9-5 job

  • When you commit yourself to a startup, you will need to devote much time (late nights, early mornings, all weekends) to the startup. This can impact relationships with family, friends and significant others. It can even isolate an entrepreneur in a stage of loneliness. Most people who are not in a startup will not understand the amount of hard work, pain, effort and even tears that an entrepreneur needs to endure just to survive. Entrepreneurs also forgo a salary that in real terms is incurred as an opportunity cost. While you could be making a six-figure salary in a corporate job, you will likely only make a fraction of that or no salary at all in the early years of a startup. There are big risks involved in the entrepreneur’s journey.
  • Trade-off for the entrepreneur: Trades in a mediocre corporate career for the chance to do something inspiring, impactful and amazing.  

Moreover, it’s crucial to understand WHY one wishes to be an entrepreneur. If you desire to become an entrepreneur and start your own company simply to get rich, your “why” will likely be too weak and not sustain you through the difficult times. You will get incredibly frustrated. There are other ways to make a lot of money other than doing a startup.

Photo of Person Walking on Deserted Island

Your “why” to do a startup needs to be stronger.  Wealth may be a byproduct of starting your own company – and it’s not wrong to want to build a successful company, creating jobs, paying your bills on time and benefiting from it personally (and for your future family) as a trade-off for the sacrifices you make in time, money and energy. But you should dig deeper into your motivations, your interests, your drive to solve problems, and your passion for making a positive change in the world.

You need a “why” that will connect your mind and your heart (soul). When the money isn’t flowing into your bank account and you are faced with a myriad of challenges, what would motivate you to keep going and to keep you committed. What would motivate you, even if you weren’t making much money at all?

Just to name a few, the following are examples of what motivates successful entrepreneurs:

  • Make a positive difference in the world
  • Build something meaningful from ground up
  • Fulfill your dream to solve a problem that people care about
  • Dedicate your life to finding an answer that has eluded many people in the past
  • Shape the future to make life easier for people
  • Use all of your natural talents to reach your full potential as a leader and innovator

Becoming an entrepreneur is not a get-rich-quick scheme. It takes hard work – often more than you think – and patience. It stretches you, revealing your strengths and, yes, weaknesses, too, which is why you will need people around you to compensate for what you don’t necessarily do well. It will force you to work as a team, listening to people and being honest with feedback. You will need to become customer-obsessed, forward-thinking and humble enough to always be “closing” new business and new investments in your business.

Silhouette Photography of Person Standing on Green Grass in Front of Mountains during Golden Hour

If you like a challenge and you love the idea of building something great from scratch, you will have fun, get really motivated, experience the freedom that unleashes you to be your best self at work, and achieve goals that are fulfilling and long-lasting. The ups and downs of the entrepreneurial life will not take you down because you will have such determination that you will make your work count and invariably succeed one way or another.

When something is difficult – as starting and sustaining a startup company is, or learning to play classical piano, or getting your tennis serve up to 100 miles per hour – it often means it has more value when you master it. By investing in your education on how to become an effective entrepreneur (from idea and vision to execution and market traction), you are pursuing your own mastery of one of the most thrilling and challenging career paths on earth today.

Using Public Information to Perform Market Research

To start off doing market research, you can simply do a Google search on a topic of your interest, aligned with your vision for your potential startup company. The online search will bring up a list of information sources from which you can draw free, open and public information online regarding companies, markets and industries.

Macbook Air on Grey Wooden Table

Information can come from the following sources:

  • SEC filings of public companies
  • Articles in the media
  • Summaries or synopses of analyst reports (free)
  • Blog posts by companies
  • User feedback online boards
  • Social media postings
  • Videos
  • Q&As with industry experts
  • Interviews with corporate executives
  • White papers (in-depth studies of a topic)
  • Brochures
  • Podcasts
  • Webinars (usually audio only, but with PowerPoint slides)
  • Industry associations

You can gather so much free information that will help you shape your startup concept. You don’t need to spend thousands of dollars of analyst reports. You may need consultants later in your startup development, but you don’t need to spend big money on high-priced consultants early on when you can do research with simply access to the Internet and a device (computer, iPad or smartphone).

There are a variety of types of market research tools – both offline and online – that are used by many large businesses and can be available to small and mid-sized businesses. When these techniques involve people, researchers use questionnaires administered in written form or person-to-person, either by personal or telephone interview, or increasingly online. Questionnaires may be closed-end or open-ended. The first type provides users choices to a question (“excellent,” “good,” “fair”) whereas open-ended surveys solicit spontaneous reactions and capture these as given. Focus groups are a kind of opinion-solicitation but without a questionnaire; people interact with products, messages, or images and discuss them. Observers evaluate what they hear.

  • Audience Research. Audience research is aimed at discovering who is listening, watching, or reading radio, TV, and print media respectively. Such studies in part profile the audience and in part determine the popularity of the medium or portions of it.
  • Product Research. Product tests, of course, directly relate to use of the product. Good examples are tasting tests used to pick the most popular flavors—and consumer tests of vehicle or device prototypes to uncover problematical features or designs.
  • Brand Analysis. Brand research has similar profiling features (“Who uses this brand?”) and also aims at identifying the reasons for brand loyalty or fickleness.
  • Psychological Profiling. Psychological profiling aims at construction profiles of customers by temperament, lifestyle, income, and other factors and tying such types to consumption patterns and media patronage.
  • Database Research. Also known as database “mining,” this form of research attempts to exploit all kinds of data on hand on customers—which frequently have other revealing aspects. Purchase records, for example, can reveal the buying habits of different income groups—the income classification of accounts taking place by census tract matching. Data on average income by census tract can be obtained from the Bureau of the Census.

Proof of Concept for Your Solution

Before you build your dream idea, you absolutely need to test the concept – or better yet, prove that the idea you wish to bring to life is a valid concept that addresses a real problem or need. To build a proof of concept for a business idea, it is critical to get input and feedback from people you know who can offer perspectives and insights related to what you are exploring.

Woman in Blue Denim Button-up Jacket and Brown Hat About to Fly a Paper Plane Beside a Body of Water

You should either have one-on-one conversations or, better yet, conduct informal “focus group” meetings. In a focus group meeting you would ask everyone around the table for their opinions on different things that relate to your topic.

For example, let’s say that you have an idea to build a financial management platform that will increase financial transparency and build digital trust; this forms your hypothesis that there are unmet needs around transparency and trust. You’d want people whom you know who work in a financial position to participate in a focus group.

You’d ask them for their opinions about how important financial transparency is, to what degree there is distrust of financial information, what it would take to get them to try a new digital platform, what they won’t do and a myriad of other questions to probe them.

By gathering their feedback, you may find out that everyone is concerned about too much transparency violating privacy laws and confidentiality and that no one would use a digital platform that is not integrated into the applications they are already using. This would be extremely valuable feedback, poking holes in your hypothesis, but saving you from wasting time and money on a “value proposition” that no one values.

Two Woman Chatting

You need to get other people’s input and feedback on the usefulness of your concept (if it were already a product) and the way you plan to design it. You also have to identify the potential pitfalls, such as getting into trouble with government regulators who oversee financial transactions.

It is important to get feedback on the proof of concept from people other than your family, friends and significant other. They would likely have a tendency to give you biased feedback, potentially telling you what you want to hear for the sake of keeping a good relationship with you. What is crucial is proving the concept with the real world outside of your immediate network and comfort zone.

You may get contradictory feedback (which is subjective anyway) and you may not please everyone, but you can glean something valuable from all the feedback.

If Steve Jobs was doing an informal focus group for his concept of the iPad before it was ever built, most people in the focus group may say, “I would never use it.” Rather than get totally discouraged, Jobs may have simply concluded that they wouldn’t use it… unless it was radically simple and had the applications that people care about and want to use. He set out to create a product that people would use, even if they didn’t know it before they ever handled an iPad.

Two Man and Two Woman Standing on Green Grass Field

Test everything you hear, but also listen and take it in. Strive to understand each person’s perspective, but get as much feedback from as diverse a crowd as you can. It will help you to refine and tighten your concept. It’s part of continuous improvement.