The 20 Reasons Startups Fail
Build Your Startup Like a Serial Entrepreneur
Designing your business model
We recommend that you move to the Test phase when you have a rough idea of who your customer is and the problem you are solving for them.
In the Test stage, we are looking at three things. The first two are around the solution. Once you have identified a problem, even and probably before you are ready to build a product, can you start to solve the customers’ problem? What are the things the solution must have? And what are the things that maybe we would like it to have in the future, but it does not need to have right now in order to solve their core problem?
The third question is, “Will customers pay us to solve this problem?” There is a lot of debate in the startup world around whether startups need to have revenue right away. Our position is that startups would do well to start making money as soon as possible, and be able to use that to fund parts of the company. That gives you a lot of leverage as a founder. And obviously, cash in the door is always better than no cash. At the same time, there are plenty of cases where it does not make sense to spend a lot of time trying to get a lot of revenue right now.
However, the trigger of customers paying you for your solution is an absolutely critical must-have in this phase. Yes, you can do free pilots, samples, or other options where the potential customer is experiencing your solution for free. And yes you can get interesting feedback and data from that. However, it is not until they have paid you money that you start getting real, honest, authentic feedback about what worked and what did not work.
Payment for your solution literally can be $1. The difference in mindset of a user who does not pay any money for something versus a customer who has paid $1 is huge. A customer will have a very different perspective and opinion about the value they received when they have put money on the line.
This stage is focused on trying to solve your customers’ problem through a quick and dirty experiment. How can you pull together tools that exist already in order to create a version of the solution that does not take very much time and is not expensive, but allows you to test your theories.
Our Resource Library contains videos detailing different techniques for running solution testing. There are a wide variety of ways you can offer your solution to customers to find out what is meaningful to them without actually building something or at least without spending a lot of time or money building a product.
The lever that gets you out of the Test phase is simple: Sell the solution to your early adopters. The term “early adopters” is important here. You may be able to get somebody/anybody to pay you for the solution, like a family member or good friend. However, we are not just looking for a warm body because that sale is not scalable. Can you make money from the people you have identified as your early adopters?
As soon as you have made a handful of those sales, or even one, then it is time to move on to the Grow stage on the Roadmap, where you focus on building a repeatable business model.