Validating my business idea by potential customers: how I did it

Only three weeks have passed since I last published an article on this blog, and yet so many things have happened. It is amazing how time flies when you do things you love.

Today, it’s time to go through what I have been doing from this point in time until today.

If you are thinking about building your own product, starting something that matters to you, have an idea but don’t know what to do next, then this article might help you.

Here are all the things I’ve accomplished in the last month.

1. I ditched the consultancy MVP.

First things first.

The last time I discussed my next steps as a founder, I explained that I was planning to launch a consultancy MVP to validate my business idea.

I quickly realised that attempting to sell myself as a consultant was trickier than I thought.

  1. I didn’t have any experience as a consultant,
  2. I would have validated the problem but not the solution,
  3. And, in fact, consultancy as a solution would have been a weaker solution than what my prospective customers are using at the moment.

Instead I decided to focus on finding a problem/solution fit for the SaaS business I’m building.

I realised that, with the right approach, it wouldn’t take me three months as I first thought to validate my hypothesis.

2. …which means, back to the drawing board.

Instead of attempting to charge for consultancy fees to validate  my problem and assumptions, I chose to talk directly to my potential prospects.

I chose to follow the process detailed in “The Four Steps to the Epiphany“, starting with the first one: customer discovery (which is about validating problem, solution and business model with potential customers).

3. I left my full-time job.

In the mean time, two weeks ago, we took the decision to quit my full-time job to focus 100% on this venture. I said we because my fiancée and I discussed it for many months before agreeing that it was the best thing to do.

I have enough money aside to live without a salary for more than a year and I have a space at home to work comfortably.

4. I saved some money.

I used Unbounce to build my consultancy landing page.

I chose to cancel my subscription of 50$ a month and replaced it by a simple page I built using Twitter Bootstrap.

The page doesn’t have a real purpose at the moment but will come to light once I enter the customer validation phase.

5. I remained focused.

I knew that staying focused was my only way to survive and perhaps thrive in this hostile environment.

I’ve decided to set a goal for myself during this customer discovery phase: to have 10 potential customers with a score above 31 during my customer interviews (I will give more details on the scoring mechanism below).

For the last few weeks, my goal has never changed.

Every morning I would decide on my tasks for the day with one objective: getting closer to complete my goal.

Achieving this goal would mean that:

  1. a painful problem has been identified by a group of people sharing similar attributes,
  2. proposed solution and pricing have been validated by potential customers,
  3. we are ready to go through customer validation, which is about value proposition and first sales.

6. I found my first prospects to talk to.

Customer discovery and trying to find prospects to give you 20 minutes of your time in exchange of almost nothing is much more complicated that I thought.

It turns out, people don’t care about you or your venture.

Of course, I knew it before, but experiencing it is a different feeling. Your skin has to be thick from the very start.

It gives a good taste of the many challenges ahead, much more difficult that just finding people who are willing to talk to you.

To find prospects to talk to I’ve used the following tactics:

a. I contacted people I knew.

I wrote down on an online spreadsheet all the people I knew who could fit my customer description.

I mainly used LinkedIn and Facebook to find those people. In total I found around 15 people who would fit my initial profile.

I then drafted a basic template on Yesware and started to send some emails (and Inmails).

A few examples:

  • Via email

People I know - 1

 

  • Via Inmail

People I know

 

If you have a network full of people who fit exactly your customer profile, you’re in luck. If, like me, you have only a few connections you will have to find other tactics.

b. I asked for introductions.

This time, I made a list of people who could recommend me to some potential customers.

In total, I’ve asked more than 100 people and the number is still growing. I might think about somebody I haven’t thought before who could be helpful. I might meet somebody new and ask for an introduction.

This is a continuous effort.

  • One example:

Reco - 1

 

This is by far the most effective tactic. I’ve noticed that people are very easy to talk to once an intro has been made.

I’ve made a few mistakes along the way, though.

I was expecting that, after sending an email asking to get recommended, the receiver would take the time to scan through his or her connections and come back with a list of ten people who would fit my ideal profile.

Wrong.

People have very little time for you and you need to make things very easy for them.

So, instead of sending an email asking for THEM to look through their connections, I’ve started to look at THEIR connections myself on LinkedIn, identify some of the people I’d be interested in and then send an email to the “recommender” asking for his or her help.

You might think it’s obvious, but it took me a while before changing this tactic.

c. I sent (a lot) of cold emails.

I’ve never been really afraid of cold emailing or cold calling companies. I’ve done it in the past in my previous work experience.

During customer discovery, you have to do things that don’t scale. Cold outreach is one of them.

It won’t be necessarily your main acquisition channel in the future, but to get very early stage traction it is one of the most effective tactic.

i. I built a list of companies to target.

I’ve literally started at random, looking for eCommerce websites who I thought could be a great fit.

I would search for keywords such as personalised cards or buy flowers online to find some companies worth contacting.

Then, one by one, I added them to an online spreadsheet.

Once I found a great company, I would also use SimilarSites or Alexa to find similar ones. It’s not really effective for small websites but could be quite good for larger ones.

ii. I searched for contacts within those companies.

Once I had a decent list of 50 websites, I would then go on LinkedIn and search for contacts working for this company.

It turns out that a lot of eCommerce websites are part of bigger groups. Most of the time, I had to look at their T&Cs to find the name of the company they were trading under.

I would then add each contact next to their company. I would also add relevant information such as their title or social media accounts.

Sometimes, it is incredibly difficult to find a relevant contact within a company. Often, I wouldn’t be able to find a contact at all.

In this case, I tried to find a generic email address to contact the company and add it to my spreadsheet.

iii. I guessed their email address.

This topic deserves its own post.

I would use a mixture of LinkedIn, Rapportive, Data.com and online search to find them. I will publish a complete tutorial on this subject in a few days.

Rapportive

 

iv. Sending emails.

The fun begins.

It is now time to write a template to reach out to contacts you’ve identified and another template to send to the remaining generic email addresses.

  • Here is how the first one looks like:

Template - 1

 

  • And here is how the second one looks like:

Template - 2

 

For the first one, you need to be able to get your point across quickly while managing to sparkle your contact’s interest. It is tricky and I’m far from being an expert at it.

The second one is very short and to the point. If, like me, you are trying to reach out to companies rather than individuals, you are most likely to be in touch with customer service representatives.

Their job is to make the people who contact them happy.

Don’t get me wrong, you won’t get an answer every time but you will get some answers if you are resilient.

Reply - 3

 

v. Following-up.

I’ve chosen not to use a CRM software for the moment. I’ve found out that a few well-maintained online spreadsheets can do the job just fine.

The key with cold emails is the follow-up. I’ve chosen to follow-up every week with the contacts who haven’t replied yet.

I’ve received many answers from my second, third, or even seventh emails.

vi. Repeat.

Reaching out to cold contacts is a never-ending process. If you expect results from Day 1 you might be disappointed.

In my online spreadsheet, on the far right, I have added 10 columns. Each column represents a contact attempt.

Spreadsheet

 

Unless a contact replies and tells me that he’s not interested I will keep emailing weekly until I get an answer.

d. I joined some Facebook groups…

I’ve recently tried to find people to talk to in Facebook Groups. I’ve started to offer my help around customer retention to eCommerce Entrepreneurs.

Members have been really responsive. On the flip side, they might not be the exact profile I was looking for.

e. … and some Meetup groups.

Networking is important for many reasons.

  • As a single founder, it allows me to interact with something else than my laptop screen,
  • It allows me to meet new people and learn from their experience,
  • I could meet my future customers,
  • I could meet my future co-founder(s).

I’ve started to go to every Meetups I could in Dublin around my area of interests (eCommerce, marketing, startup, data) and my diary is usually booked every evening from 6pm to 9pm.

Dublin is a great city to be in, and thanks to the many meetup organisers, there is always an event to go to.

The thing about meetups is: you never know who you might meet and find common interests with. I’ve met most of the people I know in business at Meetups.

Some examples:

Meetup - 2 Meetup - 1

 

7. How I created and scored customer interviews.

a. Coming up with the questions.

Getting interviews with potential customers is the easy part. The next challenge is to get the most out of them. Interviewing customers, especially when one is passionate about his business, is tricky.

For those interviews, your goal should be to understand your interlocutor’s problems and challenges, and hopefully to match them with your hypothesis.

It is very easy to be biased and lead your interlocutor to tell you that your idea is the best he or she has never heard.

I’ve used this article written by Jason Evanish.

I think I have good empathy for people so it was great to listen to other people’s experiences and challenges. I went off script most of the time. Nuggets of information can come from everywhere.

b. Recording everything.

I called and met potential customers on my own so I didn’t have anybody to write notes for me.

I took notes of everything I could during the interviews.

Then, right after each interview, I took the time to write proper computer notes. I store them all in a Customer Interviews folder.

Customer Interviews

 

I would advise to translate the notes into computer format as soon as your interview is over. This way, your memory is still fresh and you won’t miss much.

c. Scoring each interview.

You need a way to overcome your bias to see if you’re into something. I found a great way to do so from the book “Lean Analytics“.

The authors came up with a set of questions to ask yourself after an interview has been performed.

Here are the questions, and the possible answers:

1. Did the interviewee successfully ranked the problems you presented?

  • Yes, with strong interest – 10 points
  • Sort of, they couldn’t decide which problems were really painful, but were still interested – 5 points
  • They struggled with this and spent more time talking about other problems – 0 point

2. Is the interviewee actively trying to solve the problems, or had done so in the past?

  • They’re trying to solve the problem with Excel and Fax Machines – 10 points
  • They spend a bit of time trying to fix the problem, but just consider it the price of doing their job – 5 points
  • They don’t really spend time fixing the problem. They are happy with status quo – 0 point

3. Was the interviewee engaged and focused during the interview?

  • They were hanging on your every word, finishing your sentences, and ignoring their phone – 8 points
  • They were invested, but showed distraction or didn’t contribute comments unless you actively solicited them – 4 points
  • They tuned out, looked at their phone, cut the meeting short, or generally seemed entirely detached – 0 point

4. Did the interviewee agree to a follow-up meeting?

  • They’re demanding the solution yesterday – 8 points
  • They’re OK with scheduling another meeting, but suddenly their calendar is booked for the next month – 4 points
  • You both realise there’s no point showing them anything in terms of solution – 0 point

5. Did the interviewee offer to refer others?

  • They actively suggested people you should talk to without being asked – 4 points
  • They suggested others at the end, in response to your question – 2 points
  • They couldn’t recommend people you should speak with – 0 point

6. Did the interviewee offer to pay immediately for the solution?

  • They offered to pay for the product without being asked, and named a price – 3 points
  • They offered to pay you for the product when you asked them to – 1 point
  • They didn’t offer to buy and use it – 0 point

Here is how it works: if the interview score is equal or above 31 points, then there is a good chance that you found product/solution fit.

I took the time to score each interview as soon as they are over.

It’s important to capture the feeling you just had with your interlocutors.

So far, my scores are pretty consistent:

5 medium-size B2C eCommerce retailers: all above 31

3 others (large B2C retailers): all under 31

It is crucial to find a pattern as soon as you have performed a decent amount of interviews. Your guts will probably tell you which customer segment you need to pursue, while the scoring will give you a more analytical approach.

8. Updating my hypothesizes.

A little bit more than 2 months ago, I created my CPS canvas and shared it openly on Google Drive. I knew I would constantly come back to it and edit it after talking to my first prospects.

No plan survives first contact with customers.

Looking at the revision history now, here is what changed.

a. Customer.

BEFORE

Our customers are medium-size eCommerce businesses. Within this segment, marketer/business analyst/data analyst, are the ones who are likely to be using and buying the product.

AFTER

Our customers are marketers, business analysts or founders within mid-sized B2C eCommerce retailers.

WHY

I discovered quickly that eCommerce businesses could mean a lot of different things. Any businesses selling something online is an eCommerce business.

What I wanted to describe was instead eCommerce retailers, which is the sale of goods through the Internet.

I also added B2C based on my interaction with customers. B2C retailers sell to more customers than B2B retailers, with prices generally much lower. It means that B2B retailers don’t have as much trouble as B2C retailers to connect with their customers.

b. Problem.

BEFORE

Our customers have trouble identifying and acting upon the portion of their customers who are about to lapse or are lapsing.

AFTER

Our customers have trouble retaining their customers.

WHY

After discussing with many experts and potential customers, I started to simplify the problem to make it more understandable.

I feel like this is not the final problem I’m trying to solve. I need to dig deeper so expect an update very soon.

c. Solution.

BEFORE

A software that integrates with any eCommerce platform or bespoke backend. It then analyses different customer data points. The analysis leads to segmenting their customers into different groups based their activity and other factors. Based on this analysis, automated multi-channel campaigns are created to prevent their customers to churn for example. Our software integrates with our customers marketing tools (email marketing, mobile marketing, communication tools) and the campaigns are created within each of those.

AFTER

A software that integrates with any eCommerce platform or bespoke backend. It then analyses different customer data points. The analysis leads to segmenting their customers into different groups based their activity and other factors. Based on this analysis, automated multi-channel campaigns are created to prevent their customers to churn for example. Our software integrates with our customers marketing tools (email marketing, mobile marketing, communication tools) and the campaigns are created within each of those.

WHY

I’m still not happy with the way I explain the current solution. I need to simplify.

However, I still made some progress. The general idea hasn’t changed, but one important aspect has evolved.

I’ve discovered that one of the major pain for my customers is in building, sending and measuring marketing campaigns to communicate with customers. At scale, sending marketing campaigns is a long and painful process.

Is there a better way?

Of course there is.

What if we could completely cut it out? What if their customers could receive the content they love, when they need it the most, where they want it the most without retailers having to take days (sometimes weeks) to build marketing campaigns?

This what Slices.io is all about.

Delivering a unique experience to our prospects customers by using a data-driven approach.

9. My results so far.

Number of emails: 358
Number of cold people reached: 210
Number of no: 9
Number of maybe: 15
Number of yes: 6
Number of prospects with a score equal or above 31: 5
Conversion rate from cold to interview: 2.8%

(Those numbers are only the statistics regarding cold contacts and don’t include recommendations.)

So, there you have it.

For every 100 cold contacts, I got an average of ~3 who agreed to speak to me.

This number could seem low, but given the fact that those persons didn’t know me beforehand I found it to be a good result. I also haven’t started to cold call yet and I expect the numbers to go up with this tactic.

10. What’s next?

I’ve learned a lot from my discussions with potential customers and my research but it is just the beginning.

Here are my 3 key objectives for the next few weeks:

  • Have an additional 5 customer interviews with a score of 31 or above: this means more customer discovery.
  • Translate my key learnings into compelling value proposition and business model: this is the customer validation phase which I’ve already started.
  • Get our first pre-order: it is now crucial to get pre-orders from the most interested prospects. They need to see a tangible product in front of their eyes and be willing to pay for it.

How did you validate your business idea?

  • Great post Louis – very comprehensive. I have changed my own prospecting technique slightly after reading your version. My only complaint is that I could have done with it a year ago. Best of luck with Slices.

    • Louis Grenier

      Thank you so much Oisin. Can I ask you what you’ve changed?

    • Thanks Oisin! I’m curious: what did you change in your prospecting technique? 😉

      • The primary thing is I’ve started using Yesware. Was a little bit blind as to what was working (or not working) before in terms of subject lines and content. The scoring system for customers was also new to me. Going to start using that. Thanks again.

        • I’m glad I could help. See you around soon Oisin.