So, you’ve got great business ideas
I get it, I’ve been there too.
Two years ago I quit my job and started Ladder – my own business venture. Things are going pretty well; our team is now 40+ people strong and we’re hiring another person every month. Aside from the 200 business ventures we’ve worked with, I’ve also helped over 70 other people launch and scale their new business ideas.
So now it’s your turn.
What’s your big new business idea?
AirBnB for pets? Uber for backrubs? Yelp for people?
OK, so assuming it hasn’t been done yet and it doesn’t defy the laws of physics… what are you waiting for? Quit your job and start a startup!
As soon as you quit your job, the clock is ticking.
It’s a race to get customers before you run out of savings or hit your credit card limit. Not to mention the opportunity cost of what you could be doing with your time instead.
Is your idea really good enough to bet $10s of thousands of dollars of your own money on? Are you really ready to commit to working 80 hours a week for 7 years on this thing?
What makes you think you can overcome the 1 in 10 odds?
Wouldn’t it be smarter to test the idea first?
You wouldn’t buy a car before taking it for a test drive. Why would you waste so much more money (and time) without ‘test driving’ your new business venture first?
Well, that’s what I’m going to show you how to do.
You don’t need to raise thousands of dollars in funding or take out a loan. You don’t have to miss paychecks or worry where rent money will come from. You don’t have to find that technical co-founder or spend hours learning how to code.
I’m going to teach you how to validate your new business idea before doing any of those things.
In 5 easy to follow steps.
5 Steps To Validate A New Business Venture
We originally created this content as part of a course business we were launching codenamed “Z21”. We actually followed these exact steps and had 5 people sign up for the $2,500 course and place deposits… but we refunded their money. Why? Because this wasn’t the only idea we were testing and we found something that was even more promising.
The great news for you is that we didn’t want that content to just go to waste, so we’re putting everything into this post… for free. Don’t say we never give you anything. ?
Note: even if your business is already established, you should still find this a useful exercise.
How can I test my business idea?
- Get sales, even without a product
- Map your business strategy, make it fit on one page
- Continue to validate via small marketing experiments
- Promote to your network, influencers, etc
- Define the final MVP and mock it up
Step 1: Sell your new business idea
Yes, that’s right. Sales.
You’re asking “How can I sell a product that doesn’t exist?”
Exactly. It’s tough to sell a product that doesn’t exist.
…and that’s precisely the point.
If you CAN pre-sell this product before it even exists, you’ll KNOW that your idea is good.
When I started Ladder I had already closed $20k in recurring revenue before I quit my job.
Did I have a product? No.
Did I have a website? No.
Did I even have a pitch deck? No.
What I did have was a problem worth solving, and a vision of what the solution could be.
The startup founders I talked to were working with 5-6 different marketing specialists, consultants, and agencies each, all of whom weren’t talking to each other and some of whom were ripping them off.
They were desperate for someone to come in and clean up the mess.
I offered to do everything their current consultants were doing, but with one point of contact and a 20% money back guarantee if I didn’t hit their targets.
The way you do it doesn’t matter. What matters is that you actually find out what people are willing to pay up front for.
If people are feeling so much pain from the problem you’re solving, that they’ll stump up their cash ahead of time, you’re on to a winner.
You can offer a money-back guarantee like I did, but It’s important that you actually get people to fork over their cash.
The reason? People lie.
Your Mom doesn’t want to hurt your feelings, so of course she’ll say your idea is the best idea in the world. Your friends also don’t want to hurt your feelings, so they tell you to go for it. Your colleagues don’t even like you, so they tell you what you want to hear so you’ll go away.
Well, actions speak louder than words; if people aren’t forking over cold, hard cash, you don’t yet have an business venture worth working on yet.
I know – it’s uncomfortable to ask people to take a risk on you. It feels dishonest to take someone’s money before giving them a tangible product in return.
Get comfortable asking people to take a risk on your business venture
You’re also going to have to sell your vision to:
- your first employees (who by all rights should be working elsewhere for more money and better hours)
- early investors (who’ve seen thousands of overly-optimistic companies fail and have plenty of other great ideas to choose from)
- your friends and family (who I guarantee will be concerned about your mental health and finances).
Besides, people pay for products that don’t exist yet all the time. Heard of Kickstarter? Bought airline or concert tickets? Booked a hotel? Pre-ordered a hot new video game?
If there’s enough demand for the product, there will be at least a couple of early adopters who will buy it before it exists. If there isn’t, that’s the invisible hand telling you to try something else.
Still need convincing? Lack of “market need” is the #1 reason startups fail.
So, protect yourself from this risk early on, by doing the following:
Write an email to your network
There will be people you know that have the exact problem you’re trying to solve with your business. Brainstorm a list of those people and email each one with something similar to this:
Subject: Working on a new business: Doggie Treats.
I’m selling premium dog biscuits on a subscription for $50 per month. Taking 20 pre-orders at that price.
PayPal me $50 at [email protected] if you want in.
Know anyone else that would be interested? Feel free to forward this email.
Any questions, just hit reply.
Sure, it feels uncomfortable writing that email.
Nobody likes to ask your friends and family for money. But if you are providing genuine value, it won’t feel uncomfortable for them. They’ll be happy that you’re solving a problem for them.
But if people who already like you react negatively to your new business idea… then why would people who’ve never met you buy from you?
Time to move on to the next one.
Get out of the building
This is basically Steve Blank’s catchphrase. As a serial entrepreneur, Stanford professor and grandfather of the Lean Startup movement, you should listen to him. What he’s talking about is the value in actually talking to customers.
This is the #1 mistake I’ve seen people make (and I’ve made myself). It’s nice and comfortable to stay inside your office and dream about this perfect business venture you’re creating. As long as you stay in that building you can continue to dream, and everything’s right with the world.
Going outside means interacting with the public. It means pushing yourself out of your comfort zone. Most of all it means rejection.
The real world is imperfect. People are illogical. The dream you had about building the perfect company is often shattered upon first contact with your potential customers.
In the real world, people tell you no.
That sucks. But let me tell you what’s worse – working 80 hours a week for 3 months and spending thousands of dollars of your own money only to THEN going into the world and hear that big fat NO.
In the early days of Ladder, I spent a whole year of evenings and weekends theorizing new business ideas that never made it past the pitch deck stage.
Seriously – they never even saw the light of day. I was killing myself working 80 hours a week, earning half my previous salary and sacrificing time with my friends and loved ones… for nothing.
I was told to ‘get out of the building’ time and time again by lots of smart people, but it took a whole year of wasted effort for me to really internalize it. It was only after I really started listening to customers that I realized how wrong my theories were. From there we made changes to our business venture that helped us triple in revenue over the next 6 months and hire 15 people.
Don’t make the same mistake as I did, for as long as I did.
Remember: in theory, there’s no difference between theory and practice. In practice, there is.
So get outside the building and ask potential customers these questions:
Interview Structure Example
1) Hey, I’m trying to learn more about __________ for a project I’m working on, do you have five minutes to help me out?
2) Tell me about a time you __________.
3) What was the worst thing about __________?
4) How do you solve __________ today?
5) What sucks about that solution?
6) If a better solution existed, where would you hear about it?
7) Thanks you’ve been incredibly helpful. Would you mind if I took your email address so I can send you what I’m working on when it’s ready?
Remember, these aren’t your friends; they have no reason to trust you yet so don’t go for the hard sell. Do that in a follow-up email a week later.
From these questions you’re looking to get an idea of the following:
- What problem do customers actually want solving?
- What language do they use when they talk about it?
- What are their hopes, fears, concerns and expectations?
- Who are the competition? Where do they fall down?
- Where would prospects look to find a solution like yours?
These answers are incredibly valuable; as you’ll see later, they relate directly to the marketing campaigns you’ll run to test your idea (and will continue to be useful should you keep going with the idea).
Now let’s break down each question.
1) Hey, I’m trying to learn more about __________ for a project I’m working on, do you have five minutes to help me out?
- Be friendly, use open body language (smile, hands out of pockets!)
- If they object, repeat that it won’t take long, and offer to buy them a coffee
- If they ask for more info, say you’re building a product to help solve __________ and you want to make sure you’re building something useful.
- If they ask for details about what you’re building, ask if they wouldn’t mind answering questions first so you know you’re not biasing their answers.
2) Tell me about a time you __________.
- If they ask what type of experience you want to hear about, ask them about the last time they experienced the problem.
- If they haven’t experienced the problem before, thank them for their time and ask them for a referral to someone who has.
3) What was the worst thing about __________?
- The goal here is to find a big problem they know they have.
- Be careful not to invent problems for them – it has to be something they already feel as a pain point.
- Ask them to elaborate until you feel like you know enough about the issue.
4) How do you solve __________ today?
- Ask as many elaboration questions as you need to fully understand it.
- If they aren’t currently trying to solve the problem, this might be an indication that it’s not a big enough problem.
- Be careful not to ask them if they’d pay or how much they’d pay for a solution, ask them how much they have paid.
- Figure out what companies are involved in providing this solution, and if it’s their core business offering.
5) What sucks about that solution?
- Zero in on what dimensions the solution fails on – i.e. too expensive, too slow, too inconvenient.
- Try and determine if the solution is ‘good enough’ or if there is real pain – inertia is very hard to overcome, even for a superior solution.
6) If a better solution existed, where would you hear about it?
- Try and get as many examples as possible – what would they search on google? what type of friends would tell them? what websites currently inform them of products of this type?
- Ask for specifics – i.e. if they say ‘my friend alan’, ask them for more info on alan and why he’d be a credible source of information.
7) Thanks that’s really helpful. Would you mind if I took your email address so I can send you what I’m working on when it’s ready?
- Very important to get this information – you should always be building your email list to have people to launch to.
- If they say no, that’s a bad sign – you’re not solving a big enough problem for them even to want to be notified when it launches.
Now your turn – what, did you think you’d get away without doing any work here?
Here’s your homework:
- Interview at least 5 of your target customers, using the script provided
- Be ready to answer the following questions:
- What is the biggest problem you can solve for them?
- What other products currently solve this problem?
- Who and what influences their purchase decision?
After talking to potential customers, you might find yourself doubting your original new business idea.
Great! This is the perfect time to switch to a better business venture, before you have any significant investment to lose.
Remember to repeat the exercise if you do switch!
Step 2: Your business venture strategy
OK, you’ve tackled the practical part; overcoming your discomfort and asking your friends for money and getting rejected by strangers. Good work.
Now you get to spend some time on theory as a treat for good behavior.
Let’s see if this business vetnure works on paper… or rather, canvas.
Meet the Lean Canvas.
Popularized by the Lean Startup movement, there are a lot of different versions out there. The one above is modified from the Ash Maurya version, from the book Running Lean, which we definitely recommend if you like the content of this post. You should also check out Steve Blank’s worksheets and Alex Osterwalder’s Business Model Canvas.
But what’s important is that it all fits on one page.
This is much, much shorter than the average business plan, and that’s why it works.
“If I had more time, I would have written a shorter letter.” – Blaise Pascal
Fitting your entire business venture on one page forces you to focus only on what’s important.
Going through this process forces clarity of thinking and essentialism; stripping your random thoughts back into a clear, differentiated proposition. Asking yourself “what’s really important?” at every step can really be a transformative exercise.
It’s really tough to do this. But you’ll see how immediately insightful it is once you try.
Just by forcing yourself to fit your ideas to this format, you’ll find that quite a few of them that seemed magical in your head, are actually pretty faulty or mundane once you write them down.
Because it’s all on one page, you can quickly understand most of what you need to know about the business at a glance. This lets you compare and contrast multiple business ideas.
Once you do settle on your new business idea, you’ll need this level of clarity anyway if you’re really going to sell your vision to investors, employees, and customers.
Got it? Good. Let’s go through this step by step:
Problem / Solution
What problem(s) are you actually trying to solve? How does your solution fix that problem? If you don’t have a clear idea of this you’ll really struggle to fill out the rest.
- Building a business will be much easier if the problem is one that you yourself have.
- Make sure to limit this to one problem if possible, no more than three.
- Only list one solution. If you can’t fit it in this space, it’s too complex, try again.
Proposition / Advantage
What benefit do you offer people who buy your product? What is the main advantage your product or team has which allows you to deliver on that promise?
- Try and get your benefit down to one main point.
- Use follow up points to express additional benefits, but keep it to no more than three.
- The harder it is to copy your advantages, the better.
Customer / Channels / Influencers
If you have a clearly defined problem, and a good idea of your main benefit, you should be able to picture in your head what type of person would be most interested in that offering. From there it should be easy to figure out where those people can be reached (channels) and what people might influence their decision.
- Make sure you pick customers that feel the pain of the problem more than anyone
- Limit ‘channels’ down to 2-3 max; in practice it’s rare more than 1 channel works anyway
- Give easy to understand descriptions of your customers persona; what’s important?
Alternatives / Concepts
List a couple of products your potential customers are currently using to solve the problem. Can you make a popular analogy for how your business works?
- If your potential customers aren’t currently using alternatives, that’s a huge red flag
- It doesn’t have to be a direct competitor; e.g. Excel is it for many analytics platforms
- Analogies are great ways to convey a lot of information. ‘Uber for X’, ‘AirBnB for Y’
Metrics / Cost / Revenue
These are the unit economics of the business (something we’ll discuss in more detail later). At a top level, how do you make money? What do you spend it on? What is important to track to tell if you’re doing a good job or not?
- You only need a very high-level view of your costs – what are your biggest outgoings?
- Avoid the temptation of having multiple revenue streams – the best often have just one
- Make sure the metrics are actionable – could I make changes to affect this number?
The Full Canvas
See how easy it is to understand the business venture when you put it down this way? See how the limited space forces clarity of thought? See how easy it would be now to compare and contrast multiple new business ideas?
Great – you’ve condensed all the complexity that is your business venture idea, down into a single page. Now, what if you had to fit it into a Tweet?
If you thought it was tough to condense your idea down to a one-page lean canvas, try cutting everything down further to under 140 characters.
Why is this useful?
You’re in an elevator. You recognize a famous investor who is in there with you. This is someone you respect, with experience and resources that could help you take your business to the next level. You get talking and they ask you what your business does.
What do you say?
You only have a couple of minutes to explain yourself before they get off at their floor. That’s why they call it an ‘elevator pitch’ but it can easily be a Tweet, the way someone introduces you at a cocktail party, or how you explain it to a five-year-old. The format doesn’t matter; what matters is that you can deliver a clear, concise and interesting description in a small space.
Let’s get started.
Anatomy of an elevator pitch
There are tons of elevator pitch templates out there, but they all look something similar to this:
Let’s go through the different sections:
Name of Company
I hope this one’s self explanatory…
What your product actually is. A website? A mobile app? Avoid getting too fancy here; imagine explaining what it is to your mother. If she wouldn’t understand the jargon, ditch it.
Who buys your product? If you’re selling to businesses, try a job title / company type / company size combination (marketing managers at eCommerce businesses with <20 employees). If you’re going the consumer route talk about lifestyles, demographics and what products they buy (wealthy urban females 25-34 who enjoy Prada bags).
Solve A Problem
What do you DO for that audience? How do you make their life easier or better? What pain do you help them avoid? Use words that everyone can understand and relate to.
What makes you different? What do you do that makes your product so special? This has to be something meaningful and credible. Bonus points if it’s something that’s hard for incumbents to replicate, like “disappearing photo messages” (Snapchat) or “all-electric sports cars” (Tesla).
A few more pointers:
- Avoid adjectives – ‘first’, ‘only’, ‘cheapest’ or ‘best’
- Go niche – a small initial market is more realistic
- No buzzwords – cut the jargon from your pitch
- Short length – you only have a small window to pitch
If you do this right, the investor will be able to answer the following questions:
- What does this company offer?
- Which of my friends would buy this?
- Why would I tell them to buy this?
And remember, it doesn’t have to be an investor; you’ll need to give this pitch to potential new employees, new prospects, the press and even your mother-in-law; make sure it works for a wide range of people and practice and refine it constantly.
So let’s give this a go; here’s that template again:
My company, ____________ (name of company)
is developing ____________ (defined offering)
to help ____________ (defined audience)
____ (solve a problem)
with ____________ (secret sauce)
…and here’s the elevator pitch for the course business idea we tested:
My company, Z21 (name of company) is developing an in-person course (defined offering) to help potential entrepreneurs (defined audience) test market demand for their business ideas (solve a problem) with a lean process to avoid wasted money and effort (secret sauce).
Now we remove the template scaffolding to make sure it flows:
My company, Z21 is developing an in-person course to help potential entrepreneurs test market demand for their business ideas, with a lean process to avoid wasted money and effort.
Can we make it even more concise? The template helps, but feel free to ditch it if you can make the pitch clearer without it, just make sure the essential information is still there.
Z21 is an in-person course teaching potential entrepreneurs lean principles so they can test market demand for their ideas without wasting time and money.
Can we improve further?
At Z21 we teach entrepreneurs how to test their business ideas before quitting their job.
Hey – pretty close to the post title, right? ?
Notice that the tangible example “quitting your job” helps us make the “wasting time and money” less ethereal and more understandable? We can also just use the word “teach” and let them assume it’s an in-person course. We don’t mention lean principles here, but the very fact that we think entrepreneurs should ‘test’ their business ideas gives that away (if they’re already familiar with lean principles).
Hearing this pitch, my grandmother wouldn’t have any clue HOW someone would TEST a business idea, but she CAN understand the dangers of quitting your job to pursue a poor idea.
You could imagine her reading this headline in the paper, cutting out the article and giving it to me if she knew I wanted to start my own business. If you can’t imagine the same scenario, your elevator pitch is probably too full of jargon.
Of course, there is a time and place for jargon.
People use it because, IF both parties understand the meaning, it can be an efficient way of achieving your goal of fitting a lot of information in a few words. It also can have a tribal bonding effect – convincing them you’re ‘one of us’ because you use the same words.
For example, I could use this:
Z21 teaches the lean startup methodology to wantrepreneurs so they can validate their ideas without burning too much personal runway.
Let me explain the jargon:
So I didn’t explain this earlier, but the name Z21 is actually jargon, homage to Peter Thiel’s popular book Zero to One. Because this book is entirely about how to avoid market failure for your startup, it’s a fitting reference that a tech enthusiast is likely to get.
“lean startup methodology”
From this they’ll know I’m referring to the principles outlined in Eric Ries’ book “The Lean Startup”. That’s a whole book worth’s of information condensed into 3 words and importantly, it tells them I’ve probably read it. Even if they haven’t read this book, the word ‘methodology’ makes me sound smart and they understand what probably understand what a ‘startup’ is and what ‘lean’ means.
If I really wanted to impress I could have said “customer development methodology” which would hint that I’ve read Steve Blank’s “The Four Steps to the Epiphany”. This book came before the Lean Startup and Steve Blank invented many of the principles Eric Ries later popularized, but it saw much less mainstream success. Because it was less popular, the odds are much lower that they’ll get the reference, but if they do, it’ll lead to a much deeper level of respect (like someone casually dropping the name of an obscure band that you both turn out to love, even though most people have never heard of them)
I’m not sure if it was coined by Noah Kagan of AppSumo, but he certainly popularized the term. It refers to people who are in love with the idea of starting a business, but never make the right moves to actually do it. This is precisely the audience we’re trying to help with our course, and because has a lot of cache in the entrepreneur community, using this term will immediately get who our audience is.
This is just a fancy word for ‘test’ but it’s what much of the literature uses. I think this is because the word ‘test’ has been watered down by the masses, so it doesn’t really mean what they intend it to mean anymore; a scientific test to prove the hypothesis that your business has a market.
“burning too much personal runway”
Your ‘runway’ or ‘burn rate’ is just a calculation of how much money you have until you run out. The best explanation of this I’ve seen is by popular investor Fred Wilson. Startups are almost always unprofitable (at least at first) which is why they need to raise money, and why they need to calculate how long it’ll last. So personal runway is simply how much of your own money you can afford to spend on your startup before you have to give up. The biggest way to affect your personal runway is to quit your job, so this reference ties very nicely in with what we’re helping ‘wantrepreneurs’ avoid.
By now you should get why people use Jargon despite all the confusion it can cause; if it works, you instantly gain more credibility, respect, and you convey a lot of information all at once.
But be very careful.
If the person doesn’t get the reference, you risk alienating them and turning them off your product completely; it’s a high risk, high reward strategy.
What you’re also likely to find, is that people nod along as if they understand the jargon (because maybe they heard it once and think they kind of get what it means), but then just when you think you’ve made the sale, you realize they had no idea what you’ve been talking about.
At Ladder this happens to me all the time when I explain that we use an ‘Agile’ process. People don’t want to look dumb I guess, and they probably hear the word Agile a lot so they think they know what it means, but very few people really have internalized it.
We’ll be within grasping-distance of closing a deal… and they’ll ask for a 12-month marketing plan before they’ll sign. Avoiding wasting time creating useless 12-month plans is really the main reason Agile exists, so by asking for that plan they’re betraying the fact that they really don’t ‘get’ what they were about to buy.
So use jargon if you must, but use it at your own risk!
Now we’re happy the new business idea works on paper, let’s see how the numbers work out. The unit economics of a business venture is simply how much it costs that business to sell one ‘unit’ of the product, and how much money it makes from the sale of that one unit.
To work this out, you need to understand your ‘marketing funnel’; map out all the steps someone goes through to become a customer, and do some analysis to figure out how many make it from one stage to the other. It’s called a ‘funnel’ because at every stage, fewer people make it through. Only a small percentage of people who visit your site will get to the end and buy something.
This type of analysis is just as useful even if you haven’t sold your first unit.
That’s because it forces you to make assumptions about your business model. How cheaply can we attract visitors to our site? What percentage of visitors will turn into customers? How long will they stay customers? How many friends will they refer?
Once you’ve made your best guesses, you can see if your business is likely to make money, and if it is, what benchmarks you need to hit to make that happen.
P.S. If you’re new to this, you should still be able to follow along, but you might want to bookmark our beginner’s guide to marketing analysis to learn more about the topic later.
Not sure which funnel stage to target? Start here.
Let’s take a look at a couple of example funnels:
- Before you signed up to LinkedIn, you probably ended up visiting someone’s profile (usually by Googling their name).
- Most of the people who visit the LinkedIn website, end up creating an account.
- The first thing LinkedIn asks them to do is invite their friends.
- Now you get to the main timeline and they show you ads (how they make money).
- If you keep coming back daily, they’ll make more and more money from you.
At each stage, more and more people will drop off. It’ll be different for every business. For LinkedIn, a lot of the people who sign up will invite friends (colleagues), but I bet they have a much, much lower retention rate than Facebook (which people use multiple times a day).
Let’s look at another one and see how it differs:
For a Software as a Service (SaaS) company selling their product to other businesses, their funnel might end up looking a little different.
- The top of the funnel might be a cold call / meeting at an event, rather than website visit.
- A small percentage of those opportunities will schedule a follow up meeting with them.
- A much smaller percentage will end up buying, usually after a lengthy sales process.
- Only then will they consider recommending the product to other people, if things go well.
- Because they’re billed monthly, retention just means they haven’t cancelled yet.
Ok now how would it look in the eCommerce space?:
- We’re back to website visits for the top of the funnel.
- People tend to buy something before they have any other interaction (but it’s a small %).
- Some customers will like the brand enough to follow them on social or click their emails.
- This leads to repeat purchases, and eventually to referrals to their friends.
So let’s look at how the funnel looks with numbers filled in:
- At the top you have your marketing spend; how much it costs to advertise your product.
- CPM just means how much it cost you to show your message to 1,000 people.
- Clickthrough rate is a measure of how effective that message was; did they click the ad?
- That leads to visitors, a small percentage of which will buy something (conversion rate).
- Then of course you have your revenue, some of which you keep as profit.
- Return on Investment is a key metric; you spent $400 and got $700 back; a 75% return.
Of course, this just looks at one purchase: what about repeat purchases?
A lot of businesses don’t break even on their marketing unless you look at their repeat purchases. A good example is printers; they sell the printers at a loss and make the margin back by selling you ink whenever you run out at a huge markup.
To take into account repeat purchases, you need to calculate your LTV or Life Time Value, vs your CAC, Customer Acquisition Cost to look at your true ROI.
There are of course lots of different ways to calculate this; it’s not an exact science because the numbers will change over time as your product improves (or gets worse) vs. the competition, and as your marketing operation matures.
The important thing is that you have these estimates in the first place. Without them, it’s very difficult to know what you’re aiming for and how realistic it is.
If I see that to make your new business idea work, you need a 50% CTR, when the industry average is 1%, I’m going to tell you to go back to the drawing board. Just the act of writing out these assumptions is usually enough for your gut to tell you that something doesn’t feel realistic. Ideally, though, you’ve put down conservative estimates and the model still works out great.
Viral Coefficient / Retention
One thing that most people fail to understand is the power of virality and retention. Sure they think it’d be cool to ‘go viral’ but even then they’re using the term wrong. For example, a celebrity Tweeting out something that then gets seen by a million people doesn’t mean it has ‘gone viral’. It’s only ‘viral’ if those people then share it with more than 1 other person each, who in turn spread it to more than 1 other person each, and so on till it spreads throughout the World.
You might recognize that’s exactly how a virus spreads (hence the name). If I give you and two other people in my office a cold, they might pass it on to three other people each themselves, now we have nine people infected. If the same rate continues, we’ll have 27 (9 x 3), then 81, then 243. Woah, that escalated quickly!
Retention is not as powerful, but it is arguably much more important because it’s the sign of a good product.
Rather than being a flash in the pan-viral product, if your users stick around that’s a stable base you can count on, and build on. If they don’t stick around you’ll always be having to pay to attract new customers through marketing, to replace those that left; a leaky bucket.
To illustrate the relative power of these two metrics, take a look at the growth rates of a user base at different levels of virality and retention.
Minimum Viable Brand
Next step is branding.
OK, calm down.
No need to go into Don Draper mode – we’re not talking a big expensive branding exercise.
All you need right now is a minimum viable brand.
We just need to establish the basics, so you (and your employees) are consistently saying the right things, in the right way, with the right accompanying visuals.
Consistency breeds familiarity. Familiarity breeds trust.
People buy from companies they trust. That’s the power of branding.
What you’re seeing here are the six interlocking pieces that make up a minimum viable brand. Let’s go through each one.
What We Stand For
This is where you make a statement that should guide every decision at your company. It’s a universal belief, a way that you see the World.
Note: you’re not really making a stand, if it doesn’t have some downside; somebody should be able to disagree with this statement, or it’s not really meaningful.
You should be willing to turn down customers who don’t fit with this message and refuse to hire employees who don’t believe in it.
To make sure you’ve settled on something meaningful, you should be able to list not just three positives, but also three negative responses to your stance. Rather than avoiding these concerns you’ve now prepared ways to handle your customers’ main objections.
What Our Beliefs Are
Your beliefs are related to what you stand for, because they help you put it into practice. Limit these to three short bullet points; the type of thing you could stick on a motivational poster (but much less vapid).
These must be an extension of what you stand for – be careful not to contradict yourself. Consistency is the name of the game.
What People We Engage
You should have a good idea of this already; it’s just the marketing persona that you listed in your lean canvas; the type of person you spoke to with your customer interviews. Make sure to jot down what language they use when discussing issues related to the problem your product solves.
Make sure to go niche with this initially, as it’s easier to dominate a niche audience and expand than to try and win everyone over at once. For example Facebook started with the niche audience of Harvard students, expanded to other elite colleges, then all colleges and eventually the World.
What Distinguishes Us
How are you different from your competitors? What’s your secret sauce? How is it credible? In choosing this focus, remember you’re giving up the ability to focus on other differentiators, so make sure you choose wisely. Remember: for your choice to be meaningful you have to be giving something up. Every great strength has a corresponding weakness and vice versa.
What We Have to Offer
This is where we talk about our product; what specifically is it? How do we charge for it? What benefits does it offer? These are all important questions that you should have developed answers for via the lean canvas exercise. If you’re still struggling, or explaining your offering is overly complex, it might be an indication that your business idea isn’t well formed; you might need to go back to the drawing board.
What We Say and What We Show
This is how we talk about the product; the look and feel of experiencing our brand. Some call it a ‘brand style guide’, but yours doesn’t have to be that official or well developed yet. Don’t go too over the top here; just a sentence or two to describe the personality behind your marketing content, and the consistent brand colors you want to use. This document is essential to share with any designers, copywriters or freelancers you work with; what would they want to know? If you do find them asking more questions, consider incorporating them into your brand style guide.
You’ve learned a lot, congrats for sticking it out this long. For your homework, try writing out a lean canvas, working out your unit economics and creating a minimum viable brand.
- Lean canvas
- Unit economics
- Minimum viable brand
Step 3: Validating your new business idea
Now it’s time to really put your business idea to the test.
With every new idea, it’s important to actually run an in-market test to ensure all your theorizing and number crunching matches what you see in real life.
For this section, we won’t go too deep into the details of Unbounce, Facebook, etc… as they can be whole topics in and of themselves. However, we will give you enough of an overview that you can confidentially approach these tools and get a basic in-market test live.
Building Landing Pages
Your instinct is going to be to get a fully functioning website up. Resist that urge. It can cost thousands of dollars to pay a freelancer or agency to build you a website, or take you hundreds of hours to build it yourself via WordPress or SquareSpace.
This is a distraction at this stage; you don’t even know if the idea is worth all that time and money yet!
Do yourself a favor and build yourself a simple one-page site, called a ‘landing page’, first. You can do this with a number of different tools, but we prefer Unbounce because it’s a simple drag and drop tool which supports A/B testing; very important if you want to try a few different value propositions or page designs.
We’d highly recommend you start with a template; these have all been tested numerous times by Unbounce and their customers and they follow all the best practices of good conversion-oriented design. It’ll also save you time; remember this isn’t your proper website yet and you don’t have to stick with it forever!
Look how easy that is! Just by double-clicking on the text you can edit it and change fonts, styling and anything else you need. You can also click and drag elements around the page or swap out the images for your own.
One sticking point is usually colors. How do you know what to choose? The good news is that you have a window in the future to change these, if the idea does work out (but before you really launch the business), and you can test multiple styles in Unbounce. If you need a basic background in color theory, read this article, but don’t fret too much about it; it’s not really a ‘science’ as much of it has been debunked. To make sure your colors do ‘match’ each other, try and use a color matching site like Paletton.
You’ll also need some images. A common rookie mistake is to just take images directly from Google image search for your own use, which is illegal. You have to make sure the images are released by the artist for the purpose you intend to use them. I wouldn’t splash the cash on hiring a photographer to take snaps for you, instead start with a stock image that’s been released for companies to use. Here are some stock photo sites to try:
- StockSnap – free from copyright, no attribution required
- Death to the Stock Photo – email newsletter with unique pics
- Unsplash – good for landscapes
- Resplashed – free HD images
- Flickr – search millions of creative commons images
- Startup Stock Photos – photos of trendy startup offices
- Pixabay – lots of images and vectors
Now how do you edit your images? If you don’t have photoshop or know how to use it, don’t fear! There are simple to use and free alternatives online. I’d start with Canva as they make it very simple with their good looking templates, but if you need something more advanced and similar to the photoshop experience, Pixlr is a good bet.
OK, back to Unbounce. Remember the Minimum Viable Brand we worked out earlier? Well now is the time to put it to use. Each part of your MVB relates to the wording on each part of the landing page (I told you it was actionable!).
You can see below how we’ve turned our MVB into actual copy on the page; if you can’t easily do this, it might be time to revisit your brand and rework it until it sounds right.
Note: remember to check how it looks on mobile, as the vast majority of people (~80%) who visit your page will experience it this way. In fact, we tend to build all of our pages in the mobile view first, before adjusting to desktop; doing it this way results in much cleaner looking pages.
We won’t get too deep into this topic, but one benefit of Unbounce is their flexible tracking tag management. It makes it easy to simply copy and paste your Google Analytics tracking code and Facebook conversion pixel. If you need more information on how this is done, Google, Unbounce and Facebook all have excellent documentation.
The other cool thing you can do in Unbounce (that I highly recommend) is setting up a custom domain. For example if you own the domain www.example.com, you could send anyone who enters that into their browser to your Unbounce page. Don’t go buying too many domains early on however; you might want to wait till you’re really confident before you invest, particularly if they cost more than ~$20 (it’s astounding how much money I’ve wasted on unused domain names over the years).
One great way to get more users is to prompt ones that sign up to share with their friends after they sign up on your Unbounce page; a viral ‘thank you’ page. You’ve probably seen many examples already, or you might be familiar with the way Harry’s Razors launched with a viral waiting list. The good news is that you don’t have to build any custom websites or features for this either – Kickoff Labs has a version you can set up with no coding, which has a direct integration with Unbounce. They even have a template modeled on Harry’s Razors’ page!
Email Drip Campaign
Once people sign up and give you an email, they’ll expect to hear something from you. There a lot of different options out there, but Mailchimp is what we recommend as an easy way to send the people who sign up to your list a series of emails to keep them engaged.
At a bare minimum, make sure you have a welcome email; send them an email to say hi and give them a desired action to take next. If you want, you can even set up a series of follow up emails to keep them engaged; but I wouldn’t go this far until you see how your landing page works (if nobody even signs up in the first place, they won’t ever get to see your lovingly crafted drip campaigns!).
Building Ad Campaigns
Now you’ve set up your landing page, viral thank you page and welcome email, it’s time to start driving traffic to the page. With even a $50 budget you can show an ad to thousands of people and have hundreds of clicks to your page. Don’t get hung up on the cost here; a small investment now will save you hundreds of hours and thousands of dollars pursuing the wrong ideas. Even better, this small amount of spend will usually give you an early read on whether your unit economics are off. If you’re expecting 10% of visitors to signup and you only get 5%, you have work to do!
We’ll walk through the Facebook and Google ad platforms as they’re the ones you should start with. But first thing’s first; where do these ads show? Typically ads placed directly in line with the ‘organic’ results are the best performing. However, in some cases on desktop you can also appear on the right-hand side (these are cheaper, but get clicked on less). See examples below:
The really cool thing about modern marketing is how well you can control who actually sees these ads; there are some pretty advanced targeting options out there!
For example on Facebook, you can target by demographic.
You can target by what that person likes or has shown interest in (or exclude people who have certain interests).
There are even some really creepy behavioral options.
Going further down the rabbithole, you can even use your own data to target users on Facebook; for example targeting people who have been on your website, have given you an email address, used your app or even engaged with your content on Facebook.
On Google, things are a little less creepy, though I definitely became a little bit more wary about what I searched for once I realized my searches were showing up in some digital marketer’s keyword report!
Make sure to use the keyword planner to research how many people actually search for the words you want to advertise against.
Remember your Minimum Viable Brand? Time to use that again when you’re creating ad copy for your campaigns. Bear in mind that you are up against character limits here, so try a few different ways to say what you need to say.
Now you’ll definitely want to track how each ad performs. The good news is that’s easy to do with Google Analytics and UTM Parameters. For a more comprehensive explanation of the best way to do this, check out our post on building UTM Parameters.
One thing you’ll notice when setting up your campaigns, is that you need to choose a ‘bid’; how much you’re willing to pay per click or per signup. If you managed to work out your unit economics earlier on in this guide, you already have what you need! Just divide how much revenue you expect to make per click (or conversion) by how many conversion you expect to get, and that should be your bid.
Great, if you’ve gotten this far you’ve learned a lot! Time for a little bit more homework to put this into practice. Set up an Unbounce page (Kickoff Labs and Mailchimp are optional), and create either a Facebook or Google campaign to drive traffic (use Google if people search for your product category already, Facebook if they don’t).
- Unbounce landing page
- Kickoff Labs and Mailchimp welcome email (optional)
- Google Adwords or Facebook campaign
Step 4: Promotion
By now you should have had a few hundred people visit your landing page. Wouldn’t it be great if you could get that traffic for free? That’s what I thought. If you’re happy so far with how your paid traffic is working out, you must be growing in confidence with your idea. Now is the time to start promoting it to influencers.
Just Google it! Seriously it’s sometimes just that easy. If they’re ranking highly for important terms to your business, they’re the type of people you want to work with to promote your idea.
Another way to find them is with a tool called BuzzSumo. This shows you not just what content got the most social shares related to your topic, but also who shared it! Reach out to them and see if they’re willing to share or link to your business too.
Search for your topic and see the most shared social content.
Click into one of the posts and see who shared it, and how authoritative they are.
You can also see what other links they’ve shared.
For fresher content, check out what’s trending in various categories.
You can also directly search for influencers in your category.
As you go through this tool, make sure you create a Google doc to record the interesting influencers and content ideas you encounter. Make sure you record the posts from the top people in your space as you can start posting these via your social profiles. What you want to end up with is something like the following spreadsheet.
*Download the spreadsheet here: [Get the Template]
Now that you have this master sheet, you should set up profiles on Facebook, Twitter and LinkedIn (if B2B), then start posting. To do this automatically, buy a Buffer premium account (awesome plan should be enough) and upload your spreadsheet via Bulk Buffer; now you’ll be automatically posting multiple times a day without any further effort!
You can also start reaching out to the influencers on your list.
Here’s how NOT to do outreach:
Dear Site Owner
Can you tell me please if you offer the ability to guest post on your website? Can you please tell me discounted price? http://www.example.com
I will provide you very high quality and 100% unique article with good SEO. Looking out for your reply.
Quality NOT Quantity
- Take the time to research their blog (if it’s truly relevant, you’ll learn something useful!)
- Read the comments too – this might give you intel on what the market is demanding
- Actively comment and share their content so build rapport
- Get a sense of what type of content their audience would find useful
- Write 20 headlines for your topic before choosing the best one
- Only write the post if you get responses; don’t waste time on content nobody wants
How to reach out properly
Hey [name], I hope you forgive the cold email. ?
I was just reading “[insert their headline, hyperlinked]” and it got me thinking about [insert your topic]. So now I’m writing “[insert your headline]” and I’m on track to finish Sunday.
Would you be interested in publishing it as a guest post? I was going to post it on my blog, [insert name, hyperlinked], but it would be great to reach (and help!) a wider audience.
If you get responses, shares or links, then it’s a sign you’re onto an interesting idea.
- Bloggers are busy and get pitched all the time – follow up until it becomes annoying!
- Use a tool like Sidekick to track email opens and schedule follow ups
- Continue to read, comment and share their content – eventually they’ll notice
- Try and meet them in person; how many purely online relationships do you have?
- Be on the lookout for shares of your content without a response
- Only pitch your business idea once you’ve built a relationship
Note that I’m not telling you to build your own blog. Building a successful blog is an enormous undertaking; as much effort as creating a new product. You shouldn’t waste time on building your own audience when you can tap into the audience that others have built for free. That way you can learn what content resonates (and what doesn’t), before having to make the investment in building your own blog.
Now you’ve learned how to promote your business idea for free. So go out there and actually do it! Deliver an Influencer & Topic spreadsheet, set up your Buffer account to post relevant links on social media and write 5 potential guest topics with email drafts.
- Research and create your Influencer & Topic spreadsheet
- Set up your Buffer account to post relevant links on social media
- Write 5 potential guest topics with email drafts
Step 5: Definition
You’ve gotten pretty far. If your new business idea has made it through all the previous steps, you really might be onto something. Let yourself get excited for five minutes. Then come back to reality; you still only have an idea… if you think ideas have value, try and sell your idea to someone. How do you turn that idea into a product?
DON’T power up Photoshop and start designing the product of your dreams. There’s one more lean step to take before you do that; creating a mockup.
Mockups are purposefully rough sketches of what you want your product to look like and how you want it to operate. Because they’re rough, they don’t take as long as a full fidelity design, and they are also less likely to distract people into giving biased feedback. For example they might say they like a product, when they really just like the colors you used. To create mockups I’ve used Balsamiq for years, but there are lots of other great options.
Pro Tip: you can actually make mockups clickable; that can go a long way to simulating how you actually want it to perform once the idea has been built.
- Forcing yourself to define how your product will look, helps you realize the complexity and tradeoffs inherent in building your product
- The final product will likely be completely different to your initial vision – you’d be crazy to commit too much time to Photoshop or coding
- Low fidelity version leaves room for expert designers / developers to do their job, whilst still giving them solid direction
Now that you have a mockup, it’s time for User Testing! This just means showing your mockup to potential users to get feedback. How do you do this? Well at a most basic level you could just print out your mockups and lay them out.
At the high end, you can use a website like UserTesting, who will find people in your target demographic and send you full screen and audio recordings of them using your product. However, for your purposes this is a little over the top; I’d stick to paper, or maybe try their free service, Peek, on your landing page to make sure it’s understandable to the general public.
So what questions do you ask?
- What is your first impression of this website / mobile app?
- What is this page for?
- What is the first thing you would like to do on this page?
- Please go ahead and try that now.
- (back to home screen) > If you needed to do X, where would you go?
- Please try to do X now.
- What stood out about this website / mobile app?
- What frustrated you about this website / mobile app?
- How would you describe this website / mobile app to a friend?
- Who would you recommend this website / mobile app to?
Make sure you get them to talk aloud, reassure them that there are no wrong answers and make sure you record the session for later.
Why User Testing?
- It’s very likely you’re overestimating the average user’s knowledge
- It’s also very likely you’re underestimating how complex your product is
- User Testing gives you a reality check as to what real people think
- You get a lot of qualitative data on what people struggle with, what they expect to see and the language they use to describe you
- Running a couple of user tests can save you thousands in dev / design
- You can get useful information from user testing even using wireframes
- You can also run User Tests of your competitor’s websites!
Congrats, you’re at the final step (of the final step)! You’ve done a lot – much more than most – which is why you’re now much more likely to succeed. But there is one final step: the press release.
Jeff Bezos forces any new product at Amazon to first be pitched in the form of a press release, before assigning budget to build it. He does that because it allows him to prioritize products that make sense to the market; if you can’t succinctly express the product in press release format, you probably have an overly complex idea. The other great thing about doing this is that you actually have a press release to send out once your product is actually released.
For example check out this press release for Amazon Web Services
See how clearly the strategy is laid out here? Has it even changed in the past 10 years? You only achieve that kind of consistency by working out the strategy ahead of time, like you’ve been doing following this guide.
Here’s what you need to cover:
- Make the product’s name clear
- Make it clear what ‘category’ the product is in (what IS it?)
- Describe who would buy the product; the persona you built earlier
- Describe the benefit they get from buying the product
- Describe the problem the product solves
- Describe how your product solve the problem
- Make sure there’s a quote from the CEO
- Provide a call to action
- Provide a blurb that describes your company (‘about us’)
And here’s a template you can use:
Once you actually send the press release, consider the following:
- Journalists are 10x busier than you – make things easy for them
- Nobody cares about your idea – give them a reason to care
- A Good Headline Is Everything
- DON’T play hard to get – give them full disclosure
- Offer a tempting quote and/or takeaway
- Keep it concise
- Make the ‘who’ and ‘what’ obvious
That’s all – you’re done! If you went through every step and your new business idea survived, you can be very confident that you’re on to something big. Sure, you could still fail, but you’ve done really everything you can short of actually building and launching the product, so that’s what you should do next.
I hope you enjoyed this guide and find it useful. If you do launch your product using this guide, Tweet at me and I’ll include a link at the end of this post.
So why didn’t we pursue this particular business venture?
After seeing all the examples in this post you might be wondering why we never launched this course idea, even after pre-selling it. The truth is that it was definitely worth launching (and we still think it is).
However, we were testing a number of different ideas in parallel. What we found (and what you might find), is that one of our other ideas performed better than this. We actually ended up building that idea: we call it “The Ladder Planner”, our marketing recommendation engine. If you’re interested in learning more, sign up at Ladder.io.
UPDATE: We recently launched Spotlight – a tool to automate your marketing analysis!