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Management

Figure out who’s going to buy your product before you spend money building your product

One day when I was driving around in Astoria trying to find parking (and getting more and more frustrated at not being able to do so), I thought “wouldn’t it be great if people walking around on the streets could give me real time intelligence on available street parking? I would pay for such real time, free parking information”.

In other words, I imagined that drivers would pay for such real-time free parking information and the best folks to provide that information would be people that do not drive (i.e most of the folks in NYC that don’t take on the headaches of a car).

I asked many of my friends and they ALL thought it was a great idea.. Side lesson – don’t validate your idea with your friends (more on that some other day).

At that point, I didn’t have any coders with me, so I just downloaded some sample apps from github, hacked my way through them (aka copied/pasted bits and pieces I needed from each app) and created a free parking finder app. 

Only after hacking through the first version of the app, registering the domain (spotnpark.com) did I start thinking about the next steps (exactly what I should NOT have done)

  1. How I would get the app in the hands of users? Uploading it to the app store(s) is the easy part.. But there are millions of apps.. How would people know about it?
  2. There were only about 8 cities in this world that had the kind of parking problem that NYC does.. So, does this app make sense for only those 8 cities?
  3. I know most drivers would want this.. But why would someone without a car download this app? What’s in it for them?
  4. Money motivates folks, so I figured that the app can split the revenues between the drivers, the platform and the “reporters”. How do I pay people? As we know, if someone gets paid more than $600/year, you need to send them 1099s. Would I take on that headache?
  5. Even if I do take on the 1099 headache, when does a reporter get paid? When they report a spot? Or when the driver confirms that the parking spot was truly available? Does the reporter have to stand around to make sure that the spot is available?
  6. What if a reporter does report many spots, but as is the case of NYC, street parking is gone in 2-3 mins.. Do we not pay the reporter for reporting those spots? If we do not pay them, the user generated free parking spots would reduce drastically (i.e. we are not promoting the desired user behavior)
  7. The questions became a long list… and there weren’t good answers for many of them.

I had spent the time and money in hacking the app – where as I should have spent the time in discovering the demand first, the potential solutions next, trying out the solution, then optimized it via technology.. Not the other way around.

I have seen the same thing happen with many entrepreneurs for whom I have built outsourced product engineering teams.. Most of them start with a solution first.. Without developing a market/audience to sell it to.. After spending months and gobs of $s, they find out that 

  1. There is no market for what they thought was “super important to solve” OR
  2. There is a tiny market for what they are selling but that’s not enough for them to survive or build a large company off of .. OR
  3. There is a large market for what they are “sort of” selling but no one is signing the check because the product is not where it needs to be .. yet…. OR
  4. There is a large market with many big competitors and even though their product does some things better, the potential buyers prefer to bet their jobs on the bigger guys.. 
  5. More.. 

So, what should I have done instead of spending all that time (and money) in developing the free parking finder app?

I should have tried to sell the concept first. I should have figured out WHAT will sell first since.. undoubtedly my first guess would not be the one that strikes a chord with my prospects/buyers.. I should have figured out how I am going to sell .. I should have figured out how I am going to scale beyond the first few sales.

How do I sell before I build the product? That’s what most entrepreneurs ask me.. 

I have always given them the same answer.. (based on what I had myself done in the past – another post on that)

What would you do if you already have a product / service? How would you sell it? Who would you sell it to?

Several answers come up (different variations of it)

  1. I will sell to my contacts in the industry
  2. I will write blogs about it and sell to them
  3. I will buy ads (PPC)
  4. I will do cold emails
  5. I will do cold calls
  6. I will get a lot of users (not customers) first, then someone will buy me out.
  7. Etc..

OK, that’s good.. At least you have figured out how you are going to prospect (the channel).. But.. 

  1. Do you know how to find the “prospects” that you are going to try and sell to?
  2. Do you know how you are going to reach out to those prospects (which channel)?
  3. Do you know what you are going to say to your prospects (messaging)?
  4. Do you know if that channel/message is going to work?
  5. Do you know how much you would spend on that (time, money)?
  6. Do you know what you will measure/monitor to be able to fine tune your approach?
  7. Do you have a contingency plan?
  8. …. 

More often than not, I do not get any solid answers nor a plan for it. 

At one point, I was interviewing for a job with a well funded startup – the CEO had just sold his previous company and was appointed as a CEO for this well funded startup by a VC firm.. I asked him these questions during my interview.. 

He didn’t have the answers back then and is no longer with the firm anyway.

How hard is it to NOT spend money on custom software or service development before getting answers to the questions above?

Is it because we don’t know how to do it? Or is it because we are afraid to find out the answers? Or is it because we are arrogant and think too much of ourselves?

I posit it’s a combination of one or more of the above.. But here are a few ways you can do it right now. Let’s take the questions from above and answer them one by one.

Do you know how to find your “prospects”?

If you don’t.. Then you better get to it NOW. You’re going to have to do it once you go live anyway.. 

You have, hopefully, started with an initial idea of who your ideal prospect/buyer is… If you’re in the B2B business.. Then go to linkedin and find 500 more with those same job titles. Out of those 500, only about 2-5% will respond to you anyway.. So you’re likely going to have a conversation with 4-5 people.. You will use that opportunity to fine tune your “pitch” and then relaunch your outreach to be able to talk to 40-50… that’s how the ball will start rolling.. 

Cannot find folks on linkedin (aka sales navigator)? Fine.. then go to several database companies and buy your lead list.. (they are not very clean but do a much better job than you have the resources for).. Bookyourdata, limeleads, zoominfo, discoverorg, insidesales etc .. there are SO many of them.. 

If you’re in the B2C business, then you will have a tougher time but it’s still doable.. Let’s say you think that “busy moms” will buy your service / product.. Go to Facebook or online groups where such “busy moms” are currently getting help (without using your super amazing service/product). 

Your buyer is not online? OK.. maybe they are “senior citizens” that don’t use computers as much.. But you know who uses computers for these “senior citizens”? Yes, their kids do.. So, you are selling to senior citizens through their kids. OK, so they don’t have kids? Fine.. then go to consumer database companies (e.g. infousa) and buy a list.. That’s how you will build your prospect list.. 

Do something.. Don’t just sit around fussing around with vanity metrics while your service is being developed.. Figure out marketing, then figure out sales.

Do you know which channel to reach out to your prospects via?

Very easy to do and you have to do it soon anyway. Once you have figured out how you are going to create a list of your prospects to reach out to.. Reach out to them. 

Yes! Reach out to them – whether you have a service or not.

What’s the worst that can happen? 50 people ready to buy your product but you don’t have it yet? Great.. That’s a fantastic problem to have.

Your job at this time is to figure out whether your “channel” of choice is going to work or not.. E.g. if you have chosen Linkedin as your channel.. Why don’t you use that channel to “pitch” and see if this channel is producing results?

OR, if you have chosen cold calls as your channel .. make a few 100 calls to see if this produces results.

OR if you have chosen cold emails as your channel.. Send a few 100 emails to see if this works.. 

OR if you have chosen paid ads as your “channel” of choice.. Place some ads.. It takes literally nothing to be able to do so.. Put up a simple landing page, go to facebook, bing, google ads.. Create an ad and have people go to your landing page where you have a sign up/ contact me form.. DONE.

Watch your results, figure out what’s working and what’s not.

Do you know what your messaging would be?

Many a time, you might have chosen the right prospects and the right channels, but your messaging could be off.. WAY off..  

Wouldn’t it be good if you figure all that out NOW before you spend millions in creating a service offering? Yes, that stuff is E-X-P-E-N-S-I-V-E.

It is very simple to test your messaging as well… you can even figure out how to price your service/product.

See how I did it before.. You can do it too.. And very cheaply.. 

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Do you prefer to cold email? OK, fine.. Create various versions of your “message” that you think will work and start sending emails.

It’s very simple to test your messaging as well

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Another one.. 

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So what are you waiting for? Why not invest a tiny amount on this first, save a lot of headaches, heartburns and financial disasters later?

Are you scared that you will find out something that you don’t want to know?

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