(Editor’s note: Jason Cohen is an angel investor and the founder of Smart Bear Software. This story originally appeared on his blog.)
You’re smart. You’ll make good decisions. But you also get bogged down in daily minutiae and putting out fires, meanwhile missing the big picture. That’s where this piece comes in: To splash cold water on your face, forcing you to face reality and continue to defend or change the important choices inside your business.
What follows is your startup therapy session. Having to think through and answer these questions forces you to identify what you need to do today to seek profits and growth.
In one sentence, what does your product do and who buys it? And in one sentence, why does someone buy your product?
These are surprisingly difficult questions. The shorter and more precise your answers, the more you understand why you exist. If the answer is: “I honestly don’t really know why people give us money,” that’s something to remedy immediately.
If you have an answer, is it because you have hard evidence that this is how your customers perceive you and why they give you money, or just because you believe it? “Evidence” means emails and Tweets and testimonials that use those words exactly; otherwise you’re likely interpreting their feedback to match your expectations. (I find myself constantly guilty of this disconnect.) If you don’t have evidence, it is OK to have a hypothesis but you should be concerned about collecting proof and disproof.
If you do know the answer, these two sentences should drive your marketing efforts. If these sentences aren’t on your home page, why the hell aren’t they? Is there anything else more compelling to potential customers? At the least, these represent the themes that drive your marketing campaigns.
What one thing is most responsible for preventing sales?
Do people not know you exist? Is it pricing? Not enough product features? Unorganized sales strategy? The look-and-feel of website? Something else?
Most little companies aren’t honest about this, yet it’s possibly the most important question you could ask. For example, I’m an engineer, so my first answer to “Why don’t you have more customers?” is almost always: “Because we need this feature.” You hear some potential customer say, “we will buy if you do XYZ” so you conclude that if you implemented XYZ people would start breaking your door down.
But is that really the case? If you added one feature and maybe satisfied that one customer (assuming they wouldn’t ask for a second thing – which, in my experience, they usually do), would that get you 100 more sales? For those hundreds of people who downloaded your software, but never bought — is the reason “not enough features?”
For the hundreds of thousands of people who never came to your website in the first place, or hit the front page and left after three seconds, is the solution “more features?”
When you honestly ask yourself this question, it will naturally lead into things you can do right away to get more people to the site, into a trial and/or into a sale. Don’t just rest on what comes easiest.
What’s one thing you could do to get more feedback from customers, potential customers or sales you’ve lost?
You already know that external feedback is the only way to empirically determine how to build products people want to buy. Maybe you can’t drop everything to solicit feedback (although folks like Eric Ries say you should), but surely it’s worth one day every month to go out of your way to collection information from the field.
To get the ideas flowing, here are eleven ways to get more feedback, most of which take less than a day to implement.
If you had zero revenue from now on, on what date would you run out of money?
The first thing this does is force you to nail down your monthly expenses and accounts payable. Second, you know the length of your fuse even in event of disaster (if you have revenue) or if you never manage to land a customer (if you’re just starting out).
More than that, knowing your “padding” as I used to call it is helpful in making decisions like “Can I afford to try this Risky Expensive Thing,” such as making your first hire or trying a $20,000 media blitz. Whenever you’re contemplating a new expensive idea that could be awesome but could be setting money on fire, your fuse date helps you know how much time you’re risking — time to recover if your bet doesn’t pay off.
Finally, knowing “the day my business could die” helps focus your attention on activities that bring in revenue.
If someone handed you $100,000 today, how would you spend it to maximize future profits?
This gets you to crystallize what cost-centric activities would most help your business. We get caught up in free-but-takes-tons-of-time marketing and development activities — and most of the time that’s a good way to think — but sometimes it’s still true that “you have to spend money to make money.”
Sometimes the “thing you could do” is so compelling, it might mean you should raise a small angel round or consider debt. Typically it’s best to get by with minimal debt and investment, but if the “thing you could do” is transformative, you might reconsider.
Think about these. We’ll do a follow-up session next Friday…
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