Business Validation: How to Presell a Product Before You Launch
“Really ensure that you're not playing business. A lot of people, what they do is they read an article on Tim [Ferriss]'s site, and then they're like, ‘Well, I put up a thing on Craigslist and I bought ads.’ But what's your actual business?” - Noah Kagan, co-founder of Sumo and AppSumo.
How long should it take to get your first sale?
I saw this question asked in a startup group recently. The answers shocked me:
I applaud the grit of these co-founders.
But here’s a brutally honest question you need to ask yourself when building your product:
Are you validating your business model while creating your MVP? Or are you spending $100,000-$200,000 over 12 or so months before realizing you're building a product no one wants?
If you aren’t validating your business model, then you’re wasting your time and money.
There's a reason 72% of new products fail to hit their revenue goals or fail to make any money at all (Simon-Kucher & Partners).
This is why at Growth Ramp we prefer to test market demand before wasting thousands of dollars on marketing and months of coding. We do this by validating the business.
What Are the Best Ways to Validate a Startup Idea?
“What are you actually solving, and making sure that you validate that enough people want it and will pay for it for you to then expand it beyond that.” Noah Kagan, co-founder of Sumo and AppSumo. Source: How to Validate Your Business.
If you aren’t making money, your idea isn’t a business.
It doesn’t matter if you’re incorporated.
It doesn’t matter if you’ve invested thousands of hours or dollars into an MVP.
It doesn’t matter if your app has thousands of monthly active users.
Nothing matters except for validating your business model with money-in-hand.
Therefore, there are two paths cofounders often take to validate a business idea.
First, there is the traditional route:
- Get an idea from the problems you’ve experienced.
- Build your idea with the skills and tools you have available.
- Test the product with beta users.
- Launch your product to beta users, and people like you.
- Monetize your product by asking users for money.
This approach works well if you understand how to do engineering as marketing, product launches, and network effects.
It also works if you understand the concepts of product development and marketing from a past startup.
However, there are problems with the traditional approach to business validation:
- It's not uncommon to build something no one wants. Are you the only one with the problem?
- It can be hard to find the right communities. The traditional approach works well if you are building a product with an audience on Hacker News, Beta List, or Product Hunt. But what do you do if your audience is not on those platforms?
- It's hard to know when to launch and scale your MVP. Is your MVP too minimal? When is the right time to launch it?
- You need to understand customer behavior to avoid creating zombie features. Both routes are going to create zombie features. But without knowing what someone will pay for will increase your odds of doing so.
An alternative to the traditional method, you can pre-sell your product before you build it.
This is the Growth Ramp methodology. The process looks something like this:
- Get an idea from potential customers.
- Monetize your product by asking potential customers for money.
- Build your idea with the skills and tools you have available.
- Launch your product to people who are similar to your customers.
- Test the product with customers.
What’s the advantage of getting people to pay before you build your MVP?
- You have paying customers from the very beginning.
- You have a better idea of a solution people are willing to pay for. In other words, you aren’t wasting time listening to people who won’t buy your product.
- You and your team will have the motivation knowing you are building something people actually want to buy from you.
How Do You Validate a Business Idea? And What Do I Need to Know About Validating Business Ideas?
Let me ask you something.
Why should a customer choose you over the competition?
Excellent. And you have competitors, right?
Of course you do. Because even in a new market, your customers already solves their problem in some form or fashion.
Why do I suspect the answer you just told me would be the same answer your competition would give me too?
If you have no compelling reason for a customer to choose you over the competition, then you’ll fight an uphill marketing battle.
Our goal at Growth Ramp is to help you discover the right hook to become the leader in your market. This is your unique value proposition.
Why should you focus on becoming the leader in your market?
The market share is disproportionately higher for the market leader.
- In 2010, McDonald’s sales were higher than the other top 10 burger contenders combined ($32.4B vs. $31.2B).
- Taco Bell more than doubled the sales of their rivals Chipotle, Del Taco, and Qdoba ($6.9B vs. $2.9B).
- Pizza Hut also beat out Domino’s and Papa John’s together too ($5.4B vs. $5.38B)
Pro tip: Customer and market segmentation is key to becoming the leader. McDonald's is 4x bigger than Taco Bell. But Taco Bell is the Mexican fast food leader. They are #6 for the most fast food sales.
Validating your business model and learning how to position your startup to become the market leader starts by doing customer discovery interviews.
You should interview your customers to find out:
- Who is the specific audience that will LOVE this product?
- What is the problem this audience has and willing to pay for?
- What is the value promise we give when solving this problem to the customers?
- What are the current alternative solutions?
- How will the solution be remarkably better than what’s on the market?
By learning the answers to these five questions, you can decide on your unique value proposition. You can do this by listing out all the problems found during the customer discovery interviews, then researching which angles are the most valuable.
Next, you and your team need to decide on which problems you should solve, and which problems to ignore. You’ll provide better value to your customers when you are focused on the vital few tasks.
Once you’ve found your unique selling proposition, you will want to create a pre-order landing page to present your potential solution to customers.
How Do I Create a Pre-Order Landing Page?
To create your pre-order landing page, you will need the following ingredients:
- Your voice of customer data from your customer discovery interviews.
- A landing page template.
- A writer who communicates clearly and with personality.
- Scissors and a hot glue gun. Oops, wrong recipe :).
At this stage, your customers do not know about your product. As a result, they will have a lot of questions and objections.
This is why we find it critical to create a landing page template to help you outline your offer.
Your pre-order landing page should be lengthy enough to overcome your customer’s questions and objections.
As of writing this article, the shortest pre-order landing page I wrote that made money was 1,407 words. This doesn’t include the 525-word email or all the questions I answered 1-on-1 with each person.
Most of the pre-order landing pages we write at Growth Ramp run between 2,500 and 3,500 words.
How do I fill in my landing page with high-powered copy that converts?
Simple. You take the words right out of your customer’s mouth.
Do you have the voice of customer data from the customer discovery interviews? All you need to do is copy and paste your customer’s words right into the correct section.
Hmmm, perhaps the scissors and glue gun were useful after all...
Once you’ve finished the copy-and-paste job, you should have 60-80% of your landing page complete. All you need to do is fill the page in with your offer and some choice words (not those choice words!).
How do I edit my landing page?
Rule #1 of copy editing: Clarity conquers creativity.
Rule #2 of copy editing: Long copy is better than short copy. But concise copy will make you more cash.
First, we pick one potential customer. You know, the one during the customer discovery interviews that wanted to “grab you by the throat” to do business with you. That customer.
Read your sales page out loud as if you were reading it to her.
Then answer the following questions:
- Who is this page clearly for?
- What message am I clearly suppose to take away?
- What is the clear action to take?
- Will more words clarify what I’m saying? Or will fewer words work better?
- Does this sentence make sense to my one reader?
Leave no loose ends untied using unclear words, sentences, or phrases.
At Growth Ramp, we recommend decreasing the landing page text to a reading level of 6th grade or lower.
Improving the readability is valuable, even if your audience is fluent in English (which is an assumption you should not make). Simple writing is easier for everyone to read. And simple writing is more persuasive.
I use the Hemingway App to check my reading level. It allows me to find complex sentences, phrases, and words that I need to make simple.
You will also want to check your grammar.
In the grand scheme of things, grammar is a lot less important than your 5th grade English teacher made it out to be. But you don’t want someone thinking about your grammar errors rather than your tantalizing offer.
If grammar Nazi doesn’t run in your family’s blood, use Grammarly.
There are five other types of copyediting. In order of importance:
- The Voice + Tone Edit - What 2-3 words describe how your brand sounds? How do the words convey your brand? What is the mood you want to create through your words?
- The Believability Edit - Why does your offer matter to the customer? Can you support any claim made using testimonials, quotes, reviews, or other data?
- The Specificity Edit - Paint an inviting picture in the customer’s mind. Bring everything to life by giving details on how it all works. Specificity includes using numbers, action-based stories, visual words, unexpected words, personalization, and symbols (%, $, ").
- The Heightened Emotion Edit - Is the emotion focused on the customer's value? Can people consistently feel the emotion? Do the images support the emotional strategy?
- The Zero Risk Edit - Will the product work like you say it will? Is it worth what I'm going to pay? Will it cause harm or introduce friction into my life? Will the people who matter to me approve? Will I be satisfied or improved personally by using the product?
For more on copyediting, check out the following webinars by Copyhackers:
- Sweep 1: The Clarity Sweep
- Sweep 2: The Voice + Tone Sweep
- Sweeps 3 & 4: The Believability Sweeps
- Sweep 5: The Specificity Sweep
- Sweep 6: The Heightened Emotion Sweep
- Sweep 7: The Zero Risk Sweep
How Do I Sell Pre-Orders?
There are dozens of tools available to help you sell pre-orders. Keep in mind, at the end of the day, all you need is:
- A promise to solve the customer’s problem.
- The ability to communicate the promise.
- A method to collect money.
I once pre-sold over $3,200 for a SaaS startup. All I used was a Google Document, some text, and a Paypal.Me link (here’s how Paypal.Me works).
Before you send your pre-order landing page to potential customers, you will need to determine your price and your target number of pre-sales.
You can learn more about how to create your pricing strategy here: Pricing Strategy: How to Precisely Price Your Product.
Do I Have to Pre-Sell My Product to Validate My Business Model?
Pre-selling removes a lot of risk for you. But we know not every startup needs to pre-sell to be successful.
What’s important is you are actively validating your business model.
GrowthHackers is a community for startups, which began in 2013. It’s also the hub of NorthStar, a product created by Sean Ellis, who helped DropBox, LogMeIn, and Eventbrite find their growth ramp.
The GrowthHackers team began building NorthStar in 2015. They worked on it for 3 years before releasing it in March 2018.
During those three years, Ellis and his team:
- Built the GrowthHackers community using a content syndication network effect.
- Used their own tool to grow the community, which they turned into a case study to grow the community and find beta testers.
- Created a jobs board, a conference, an online course, an ebook, and a book to promote the community, their tool, and the growth marketing movement as a whole.
Less than a year later, NorthStar was acquired.
Whatever your approach to validating your business model, the key is to validate your business model and your product.
Rand Fishkin, the former co-founder of Moz, announced his move to going full-time with Sparktoro on February 27th, 2018.* 14 months later, they have not officially launched their tool.
But since Fishkin and co-founder Casey Henry began, they have:
- Launched 3 free tools. These tools grow their users (via “engineering as marketing”) while validating their core product.
- Wrote a few dozen articles to attract beta users. Additionally, Fishkin imported every article he’s written since 2010, his email list, and social influence from his time at Moz.
- Launched a book about startups. Although there is very little mention of Sparktoro, it is there. And marketing the book has led to opportunities to market Sparktoro.
- Raised over $29.3 million. As a result, they have partnered with some big names in the marketing and startup world. The investor list includes some of the who’s who of B2B marketing, including Joel Gascoigne (Buffer), Rob Walling (Drip), Dharmesh Shah (Hubspot), Massimo Chieruzzi (AdEspresso), and dozens of other investors.
In other words, the Sparktoro team is validating every part of their business aside from collecting money.
While you do not need to pre-sell your startup, you do need to validate your business model. This eliminates your risks when you launch.
* According to Crunchbase, Sparktoro was founded in 2017. It’s likely the startup was formed late 2017, with development starting in 2018.
I’ve Finished Creating a Pre-Order Landing Page. Now What?
Congratulations on finishing your pre-order landing page!
I recommend having your potential customers give you feedback on your offer. Getting feedback from potential customers increases pre-sales for two reasons:
- The potential customers are co-creating your product. This increases sales because it leverages the IKEA effect.
- Second, you get an opportunity to answer customer concerns before the product is live.
As a result, you will improve the clarity of your offer and discover objections to making your first sale.