Altman: The startups--we look at their demo, but we never read the business plan.
Roberts: You do not?
Altman: Never, ever.
Altman: I've never written one in my life. At the stage that we are operating at, it's irrelevant.
Successful entrepreneurs rarely create full-length business plans before they launch a product.
Instead, like a methodical scientist, they set up a series of hypotheses they need to answer. And the best way to get answers to these questions is to talk to your customers.
Sachin Rekhi, the former Director of Product at LinkedIn, recommends entrepreneurs focus on answering these eight questions:
Source: The Hunt for Product/Market Fit
At the idea stage, these hypotheses are simply educated guesses. To confirm each hypothesis, you need to talk to your customers. Which is where customer discovery comes into play.
“I often tell entrepreneurs a business plan is completely irrelevant, other than to judge how somebody’s thought about a problem. Not what they’re going to do.”
~Vinod Khosla, Founder of Khosla Ventures. Source: Vinod Khosla on How to Build the Future.
If you live in an apartment, would you pay for someone to mow your lawn?
It’s extremely unlikely because that’s the apartment owner’s job. You don’t have a problem you’ll pay for.
What sells the most is not your product. Nor is it the solution.
You need to capture the feeling you create when you solve the problem to the customer’s delight.
Small business owners are rarely looking to streamline their business operations.
Instead, they’re looking to stop spending 80-100 hours in their business, off-load annoying tasks to a VA, and travel to Cancun without needing to think about their business again.
To discover the core problem you need to solve and what that solution will do, you need to talk to your customers.
This is also known as customer discovery.
Customer discovery is the process of talking to potential customers. Your goal is to see if your business plan will turn into a profitable business.
It doesn’t matter if your business plan is in your head, written on 300 pages in Google Docs, or scrawled on sticky notes taped to your business model canvas. You have a business plan that needs validating.
If you assume your business plan will work flawlessly from the beginning, you are in for a rude (and expensive) awakening.
Some entrepreneurs view customer discovery as the phase to figure out if there are any customers who might want their product.
This is the wrong point-of-view.
The problem with this statement is no one is actively looking for your product. Especially before your product reaches product-market fit.
As a result, entrepreneurs ask potential customers leading questions like:
These questions assume their product solves the customer’s problem.
Rather than taking the role of a scientist on the quest for truth, they assume what is true. This often leads to creating a product no one actually wants.
Instead, you need to start with the customer’s problem.
Talking to your customers about their problem is crucial when doing things that don’t scale. Customer discovery interviews are necessary to get clarity about your business plan.
Roughly 80% of entrepreneurs I’ve observed are soft and vague when making a request. And I understand because they feel it “isn’t polite” to be so forward.
But clear, persistent, and polite communication will get you further in your business, and in life. PS to the other 10%: being too aggressive also decreases your results.
What I’m going to share with you helped me get email responses from:
And it has worked reaching out to thousands of everyday customers too.
Here are seven principles to keep in mind when creating your email templates:
After reading these sevens principles, are you still unsure what you need to improve?
Here is a guide that will improve your email outreach campaigns: “This Dastardly Email Outreach Program Put Us in the Top 25th Percentile of All Marketers. Here’s How to Beat Us at Our Own Game.”
So know you know how to get someone on the other line. How do you find potential customers to talk to?
One goal of customer interviews is to reduce the chance of wasting money. So the more qualitative data you have, the easier it is to prove or disprove your business plan.
For many of our services at Growth Ramp, we start with 30 interviews for our clients.
Sure, 30 isn’t statistically significant for a startup to serve a population of 100,000 customers. But it is relevant for getting your first 10 customers (and at times, 100 customers).
The goal of qualitative research is to get to the saturation point. This is when more customer interviews no longer provide new insights.
When saturation occurs depends on several factors:
You could arrive at the answers you seek within 10-15 interviews.
This is unlikely because not everyone you interview will have the information you want (some interviews will flop no matter what).
Some customers may give you other insight you weren’t expecting. More interviews give you an opportunity to test their experience with other customers.
For example, let’s say one customer tells you to charge an annual price because they infrequently use a survey tool. It’s helpful to do 2-3 more interviews to see if this is true for other customers.
This is again why at Growth Ramp, we recommend doing at least 30 customer interviews for our clients looking to validate their business.
By the way, qualitative research is statistical evidence. Statistics helps us know the likelihood an event is true. Every interview brings you closer to statistical significance, even if you need more data to reach it.
You can’t know with 100% certainty if someone experiences the problem you are trying to solve. But you should do some basic research to not be a pest.
Here is a good list to start finding potential people for customer discovery interviews:
If you get real adventurous, you can get people from Facebook Ads, MTurk, or at the mall.
Anywhere your customers spend time will work.
You will want to filter the list by how well you know each person. The more someone trusts you, the more likely they will help out.
How many contacts should you have?
If 20% of people you reach out to are willing to help, that means you will want 150 contacts to get 30 interviews (150 X 20% = 30).
The goal of a customer interview is to validate a hypothesis about your business plan. As a result, every question you ask should either validate or invalidate a hypothesis.
Before you begin, you need two hypotheses:
By starting with a problem, you will want to figure out which customer segment experiences the greatest pain.
These customers are more forgiving of buggy software or an okay product label.
Starting with the problem is ideal if you know the solution is already needed. For example, you offer branding services and want to see if there’s a market for a branding SaaS app.
If you start with a problem, you will want to figure out the customer segment with the greatest pain to solve.
Let’s say you want to help bloggers improve their content promotion process.
Small solo bloggers may want to get their first 1,000 email subscribers.
In-house bloggers at a SaaS startup might want to track the ROI of their work to give to investors.
Professional bloggers will want to know the ROI of a particular channel to spend more money on Facebook Ads, or more time in LinkedIn groups.
This is why it’s important to make sure you know the buyer personas of those you interview.
I talk about this more in, “Buyer Personas: Creating Personas You'll Use (and Profit From).”
Starting with the customer is ideal if you have a market you want to serve, but are not sure what their needs are.
For example, you have 2,400 email subscribers from your blog and want to create a product for them.
Here are 5 points you will want to keep in mind when doing customer discovery interviews:
1. How will you conduct the interview?
An in-person meeting is an excellent way to build a connection and pick up on non-verbal cues. But this is also the hardest to coordinate.
Phone or video interviews are easier to coordinate and you will get more depth than a survey.
Not every person is willing to hop on the phone though, such as when asking customers for feedback in a subreddit. Here you can use a survey tool such as a Google Form, or record the information on a Word Document.
2. What questions do you want to get answers?
The questions I recommend you ask are talking about their past and are open-ended.
Because humans cannot predict the future, you can only be certain what has happened to someone in the past. And by asking open-ended questions, the customer can tell you in their own words what matters most to them.
Pro tip: The precise words customers use should be in your marketing material. This a core part of our copywriting services to help startups get their first 100 customers.
At Growth Ramp, we prepare between 15-20 questions beforehand. These questions should help you learn:
3. How will you keep and record the information?
With the customer’s permission, you can record the conversation using an app on your phone, such as Voice Recorder (or use this voice recorder app for the iPhone). Zoom allows you to record video conferences.
A recording is only necessary if you plan to listen to the interview again. More importantly, you need to take notes during the customer interview.
4. Is there a core problem or desire that the customer hasn’t told you yet?
For example, let’s say a co-founder tells you they are struggling to get more leads. You should ask why they feel are struggling to get more leads.
They might respond that they want to get leads from companies in the US, but feel their copy isn’t strong because English is their second language. Now you know you might have a better shot selling a copywriting service to generate leads than a Facebook ads service to generate leads.
5. Have you proven or disproven a hypothesis you have?
The goal of customer discovery interviews isn’t to sell someone. At least not yet.
The goal is to either prove or disprove a hypothesis related to your business plan.
It’s okay if you discover there isn’t a problem worth solving. You saved 100’s of coding hours and 1000’s of dollars on a new idea that would never work. And you can always find more potential customers to interview.
Customer discovery interviews are never necessary. There are some startups that succeed without ever doing a formal customer discovery interview.
But there is a reason why the product failure rate is so high.
72% of new products introduced in 2009 to 2014 failed to meet their revenue goals or failed entirely (Simon-Kucher & Partners).
In 2010, the rate of product failure cost U.S. companies $260 billion (The University of Texas at Austin).
And roughly 75% of venture capital-funded startups launched from 2004 to 2010 failed (Harvard Business School).
From my observation, not doing customer interviews works when:
In other words, the entrepreneurs intuitively know the eight business hypotheses I wrote about earlier in this article.
Customer discovery interviews help reduce the chance of failure by testing your hypotheses. Quality customer interviews go beyond answering product development questions.
At Growth Ramp, we interview our client’s customers to help them determine:
So are customer discovery interviews necessary?
If you are comfortable with a higher rate of failure, or have all the answers about your business model, then no, it isn’t necessary.
Otherwise, get crackin’!
After finishing your customer discovery interviews, you now should have a clear idea:
With your team, you will want to validate your business model. To do this effectively, I like to show potential customers an offer, get their feedback, then pre-sell a product.
This will give you a clear picture of the current solutions and how you will stand out in the mind of the customer.