There’s one reason we are all in business, and that’s the customer.
But when entrepreneurs are first starting a company, their efforts are so directed at internal and product- focused activities, that it’s easy to postpone “the customer.”
The tendency is understandable … and it’s a mistake.
Prototyping, protecting your IP, dealing with legalities of incorporating and the processes of setting up the books, not to mention the challenge of bootstrapping a new venture, are all vitally important priorities. If these things are not done right, the company won’t reach the point of serving customers.
However, if your business plan and value proposition are going to convince angel investors to invest, it must be built on a compelling case that proves how your company’s products are solutions that future customers want, need, and are willing to pay for.
The customer’s needs, wants and problems are the foundation for your business case. And a compelling business model is what attracts early stage investors to invest.
So how does an entrepreneur — who doesn’t have a product yet offer a customer make customers an organic part of the business plan?
Recognize that a customer is not a category. All customers are individuals who can give you the inside skinny on their business opportunities and challenges because they live with them every day. All you have to do is figure out how to have a discussion with them.
And then you have to be deliberate.
- Model of your customers. What industry are they in? What companies? What problems do they have that you can solve? What are the growth opportunities in their industry? Who do they turn to when they have problems? What problems might they have in serving their customers? Who are the decision-makers and who are the influencers? You need to talk with both.
- Recognize that your future “perfect” customers already have faces, names, and jobs in companies that you can identify. Who are these people? How might you gain access to them? Community groups, industry associations, non-profit organizations, mutual acquaintances?
- Get to know your customers. Try out what you are attempting to replace. Sounds like a no brainer, but thoroughly understand what people are struggling with currently and how much it is worth it to them to change.
- From the first moment you decide to start a company, set aside a few hours every single week to talk with several potential customers. And when I say “talk,” I really mean listen. Some calls are about selling your idea; however, in the beginning, the most valuable calls are the ones that ensure your company is not a solution looking for a problem. Therefore, don’t jump immediately into what your idea is but rather learn about your customer’s pains. Don’t ask leading or Yes/No questions. Rephrase their answer and confirm what they are saying to make sure you are both on the same page. Also, as customer development guru Giff Constable says “get psyched to hear things you don’t want to hear.” Otherwise, you will always be looking at your company/product with rose colored glasses (but unfortunately, your customer won’t)!
- Use these conversations to find more conversations. When speaking to your contact, find out who is their expert? Who do they turn to for solutions? Get referrals and ask for introductions.
- Include customers in your network of advisors. Consider inviting a potential customer to participate in your advisory board.
- Develop a system to document, categorize and refer back what you learn. Write down your customer conversation notes immediately after and synthesize the data. What did you learn from this interview? How did it change your business model? Did it prove or disprove your hypothesis? Also, be sure to ask if you can quote them. All of this information will be invaluable when you are writing your business plan, and especially when you are talk to potential investors. It is incredibly valuable to be able to quote a customer when an angel investor asks you why you think your product will sell or to be able to say “While we don’t have paying customers yet, but we do have relationships with the following people in the industry — all of whom have budgets and problems that we can solve.”
This doesn’t mean you will receive money that day, but it could mean that a potential future investor will remember you as the person who actually talks to customers — and that goes a long way with angels who write checks.