Tag Archives: market

Sell first, build later… Otherwise known as validate your market

When I talk to start-ups I often talk about the idea of sell first, build later. When I look back at the Learning Pool story, adopting this strategy was a key ingredient of our survival in the very early days and I have no doubt that ability to execute in this way has stood us in good stead as we’ve grown. Before explaining why I think this is good idea for early stage companies, a few health warnings:

  1. You can really only do this as an early stage company. When you get bigger the stakes and the expectations are higher and the risk around doing this becomes intolerable;
  2. Its easier in a business to business sale than in a business to consumer environment although you can do elements of this in a b2c setup;
  3. This is not a strategy really. It’s more a tactic to get into the market and get in front (virtually or physically) of a customer. You shouldn’t forget this bit because it’s maybe the most important element and you have to be ready to grow away from this approach;
  4. You simply must execute the build bit… otherwise your credibility, and with it your business will disappear down the toilet!

All that said, I think there are compelling reasons for adopting this approach, namely;

  1. Its all you can afford when you are a very early stage company with no cash and a window of opportunity that’s closing fast;
  2. it’s a great way to validate your market and best of all, you get to see, and if your lucky even talk to your customers to find out what they like, what they need and what they might want in the future;
  3. You find out whether you really can build this thing and identify the holes in your delivery machine that must be fixed;
  4. You get track record and proof, or otherwise that your concept is viable;
  5. You get to change direction and focus on the things that make the biggest impact for your customers based on real data and honest feedback. You also get to tweak the business model, pricing or pitch if you need to;
  6. It gives you working capital to get the rest of the product built.

One of my best memories of this in the Learning Pool story is when we’d sold a product to a large organisation before it was completely built. We were totally up front with them about it and immediately got to work on building the product so that we delivered on what we promised. A couple of months later we went to see the customer on a sunny day and sat outside their office meeting our contact and celebrate a successful project. She started the meeting by giving us a cheque for more money than the company had ever billed up until that point. When we got back in the car I asked Mary if she remembered anything of the meeting after seeing that cheque… Nope.. me neither! It was a great laugh nonetheless!

Your business needs a business plan… it just does OK!

I’ve been in perennial business planning mode for the last few months as well as helping a few start-ups with theirs. Its struck Business Planningme more than once how folks really struggle to put something together or even to convince themselves that they need a plan in the first place. For that reason I’ve finagled Mary to help me write a series of blogs over the next few weeks that might help people put together their business plans

To kick off the ‘series’ I thought I’d write down my reasons for it being a good idea to write a business plan in the first place. This is really in response to the argument that start-ups don’t need a business plan and that they should just get on with getting out to the market and see where it takes them. I really disagree with this approach (although the JFDI argument is often compelling and sounds like a great laugh) for a number of reasons. I reckon you need a business plan from day 1 because:

  1. You must define your product – what it is, how people will find about it and how much it’ll cost
  2. You must know the potential market – otherwise how do you know you don’t have a hobby on your hands rather than a business
  3. You need a business model – if you can’t write down how customers will buy your product then you don’t have a business so what’s the point of having a product
  4. You need something to aim for – targets for a very young company are always a stab in the dark but they do help you focus at least
  5. Is this thing viable – it could be that your product is too expensive, the market too small and hard to reach to make money – better to know that in a plan than in reality!

For those reasons, plus a whole lot more, you need a business plan.

So coming soon in this batch of blogs will be:

  1. 10 massive mistakes in writing your business plan
  2. Financial forecasting 101
  3. Dos and don’ts of writing the story
  4. Writing for an investment plan
  5. Storytelling – how the ancient art can make your business plan fly
  6. The importance of detail… and the important details

Plus some more stuff we’ll come up with… probably on a sick bag!