How to sell a complex product without building a prototype - Case Study #1

People often ask me: how is it possible to sell anything before actually building it? After some explanations more doubts arise: that can't be possible with more complicated products. It's easy to sell e-book pre orders, would everyone agree? But what about complex corporate software? Think Social is an internal platform for managing content marketing strategy within companies. I'm going to explain step by step how we moved from the idea up to the first sale without writing a single line of code.

The problem and the target group

While doing a research among marketing managers we've encountered the problem of implementing content marketing strategies within organizations. Marketing managers complained that they lack tools and control. We've validated this problem in two interesting target groups: mid-size companies and corporations. Trying to reach both targets was pointless - they needs were in details surprisingly different. Mark Suster in his super-famous article (read it, as I'll use the terminology from it) suggests that we should've gone for the tech mid-size companies, as they're early adopters and make faster decisions. However, we've decided for corporations anyways. Among many advantages we've been especially tempted by:

• Much higher budgets for innovation - one deal with elephant is worth more than 10 with a deer. Elephants are also more eager to test new software solutions, which means less persuading. 
• Elephants are often trendsetters for software solutions and big brands are much better social proof, than not widely known deer. 
• If the solution stands +10k employees organization it's going to work in smaller ones. You can't be so sure about it the other way round.

The sales strategy

At that point we've validated the problem and decided on the target group. But how to actually start selling Think Social to elephants? Being aware of the most important principle of sales: never say what customer needs, we've come up with such a strategy:

• The goal was to schedule meetings with middle class marketing managers in 5 different companies.
• The pitch couldn't suggest the solution, so we've rather told them: "We have some new nice products for marketing and HR, wouldn't you spare half an hour next week?” 

We used e-mail and phone calls, however it took us much more time than a week to finally meet somebody from companies such as T-Mobile or P&G, but the project wasn't our priority, so we've decided not to push too much. After the meetings it was clear, that they would like to learn more about our product and schedule next meetings. As you see we've had 5 potential customers without even starting to work on the software. Do you think it was high time to start development? Not really, we've gone for simple mock-ups instead:

Our "beautiful" mock-ups did a great job - we could discuss various feature options and the pricing with our potential customers. At that point we've validated already: the problem, the solution and the price. We couldn't go on with customers using simple mock-ups, but we thought that the preview of the product interface should do the job.

Visualization that you see above was enough to close the first deal, so the Think Social will actually come into existence. All the way through the process of selling it we've tried to verify all of the assumptions by making as low investment as possible. There are many excuses for not selling the product as early as possible, but I think that you can always find a way of doing it without major investments.

More case studies are comming, stay tuned! What do you think about such a strategy of building a startup? If you want to learn how to start earning money without creating a MVP sign up for free e-mail updates or check my online idea validation course.

Why building a startup is so risky?

"Everything popular is wrong" - this quote from Oscar Wilde permanently changed my life. Instead of saying: "hey, that's what everybody does, so it has to be a best method" I try to analyze everything a little bit more. I think you should rather try to search for a better solution, than always rely on the most popular one. Let's consider the standard process of building a startup. Everybody say's it's a risky business, because you have to spend a lot of time and money, however the outcomes are unknown. 

I decided to ask: "why is it so risky at all?". And you know what? What everybody does is just wrong!

Investment -> Validation

A standard startup lifecycle looks more or less like that:

1. The idea
2. Finding a team and co-founders
3. Legal issues, vesting contracts, business registration
4. Searching for seed funding or risking your own money
5. Couple of month spent on building a prototype
6. Fortunately the next round of funding
7. Beta launch
8. 90% chance of failure, 10% chance of success

Of course that's the perfect plan, which doesn't take random events as quorells between founders, running out of money before finishing a prototype, feature creep and finally launching a prototype after a year, not getting funding, etc. All of those events make it impossible to reach point 8., at which you can finally check if it was worth working on the project. That luckily happens after 6 months. It means risking at least 6 months with 10% chance of success. Hell yeah, it's risky! The question is: does it really have to work this way?

Validation -> Investment

Why wouldn't you check, if your idea makes sense before starting to work? "I need a MVP to do that", "I need a team", "I need founding"... blah, blah, blah. None of those is fundamental. Let's see how the idea validation change the rules of the game:

1. The idea
2. Appropriate validation

At this point you either start earning money from preorders, or fail so fast that it cost you only a couple of hours or days to find out it's not going to work. You don't have to search for a team, create MVP and you don't need any funding. That sounds a lot easier and far less risky, doesn't it? Working on the validated idea makes live easier also on the next steps:

• You earn your own money, so you need less funding, if any
• You don't have to share your company with co-founders, because you can simply hire people to do the job
• Investors will contact you at a certain point, and you won't have to pitch everybody in town

What do you think about such a strategy of building a startup? If you want to learn how to start earning money without creating a MVP sign up for free e-mail updates or check my online idea validation course.

Forget about building a prototype first

Startups are a risky business, that's why some clever guys such as Eric Rise and Steve Blank came up with the idea of Minimum Viable Prototype, which allows founders to test their solution, before creating the whole product. Sounds like a cool idea, but how does it usually work?

A Standard MVP lifecycle

Creating a MVP is far better than developing your startup in the stealth mode, but it's still quite risky. In the beginning you don't really expect the amount of work in front of you. Launching a MVP usually means following 3 core steps:

• Step 1: customer interviews. Having assumptions about the needs of your customers is not enough, so you go and ask about what they want. After 10 or 20 meetings you collect enough feedback to conclude which features are crucial to the market success. At least you think they are.
• Step 2: creating MVP. You don't want to risk your time, so you make exactly what your customers intend to purchase. Standard MVP's development takes from 1 to 4 months. Of course that's the great investment, because you already validated your solution and customers need it. You just add one or two features, which don’t take so much time, but they nice to have. 
• Step 3: surprise, surprise. Nobody bought it. You can come up with at least a few explanations: it's not completely ready yet, it needs more features, customers need time to consider your pricing, etc. The solution is awesome and you have no doubt that it's going to sell after minor improvements.

What can you do next? Yeah, ask more customers, get more feedback and implement it another way around. Don't be surprised, because the outcome will be probably the same as the first time. Using the above methodology means fortunately working for a couple of months before closing the first sale. That's far to long for me.

Don't code

Development of your MVP takes time and money, so let's consider the options for decreasing the risk of creating something that nobody wants to buy. You can certainly discard 50% of the features, which means faster development and lower budget. But let's think out of the box. Sales are the most important success factor for a startup, wouldn't you agree? Development of your MVP cost money, sales bring money. Would you rather earn money or spend them on something risky? Exactly, instead of developing your MVP you should rather start selling your solution before writing even a single line of code. How could you possibly sell something that doesn't exist? Let me introduce you to the brand new kind of MVP that stands for Minimum Vendible Product. It takes just a couple of hours to validate your Minimum Vendible Product, so it means that you save tremendous amount of time and the risk is far lower:

• Step 1: creating Minimum Vendible Product. Ask yourself: what I really need to close the very first deal? How can I offer preorders to my first customers? I bet, that in 90% of cases you just need to create a landing page or a simple PDF. Describe in details what are benefits of using your solution and there you go. How can you reach first customers? Go on the phone and call some. You can also spend 100$ on AdWords and analyze the conversion.
• Step 2: develop or not to develop. The decission is easy. Did it sale? Did it sale enough to cover the cost (time spend on the telephone, billing from AdWords) and make some satisfying profit? It might be a good idea and a decent solution - you should give it a try... and sell much more preorders. 

I started this blog to prevent you from creating products nobody wants, we will get much more into details in the next posts - stay tuned. Now just remember about the most fundamental rule: Forget about developing anything, before you sell it. The only validation of your solutions are payments from your customers.

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