Blog: Validating the Value Proposition and the Customer

Most start-ups I have come across are new to the experience of validating the customer. The entrepreneur—driven by the passion of their dream— can’t see all of the roadblocks that lie ahead. The answer is to start with an open mind and seek as many experienced advisors as possible to help along the way.

The Internet and Google can provide reams of information, numbers, and other relevant data. The marketing data alone helps to encourage entrepreneurs to go further. I have witnessed numerous presentations of great ideas, as well as countless other presentations by entrepreneurs that lack direct customer contact information. Much of marketing skill is dealing with the perception of customers and I have seen it difficult see the customer perception derived only from numbers. Unfortunately, an internet product may be difficult to contact customers directly face to face; therefore, in becomes necessary to get as much contact information as can be.

Even with customer contact information, the entrepreneur can be misled. For instance, I have seen customer interview information with comments relating to an idea as follows: “like to have,” “need to have,” and/or “got to have.” These comments may have validated the concept or product, but this type of input lacks the validation of a customer when asked, “Will you pay for it?”

For example, I can tell many friends, “I have come across a process that will turn dirt into gold; are you interested?” The answers would be: “Great!”, “Yea!”, “Let me in!”, and, “Hell yes!”. I then point out the minimum investment will be $50,000 and get, “I’ll get back to you.” “Let me think about it.”, or, “I’ve got to go because I’m late for another meeting.”

There are very intelligent and creative people who, in just one meeting, can come up with several great ideas—BUT, can these ideas be turned into a business? Based on my experience as an angel investor and consultant to start-ups, the answer is, “Rarely.”

For the record, I am of the opinion that anyone can form a company today, even online. However, many get funded but go nowhere. Very few develop into a business, which is defined by me as when a company has reached a point of stability, with positive cash flow, and there’s a chance for the founder and investors to eventually get a return on their time and investment.

Here are what I believe is needed for an entrepreneur with a dream:

  • Before any major steps are extending time energy and money, it is best to validate your product or service.
  • Make sure someone once the product and is willing to pay for it

The basics to really search for include:

  • need – prove there’s a market need for the product
  • match – prove your product can serve that need
  • sell – create the ability to get someone to pay for it is a value proposition
  • How? To validate your value proposition
  • Follow Steve Blank’s valuable quote “Get out of the building and get to interviewing”

There are many places to get information including: 

  • Google
  • customers
  • suppliers
  • chat rooms
  • social media
  • distributors
  • investors
  • mentors and coaches
  • Above all listen 

In summary:

  • First question to answer is, is a business or an opportunity
  • Believe in your dream
  • Converted to investment
  • Make investors believe

My recommendation to entrepreneurs is to validate the value proposition and the customer before spending too much money and time on the dream.