Product Market Fit

The Obsession To Make It Real

Every business idea sucks initially, but a few can be transformed into something worthwhile. The truth is that no one knows what will work until it is presented to the market. As Mike Tyson said, “Everyone has a plan until they are punched in the face.”

This is why it is so important to test an idea before investing resources in it. The product, company name, logo, social media presence, website, and everything else only matter if the market buys.

Don’t outwork your client

Treatment counselors have a saying: “Don’t outwork your client.” This means that a counselor should put no more effort into helping the addicted person than they are reciprocating. Often, young treatment advisors will line up job interviews, apply on the client’s behalf for resources, and spend hours worrying only to watch the addict go back to the street.

When is it good

Your business idea is good when people buy it. The gold standard is money changing hands. Anything less is questionable at best. What typically happens is that potential clients respond with some form of “I would buy it if.” The next step is to convert them into paying customers, and this is before anything is created.

Using the phone

At the start, the best tool is the phone. Call the people in your network who could benefit from your idea, cold-call others like them, and have conversations. If everyone says, “That is a great idea,” but does not purchase it, then it is not a great idea. What this signifies is a “nice to have,” but you need to create “a must-have.”

Building a product

Most entrepreneurs get hung up on building a product. I am guilty of this, too. We all want the dream to materialize into a concrete thing. However, creating the product is the easy part. The hard part is discovering product market fit. The number one skill for every founder is sales. Learn and practice selling to customers before you consider building a product.

Being uncomfortable

Discovering product-market fit requires sales skills and a large group of people who represent the target market. For example, if you are building a CRM for Veterinarians, you must call all of the animal clinics in the area you hope to launch. This could be thousands of contacts that must be called on the phone. It is uncomfortable, especially for those who would rather build things.

Making it real

Before you build the thing, you must sell the thing. Nothing is more real than money in the bank as a result of your idea. Using the CRM for Veterinarians example, my team would call 1000 animal clinics with the goal of pre-selling 10. If we only pre-sold 5, then we would refund the money and move on to another idea. Once the sales goal is achieved, we will build the product as described.

Discovering the details

When calling potential customers, you can experiment with different prices and features. Your conversations ultimately define the exact cost and initial feature set. You can even try out other products and business names. For example, “This is Todd Moses with Vet Sales Pro,” or “This is Todd Moses with Vet Revenue Pro.” After a few calls, the winner should be clear.

What to charge

The pre-sales customers are given a discount, but only if they buy within a short window. You can take credit card orders using Stripe or PayPal without a registered company. Generally, the pricing should be high enough to get attention but provide tremendous value for the benefits. For example, “Vet Revenue Pro is $10,000 per user annually. However, for early bird customers, we provide five Vet Revenue Pro licenses with one-on-one support for just $4,995 for the first year. But, you got to act before Friday.”

When to stop

Every dollar you collect in pre-sales should be held until the decision to build or leave has been made. Once that threshold is reached, the money is spent on creating a product or returned to the customer. That threshold must be enough to build the product in the agreed-upon time.

Todd Moses (CEO - Banananomics)

Let me know what you think.

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