Startup 101

Talking to Customers: What a Concept

You may have become a developer so you don't have to talk to people. If you're creating a business, however, you'll need to start.

A few years ago, I was working on a project with an excellent, strong-willed developer named Angel and an excellent, strong-willed project manager named Lynette. We had an issue that required some help from a vendor, and it was Angel's job to call for support. At the morning standup, Lynette asked Angel if he'd called for support yet. "I sent an email this morning," he said. "Yes, but did you call them?" Lynette replied. "I emailed them," repeated Angel. "Call them!" repeated Lynette. This went back and forth until Angel finally blurted out, "I didn't become a programmer to talk to people!"

Everyone in the room burst out laughing, and that expression became the rallying cry for our project. Lynette even had it made into a t-shirt for everyone on the team. It's true -- software developers often don't like to talk to people. That's fine…but if you're a developer who wants to create a software business, then you're probably going to have to learn to do it.

Last month, I introduced Lean Startup and talked about ways to validate your business concept before building it. The idea of driving traffic to a landing page makes a lot of sense for a consumer product, but what if you want to build software for businesses? As you might have guessed, there's an even simpler way to validate your startup idea, and it works great for business software…talk to customers!

If you have an idea to make life easier for doctors, then talk to doctors. If you have an idea to help fitness clubs get more business, then talk to fitness club owners. If you have an idea to automate trash pickup scheduling, then talk to the people who pay for trash pickup (city governments, I'm guessing).

Note that you can't just talk to users. You have to talk with people who are going to pull their wallets out and pay you -- you have to talk to customers. You're asking people to change the way they do business, and even if your idea makes perfect sense to you, there might be emotional or irrational reasons why people don't want to pay for it. Even when you're selling to businesses, you're still talking to people who make the decision whether to buy or not.

If you have a particularly "horizontal" idea -- one that applies to most businesses and not just a specific industry -- your task is harder. Unless you have something truly groundbreaking, you have to focus on the ideal customers in an industry that would most benefit from your offering. If they won't buy, then it's likely nobody will.

Startup guru and four-time successful entrepreneur Jason Cohen is a passionate advocate for talking to customers before building your company. After he sold Smart Bear Software, Jason thought he'd take the valuable marketing knowledge he gained, automate it, and turn it into a business. So he contacted several potential customers and started talking to them. He got plenty of encouragement, but didn't hear what he needed to hear -- nobody was telling him they'd actually pay for what he wanted to build. Through a series of direct conversations, the market was telling him that existing free tools were good enough.

After a few of these conversations, Jason gave up on that idea, likely saving himself a lot of money, energy and heartache. He moved on to his next idea, which was high-end WordPress hosting. Although it seemed much less complicated -- less "worthy" of his expertise -- than his marketing solution, finding extremely solid WordPress hosting was a problem people actually had. Price was an important part of the equation -- there's a big difference between $9/month hosting and $49/month hosting, and Jason wanted to go after $49/month hosting. So he set a goal of talking to 30 people who said they would actually pay him $49/month before officially kicking off his business. He found his initial 30, and after a ton of hard work, WPEngine is doing very well.

Here are some guidelines for validating your idea by talking to customers:

  • Talk to more than two. I see a lot of people who think they understand a market after talking to one or two customers. Jason recommends getting 10 paying customers committed to buying before you commit to building (and if you do a beta, make it a paid beta). Finding 10 customers is a lot of work, but building a startup is never easy. 10 seems like a reasonable goal.
  • Listen, don't sell. You're trying to find patterns across multiple customers. Ask them what they're currently using and what they want to see. Remember: you haven't built this thing yet, so don't argue about why they should want what you hope to build. Find out what they do want.
  • Separate the problem from the solution. First try to understand the pain people are experiencing. Then you can ask, "If I solved that problem, would it be valuable to you?"
  • Ask if they'll pay $10 or $50 or $50,000 or whatever you think your future product is worth (I'll talk about pricing in a future column). Most people are inherently positive and encouraging, so it's important to find out if you're talking to an actual prospect. If they say something like, "I think it's a great idea, but it's not for me" then you haven't spoken to a potential customer, have you? Find another person; this one doesn't count as one of your 10.
  • Be creative and persistent. Finding people to talk to can be hard. Robert Graham listed 15 ways to find them and had notable success with cold calling. A friend recently told me that a hand-written note to pre-announce a cold call works surprisingly well. That same friend has also had success reaching prospects with paid InMail messages on LinkedIn. Even though it's uncomfortable, don't cheat this process. If you can't find potential customers now, you probably won't be able to find potential customers later.

Recognize that customers don't care about the same things you do. If you're building a "Software as a Service" (SaaS) product, you'll be thrilled that Windows Azure handles all of the operating system maintenance for you and that it simplifies scaling. You'll be really happy that you can get a lot of Windows Azure for free via BizSpark. But unless you're selling to fellow geeks, your customers won't care much about the details of Windows Azure. They'll be happy that you use a big, trusted name like Microsoft for your platform, and they might do some due diligence to make sure they can connect your solution to their infrastructure (by the way, you can use the Windows Azure Service Bus in such a scenario, even if your solution itself isn't on Windows Azure). In the end, customers buy the solution. How you build the solution is your problem.

After you build your product, talking to customers doesn't stop. There's sales, obviously, but every customer and prospect can teach you something when you make the effort to talk to them. Ash Maurya once told me that he used to shield himself from customers with an answering service, but now he takes many customer calls directly, simply because he learns so much from them. Although you want to be careful not to get caught in the consulting trap, you can often sell more to your existing customers if you bother to talk to them. Isaac Garcia, CEO of Central Desktop, takes this concept to such an extreme that their average revenue per customer actually exceeds the highest published price on their Web site, because they're constantly talking to their customers and finding new ways to deliver value to them.

The fancy name for talking to customers before building a company is Customer Development. The resources I mentioned last month cover this ground well (from Steve Blank, Eric Ries, Rob Walling, and Ash Maurya; here's a nice online summary of Customer Development from Ash), but I'd also add The Entrepreneur's Guide to Customer Development by Brant Cooper and Patrick Vlaskovits. It's a great overview that's easy to digest.

Although talking to customers sounds easy, most software developers avoid it. After all, it's not why you signed up to be a software developer. But if you want to build a successful software business, you're going to have to learn how to talk to customers. Rally cry t-shirts are optional.

Next month, I'll talk about focusing your startup on a specific niche.

(Note: I've interviewed several of the people mentioned in this article on the Startup Success Podcast with Bob Walsh: Jason Cohen, Ash Maurya (one, two, three), Isaac Garcia, Eric Ries, and Rob Walling (one, two). I also produce and manage guests for Smart Bear Live with Jason Cohen. If you'd like to ask Jason a question or practice your pitch, register.)

About the Author

Patrick Foley is an ISV Architect Evangelist with Microsoft and cohost of the Startup Success Podcast. He can be reached at [email protected] or @patrickfoley.

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