The Entrepreneur Insiders network is an online community where the most thoughtful and influential people in America’s startup scene contribute answers to timely questions about entrepreneurship and careers. Today’s answer to the question “How can entrepreneurs find the right market to sell their products?” Is written by Clark Lagemann, co-founder of MedPro Wellness.
This is the most critical aspect of any new business—more important than your first hire and more important than your first investor. It’s the holy grail of startups. Identifying your product-market fit is the lifeblood of any business —the piece of the puzzle that ultimately allows your startup to sink or sail. Famous venture capitalist and Y Combinator co-founder Paul Graham even coins this process as “making something customers want.” Unfortunately, though, many startups skip this step altogether, presuming they know what their audience wants without hitting the pavement and asking the customers themselves.
I speak from experience when I say that finding the fit isn’t easy. I’ve had multiple “best ideas in the world” that ultimately inspired me to build a business solving a problem that people really never cared about. Because I often failed to identify the product-market fit and pivot accordingly, I eventually ran out of money.
In 2012, Lean Startup hosted one of their first workshops in New Jersey. With the startup scene relatively new to the area and me quitting my job about 18 months prior, I was viewed as somewhat of an entrepreneurial expert and was asked to participate as a mentor. I remember arriving for our mentors’ workshop and being given a black t-shirt with “Get Out of the Building” emblazoned across the front.
The message was simple: In order for entrepreneurs to find the right fit, they had to leave the building and interview prospective customers.
We asked each of our entrepreneurial teams to follow this process: Write out a set of assumptions about your product. Create a list of questions that can either support or challenge these assumptions. After you write out your assumptions, determine a success percentage and hit the pavement to canvass your potential market. Ask each person you meet the set of questions. If 80% say, “Yes, that feature/service sounds awesome,” then you’ve got a good thing. Continue to refine your product based on the feedback you receive, careful to only keep those “must-haves” and toss out the “nice-to-haves.”
Outside of using the old-fashioned “get out of the building” method, I’ve seen other entrepreneurs create Facebook ads and test the click-throughs of certain images and text. The process is quite simple and highly effective. Go onto Facebook (FB) and set up an advertising account, create your target demographics (the more specific, the more costly), and then push the ads live. Determining how much of your product you’ll sell can be as simple as asking customers for their email addresses to learn more about the product, creating a fake “buy” button (that you track the clicks on), or directing them to call a number. Monitor how many of your customers take that next level of action.
I learned my favorite process of determining product-market fit during a workshop with the Stanford Center for Innovations in Learning. Their facilitators were teaching entrepreneurs how to quickly develop a physical representation of their product/service through a process called rapid prototyping. Although the term sounds very technical, the method is quite simple.
To begin, ask your target customer a list of questions about the features they’d like in your solution. Next, spend 15 minutes using crayons, markers, construction paper, and glue sticks to create the solution they spoke of. After presenting your product back to the customer, ask for feedback and improvements. You’ll probably be surprised to learn that what you “heard” is not exactly what the customer “said.” With this new information, spend another 15 minutes improving the product and asking for feedback. You’ll find that your second prototype will be much closer to the desired product then you originally started with (this process can be repeated until you’re satisfied). You don’t need to spend a lot of money to understand what your customers want.
By following these three strategies to identifying your product-market fit, you are positioning your startup for maximum success — building product value, improving your customers’ lives, and increasing revenue for years to come.
Lagemann is not an investor of Facebook.