Get Paid for Customer Validation + 3 Other Top Startup Tips
Updated: Jul 6, 2020
Launching a company is harder than it looks! In fact, I’ve been running startup accelerators for years and it’s much, much easier to tell people what I think they should do than it is to start my own successful business.
Customers shape successful products, so it’s important to get them involved long before you think you’re ready. Otherwise you end up so far along that it’s hard to adjust the product based on valuable customer feedback.
This process is called “Customer Validation” and here are the top strategies I’m using as I launch my Rocket Pro Forma financial projections template:
Spend as much time on marketing as product
Provide amazing customer support
Get paid for customer validation
I’ve included a bonus fourth strategy at the end of this article too.
Here’s a quick video walkthrough that includes my pricing strategy from RocketProForma.com. This conversation grew out of an online session I did with Stefano Selorio from Carevocacy.
"Customers shape successful products, so it’s important to get them involved long before you think you’re ready."
Let’s dive into each strategy one-by-one:
1. Spend as much time on marketing as product
I want to spend most of my time working on my product. It feels good to just put on my headphones and work (here’s my playlist of music without words from my buddy DJ Stochastic to keep me focused). The problem here is that if I’m not careful I’ll end up building my product for no one. I see founders make this mistake all the time.
The job of a startup founder is to create a working business. The product is only one part of that equation. The most important ingredients by far are the customers:
Are there enough of them for this to actually be a successful business?
Do I know who my customers are?
Do I know how to find an endless stream of new customers?
Figuring these things out takes at least as much time as building my product, maybe more. If I wait to tackle my marketing until I’m satisfied with my product, I’ll be too late and I’ll likely go out of business. And if there’s not a big enough market I’d rather know that right away instead of months down the road.
"If I wait to tackle my marketing until I’m satisfied with my product, I’ll be too late and I’ll likely go out of business. And if there’s not a big enough market I’d rather know that right away instead of months down the road."
Here’s what the kiss of death sounds like for a lot of startups: “We’ve put $400,000 into building an awesome product and now we just need to raise money to find customers.” Actually, no. You’re too late and you’re likely to scare investors away because you spent a ton of money on something that may not actually have a market (smart budgeting is also a great reason to plan ahead with a financial projections template). Ouch!
2. Provide amazing customer support
I think Mike Tyson said it best: “Everyone has a plan until they get punched in the face!” That’s exactly what putting my product in front of customers is like.
They don’t understand my awesome interface!
They don’t know which button to press (hint: it’s the giant red one right in front of you)!
They don’t use my product the way I was expecting!
I suddenly start to understand how complicated even seemingly simple things are for other people. And I’m forced to make everything even simpler. Apple is insanely great at this. I’m getting better through practice, and the first step is admitting there’s a problem.
I’m friends with a very successful software entrepreneur who asked me how he could increase sales. I told him to sit with his customers and watch them try to use his product. I pointed out that he couldn’t outsource this because he wouldn’t believe the results if someone tried to tell him, and that he only needed to watch between 3 to 5 people in order to start seeing patterns.
He assured me he knew how his customers used his product and swore he wouldn’t learn anything. He ignored my advice for a year.
Then one day he called to say he tried it—and he couldn’t believe how difficult his software was to use! The interface he had spent so much time simplifying completely confused his customers. Fortunately, he immediately understood how to solve many of the problems after watching only a few people.
My shortcut to this is to constantly be reaching out to customers asking how I can help them. What are they confused by? What are they stuck on? Do they have a few minutes to walk me through it?
Then I help them solve their problem with my product.
This allows me to understand each experience and to spot patterns across my customers. I get to hear their questions straight from their mouths and I start to learn the language they use, which I can then turn around and use in my marketing. I also learn who my customers are and what they’re trying to accomplish. This helps shape both my product and my marketing.
Finally, this helps me focus. One of my biggest challenges as an entrepreneur is turning the list of all the things I could be working on into just a short list of high-priority items to solve right now. My customers help me do this every day.
Here’s an example of what one customer told me as I was helping her:
I asked how she found Rocket Pro Forma and learned a few things: First, my content strategy is working because strangers are finding me and passing my articles along. Second, she bought my financial projections template because she wanted to make sure she didn’t forget anything. Now I can work that point into my marketing language.
"One of my biggest challenges as an entrepreneur is turning the list of all the things I could be working on into just a short list of high-priority items to solve right now. My customers help me do this every day."
3. Get paid for customer validation
Are you earning revenue from your customers?
I know this sounds obvious, but I’ve seen entrepreneurs spend tons of time working with free “customers” who have no intention of ever paying. Hint: They may not be customers if they don’t pay you (unless you’re Facebook, Google, or the Discovery Channel).
I don’t prioritize suggestions from people who haven’t paid for my product.
On the other hand, I will provide terrific customer service to someone who has paid me even a little bit of money—and I will take their feedback seriously.
Remember that the #1 goal of an entrepreneur is to create a successful, repeatable business model. This means that customers need to pay—and the only way for that to happen is for you to provide them with more value than you’re asking them to give you. You can only test that by getting them to actually pay you.
People lie all the time when asked if they will pay for something. They say yes even when they mean no. The only true test is to get them to actually pay. If they’re not willing to part with their money then you’re not offering enough value. It’s that simple.
"Remember that the #1 goal of an entrepreneur is to create a successful, repeatable business model. This means that customers need to pay."
I intentionally started charging money as soon as possible. Here’s the pricing strategy that I’ve been using:
My main goal is to sell as many of the $99 coaching sessions as possible, because these give me the greatest insight into my customers. I’ve priced them lower than I normally would in order to make it easier for people to choose—and they’re a win / win because my customers get a terrific service from me. I will eventually raise the price, but this has been working well during my initial, intense customer validation phase.
I’m also interested in selling the $39 self-serve downloads of my financial projections template. I don’t learn as much from these customers (although sometimes I still do if they reach out with questions—or respond to my check-in emails), but I’m totally happy to learn how to attract and sell to these customers.
I’m using two pricing anchors to make the $39 and $99 prices seem attractive. First, the $3,000+ custom engagement establishes a high value, so people feel like they’re getting a lot for their money if they choose one of the other options. Read “Influence: The Psychology of Persuasion” by Robert Cialdini to learn more about how leading with an extreme number affects how people perceive and react your pricing.
I’ve also used crossed-out numbers to reinforce the higher value of both the $39 and $99 prices for my startup financials template. I haven’t decided what the eventual price of the product will be, but now I’ve at least proven a baseline for what people are willing to pay. I can experiment from here.
4. Bonus Strategy: Tell everyone what I’m doing (because stealth kills startups)
James Clear says,
“You can attract luck simply by telling people what you are working on.”
Magic Leap, by contrast, appears to be going out of business after raising $2.6 billion (yes with a “b”). I think the fatal mistake they made was trying to develop their product in secret. They kept their potential customers completely out of the process and guess what? People didn’t want the product they brought to market. It was too bulky, it was too expensive, and the benefits weren’t great enough to overcome these challenges. Remember when we talked about the kiss of death being, “We’ve put $50 million per month into building an awesome product and now we just need to raise money to find customers.” This is what I mean by building a product for no one. Stealth kills startups.
When I tell everyone what I’m doing—and when I let them touch and feel early versions of my product—magical things happen. We really do create our own luck.
First, I’m making it easy for people to help me. Now they start bringing me customers, investors, partners, advisors, business deals, and other great opportunities. People want to help us. All we need to do is make it easy for them.
Second, I’m forced to practice my elevator pitch over and over again—and I get a little bit better each time.
Third, now I’m truly committed. Telling everyone what I'm doing attaches my reputation and self-worth to this project. This is terrific motivation for me to make it work.
I'm Mike Lingle, a serial entrepreneur, mentor, and executive in residence at Babson College. I'm obsessed with helping founders grow their businesses. Check out my Rocket Pro Forma if you want to quickly create your financial projections.