How to Validate Your Idea Without Writing a Single Line of Code

The only thing that matters is getting to product-market fit

Credits: Read on

Since 2021, I have made it my goal to guide startups to a product market fit in a structured process. Experience with more than 12 startups is encouraging: the approach saves precious time, increases focus, and identifies problems with the market early. That does not always lead to success, but it helps founders to avoid investments of resources into unpromising markets and ideas.

It’s time to explain the process and share examples to help more startups successfully achieve product-market fit.

What is Product-Market Fit

The product-market fit describes the stage of a startup company where they have successfully identified a target customer and serve them with the right product. And this is crucial: If you don’t have the right product or your targeted audience doesn’t buy, you need to figure out why and work on it.

You might find another audience or market, but usually, you need to work on your product and improve the value you deliver to your customer. There are examples of companies that were sold without achieving a product-market fit, usually because they went viral. But there is no example of a company that has built a successful business without achieving the product-market fit.

“The only thing that matters is getting to product-market fit” — Marc Andreessen

Product-market fit means creating enough value for the right customers, and enough value means your customers either pay for your product or — when monetizing with advertising — pay with their precious time.

In other words, once you achieve product-market fit, you’ve answered the questions of who, what, and how:

Who is your customer, and what is their problem?

What is your solution to their problem?

How do you solve that problem in a way that creates proven value for you and the customer?

And still, 90% of startups fail. CB Insights analyzes annually why startups fail and identifies several reasons directly related to a lack of product-market fit, including the fundamental reason — lack of market demand.

Often, founders are convinced by their solution and vision, and a firm conviction leads to either hearing only positive feedback or reducing research. Many founders become overwhelmed by operational tasks, particularly fundraising, and lose sight of the bigger picture. I’ve experienced that many times and often, it happens unconsciously. Again, a structured approach, e.g., by using interview scripts and a data input sheet, can help solve this.

Step-by-Step Product Market Fit Process

Raumpioniere, a Swiss startup in prop tech has decided to participate in our program that I initially launched with the accelerator RealGrowthHacking. The team originally wanted to start scaling but realized that the basis for growth still needed to be added. So we went back to assess the market and compared the different options, and this was not an easy step, but due to the openness of the team and the founder Atilla Färber, they soon had a clear idea of the buyer persona and could test it.

An assessment helped me to understand what’s needed and create a suitable approach. Understanding the needs is crucial for such collaborations since most founders don’t come to us when they start but when they experience the first serious issues. Therefore, we need to understand what has been done before.

The structured approach toward product-market fit contains the following steps:

Market & ICP Identification
Identifying and validating underserved needs
Finding a true value proposition
Launching and testing an MVP
Optimizing the MVP
Pricing and acquiring first customers

Step 1. Market and Ideal Customer Profile

Defining the Target Market

When thinking about your target customer, it’s essential to understand the economics behind such as the size of the market, the urgency for your solution, and the uniqueness of your offer to this market. To identify this, you need to research and compare different markets by attractiveness.

A founder, Ruben Feurer, contacted me a couple of months ago: He was also about to launch a new product called Agree and, with his team, has already built a prototype. After some discussions, we decided to go back to assess the markets. Even though the team had a feeling about it, it still needed to be validated.

Starting with a smaller segment of a big market is a strategic approach for new businesses looking to enter a new market. It helps you focus on a specific group of customers and their needs and use this success as a stepping stone to grow into more significant markets.

This approach allows you to dominate the segment first, establish your company as a leader, and expand your reach and customer base over time. By focusing on a specific segment, you can also learn about your customers, their needs, and the best ways to reach and serve them, which will be an advantage when expanding to a bigger market.

Credits: Growth Unltd.

If you are looking for external funding from VCs or Angels, you must ensure that your potential revenue in 7–10 years is above $100m or — even better — $200m. That way, your startup has enough potential for an attractive ROI for investors.

Determine the Ideal Customer Profile and Buyer Persona

Once your market is identified, define to whom you are precisely selling. Define your ICP as well as you can with as many attributes as you know. If you’re a B2C business, create the buyer persona directly.

“When a great team meets a lousy market, market wins. When a lousy team meets a great market, market wins. When a great team meets a great market, something special happens.” — Andy Rachleff

The buyer persona helps to understand who the person is that will buy your product. In B2C, it is the person you’re selling to, and in B2B, it is the person who will decide in your target company to buy or not buy a product.

Working with ICP and Buyer Persona

The beauty of ICP and Buyer Persona is that they are tools that can be used and updated throughout the startup journey. So they are living documents that you should initially review after each interview and adjust as needed, and at a later time for strategic realignments.

In the case of Agree, they have developed a customer profile. But what often happens is that a founding team creates a persona once and then forgets about it. This is understandable, as it is abstract work at this stage, and they develop a good feeling for the market, the ICP, and the buyer persona through the interviews. So why keep it up to date?

Nevertheless, we have carried out this step again with Agree since the ICP and persona should also be communicated to the team. A structured approach offers clear advantages: Several people do interviews, and this information must be brought together.

To build a thriving organization, information needs to be shared.

And I often see that a crucial question cannot be answered: Where and how to reach my persona? Such gaps usually happen when the interviews are not coupled with the persona and the persona is not updated.

Success Criteria of Step 1 — Market and Ideal Customer Profile:

Finding a big enough market is the most important step in building a successful company. No market = no need!
After this step, you have your serviceable obtainable market (SOM) with over 100m $ in potential revenue, a validated “market attractiveness”, and a defined niche.
Time: two to four weeks

Finding an attractive market is essential before you even start assessing a startup idea.

Your market lays the foundation of your startup’s success, or Marc Andreessen’s words: “Markets that don’t exist don’t care how smart you are.”

Step 2: Identifying Underserved Needs

When it comes to addressing customer needs, it’s easy to get caught up in the excitement of finding solutions. After all, solving problems is what we do as entrepreneurs, product managers, and designers. Still, before we can start thinking about solutions, we must take a step back and ensure that we focus on large enough problems.

The bigger the problem you solve, the more value you create. The more value you create, the more your business will grow. In the case of Dropbox, Drew Houston, at this time a developer, was riding a bus from Boston to New York. He had initially planned to work on his laptop during the trip but realized he didn’t have his USB memory stick. He felt the pain, and the idea of Dropbox arose.

“If you build for yourself, you’ll always have product-market fit” — Naval Ravikant

Paul Graham, the founder of YC, calls those ideas “organic.” Organic ideas are often promising because if you identify the problem and develop a suitable solution, the chance is high that there are others with similar needs.

The Problem Hypothesis Framework

One way to do this less organically or test an organic idea is by using the Problem Hypothesis framework, which involves identifying a specific problem you believe your customer is facing. By conducting interviews with potential customers, you validate whether or not this is a problem that they have.

But before starting with interviews, search for all information available:

Have others attempted to solve this problem before, and why did they succeed or fail? Research and technology portals, patent databases, open innovation platforms, competition, and tools like Statista.

How many people experience the problem? Social networks, expert and consumer blogs, blogs of relevant influencers, test portals, and tools like Google Keyword Planner.

However, interviews with potential customers are essential in the Problem Hypothesis process. These interviews help you validate whether our problem hypothesis is accurate and allow you to learn more about your customers and their needs.

Credits: Growth Unltd.

It’s important to remember that these interviews aim to understand the customer, and that means listening more and talking less. You want to allow your customers to tell you about their experiences and challenges rather than trying to pitch them a solution. I made an extra post on conducting interviews, have a look before you start.

Validating a Solution

You can start thinking about potential solutions after you’ve validated your problem hypothesis through customer interviews. Testing a solution can be done relatively quickly by creating a sketch, wireframe, presentation, or prototype and letting the user comment and rate it.

Here are four key strategies you can use to ensure your solutions are truly meeting your customers’ needs:

Sketches: Creating quick sketches is an easy and effective way to validate your solution concept. Use pen and paper to sketch your design ideas, then show them to your target users.
Wireframes: Wireframes are low-fidelity representations of your product that focus on the layout and structure of your design. Use tools like Sketch or Miro to create wireframes and show them to your users.
Presentations: Creating a presentation that outlines your solution concept is an effective way to validate your ideas with stakeholders. Use tools like Google Slides or PowerPoint to create a presentation and then share it with stakeholders for feedback.
Prototypes: Prototyping is a more high-fidelity way to validate your solutions. Use design tools like Figma or InVision to create interactive prototypes that users can click through.

After showing your sketches, wireframes, presentations, or prototypes to users, ask them for open feedback and then let them rate your solutions on a scale of 1 to 10. This feedback can help you understand how well your solutions resonate with your target audience and what improvements you need to make.

Success Criteria of Step 2 — Customer Needs and Pains:

You’ve conducted at least five interviews per persona or continue until new information is no longer obtained.
You have a validated solution that results from a big problem or needs your customers (personas) have.
Time: four weeks (two weeks problem space, two weeks solutions space)

By following this process of problem validation through customer interviews and solution validation, you’ll be better able to ensure that you address problems your customers care about and that your solutions effectively solve those problems.

Step 3: Defining a Compelling Value Proposition

Your value proposition is the promise of value that your product delivers to your customers, and it’s the key to winning them over. By crafting a clear and compelling value proposition, you can differentiate your product in a crowded market and attract loyal customers passionate about your brand.

A value proposition is the unique promise of value that your product or service delivers to your target customers. It’s the reason why they should choose your product over your competitors. A compelling value proposition clearly and succinctly communicates your product’s benefits, how it solves your customers’ problems and the characteristics that set your product apart from others in the market.

“Try to please everyone and you won’t please anyone.” Seth Godin

A well-defined value proposition matters because it can help you differentiate your product in a crowded market and attract loyal customers. It’s a critical element in achieving product-market fit, as it helps you align your product with the needs and desires of your target audience. By understanding what your customers want and need, you can develop a value proposition that speaks directly to them and resonates with their emotions and values.

Overall, a value proposition is probably the most critical component of a successful product or service. It helps you stand out in a crowded market, attract loyal customers, and build a strong brand.

Defining Your Value Proposition

A value proposition is a statement that highlights the benefits of your product or service to your target audience.

Three key elements of a compelling value proposition are:

Clearly defining the specific problem faced by a targeted audience;
Outlining how the product or service addresses this problem;
Highlighting both tangible and intangible benefits to the audience.

A value proposition is a statement that communicates the unique value that a product or service offers to its customers. The Kano Model is a valuable tool for understanding the different types of customer needs and determining how well a product or service meets those needs. The model is divided into three main categories: Performance, Must-Haves, and Delight. To create a value proposition, it is essential to study the different categories and decide which customer needs you will solve.

Value Proposition Grid, credits:

Then, create a Value proposition grid to identify the benefits you bring to the customer and how well you solve the problem compared to your competitors. The value proposition should focus on benefits unique to your product or service and not already offered by competitors.

A good formula to start with is “We help [X] to [Y] by [Z].”

But please ask a copywriter to create something nice. It must be catchy and comprehensive at the same time. Something like “Simpler social media tools for authentic engagement” (Buffer) or “Great writing, simplified” (Grammarly).

Testing Your Value Proposition

At this stage, Raumpioniere developed a new value proposition focussing on the ICP: “We help real estate service providers with our potential calculator plugin to expand their website to a scalable acquisition channel without any effort.”

Developing and testing a value prop can take time, but you can speed up the process by conducting a demand test. To do this, create a landing page that explains your value proposition and use targeted online advertising to direct traffic from where your target audience is likely to be browsing.

Credits: Growth Unltd.

Other ways to validate a value proposition:

Pre-sales: Sell your product before you have produced it. You can either put the customers on a waiting list or communicate afterward that it was a test.
Crowdfunding: A campaign on Kickstarter or another platform will quickly reveal how your value proposition is received.
Launch platforms: Platforms like ProductHunt offer a great way to test a value proposition.

Analyze the results to gauge the effectiveness of your value proposition using KPIs like conversion rate (CR) or click-through rate (CTR) and search for industry benchmarks. Additionally, research where your target audience gets their information and where they spend their time so you know where to direct your advertising efforts. This may include forums, LinkedIn groups, or even distributing flyers.

At Raumpioniere, the focus on a buyer persona and the associated tests led to the realization that this market ultimately promised too little. The decision was made to pivot, which is now proceeding very successfully.

Success Criteria for Step 3 — Defining a Compelling Value Proposition:

You have validated and optimized your value proposition and understand if your solution meets the target market’s needs.
In the case of a demand test, I expect the conversion rate to be above 10% (above 20% is great) and a minimum of 200 qualified leads that match the persona.
Time: four to eight weeks (depending on the results)

By defining and refining your value proposition, you can improve your chances of achieving product-market fit and, ultimately, driving business success. At this stage, you know that you’re on to something and can start building a product that delivers the promised benefits to your target audience.

Sign-up for my “Product-Market Fit & Beyond” newsletter, and you will get a free copy of “Testing an Idea Without Writing One Line of Code”. Sign up here.

How to Validate Your Idea Without Writing a Single Line of Code was originally published in Entrepreneur’s Handbook on Medium, where people are continuing the conversation by highlighting and responding to this story.

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