April 16, 2018

The Startup Journey Part 1: Market Research

Courtney Taylor
Content Creator

Will your startup be successful?

You can never know for sure until you’ve actually launched, but understanding product/market fit is a great indicator for initial traction for your startup.

Coined by venture capitalist Marc Andreessen, product/market fit is, in his own words, “being in a good market with a product that can satisfy that market”. A “good” market in this case is essentially any significant and growing market that has a problem that your product or service can solve. In order to satisfy the market, your product needs to solve a specific problem.

In this blog, we’ll walk you through the steps that we’ve seen successful entrepreneurs take, whether working with our agency or not. We also spoke with three CT-based entrepreneurs to get their take on the process: Ojala Naeem, Managing Director at reSET; Hugh Seaton, Founder and CEO of Aquinas; and Janis Collins, Co-Founder of The Refinery. We’ll also share their ideas to help inspire entrepreneurs looking to turn their vision into a business.

Step 1: Identify a problem

The first step to building a business is identifying a problem that people experience every day. Cool technology and flashy marketing may grab attention initially, but a product or service that doesn’t actually solve a real problem will struggle to succeed. If you’ve been thinking about starting a business, you may have begun by thinking more about what you intend to make rather than what problem you’ll solve for your target market.

To start, think about:

  1. The problem that your product or service will solve
  2. Who experiences the problem
  3. What existing solutions there are, and why they’re lacking

These points form the first part of your business’ value proposition.Understanding what problem you’re solving and who you’re solving it for will inform many of your decisions when designing your solution. Your target market’s specific needs and preferences will guide you to choices that work best for them. For instance, if your customers tend to use mobile devices more often than a laptop or desktop computer, any software that’s part of your solution should likely be mobile-friendly.

What entrepreneurs have to say:

At Hartford-based accelerator reSET, Ojala Naeem helps social entrepreneurs to start their businesses and scale. She advises entrepreneurs at reSET to focus on problem-solving first to avoid committing too much time and money to something that won’t succeed. “If you’re producing something that already exists in the market, or producing something that the market’s not looking for or not demanding, then you’re putting a lot of time and energy into creating something that’s not going to be successful,” she says.

Janis Collins, co-founder of the Westport-based accelerator The Refinery, has a similar perspective. “One of the things that we focus on in our program is really knowing who your customer is,” she says. She also emphasizes that your pricing will need to fit your customer’s willingness to pay. “We really encourage people to learn about what customers are willing to pay, and how that will stack up to what you need to launch and keep running.”

Step 2: Ideate a Solution

Next, define the product or service that you would create to solve the problem you’ve identified. Create a story around your idea that explains what the product or service is, who would buy it, and why. At this point, you’ll be making several assumptions and will likely need to make changes to your plan over time, but it’s still best to be thorough and start creating a clear image of what your business would be and how it would work. This will make it easier to communicate your idea to others, and to find where its strengths and weaknesses lie.

While drafting your business’ story, try to stick to a solving a specific problem for a specific market. It can be tempting to start planning more and more features to appeal to a larger market, but this will only make it more expensive to build later on and will make it harder to define the specific value that your product offers.

What entrepreneurs have to say:

Hugh Seaton, founder of Stamford-based enterprise learning software company Aquinas, believes that building your company’s narrative is a good way for entrepreneurs to analyze their solution early on. “I would say someone who’s starting out should write a narrative and say ‘these are the people that are going to buy my product, they’re gonna go to this place to buy it, this is why they’re going to buy it, and this is what it’s going to solve.’” Doing this will help you to quickly see where your solution is strong and where it needs work.

Ojala notes that one mistake that entrepreneurs frequently make is to start with too broad a solution to appeal to several target markets. It’s best to identify as specific of a market as possible to begin with, or you may find yourself in the position of needing to build too many features in order to accommodate several different niches. “You’re not sure who exactly your customer’s going to be. You’re going after too many people and you’re diluting the value proposition because you have to appease too many different market segments… In the beginning, we try to get entrepreneurs to focus on a single market segment and say ‘here’s where we’re going to start,’” Ojala says. As your company grows, you can always pivot or expand to cover more markets.

Step 3: Share your solution with your target market

With a clear concept in place, it’s time to share your idea with people from your target market. There are several ways you can get in touch with people who might be interested in your product. If your product will be B2B, finding an organization, meetup, or club for the relevant profession can be a great way to get started. Reaching out directly to the companies that you think would benefit can also be a good way to get your foot in the door.

When speaking with the people who might want to buy your product, you should be more focused on listening to what they need than on pitching your idea. If they’re not interested in what you’re offering, ask them why instead of just trying to sell harder. Ultimately, the people you want to sell to are the ones who will decide if your product is valuable. You need to cater to what your customers need rather than what you want to include.

If your business will be B2C, social media and surveys can be a popular way to reach out to your potential customers, but need to be used carefully. It can be difficult for respondents to give meaningful answers when they don’t have anything personally invested. Try to keep your surveys short with focused questions about whether or not they would use your product and how much they would be willing to pay.

What entrepreneurs have to say:

Hugh Seaton gained a lot of experience in this from building Aquinas. When trying to better understand your market and what they want, he suggests going right to the source. “The first thing every entrepreneur should do is join whatever group or meetup you can that’s full of people that know a lot about your market. The people you meet there who work in the industry and live the problems day in and day out are probably going to be a lot more experienced than you, which is incredibly valuable.” In addition to having firsthand experience with the problems you’re trying to solve, speaking with industry professionals can often lead to introductions that will help you down the road.

Janis points out that any useful data can come from any number of sources. “The devil is in the details. Do the customers really sign up for the service or product? And then it’s really important to understand what it’s going to cost you to get that product to launch, to test, and to iterate, and then keep growing. And understanding your fixed costs, your sunk costs, and then what your variable costs will be going forward.” Janis points out that any useful data can come from any number of sources. “And there are all sorts of ways to get information about that that are available on the internet. Whether it’s a Harvard Business Review case study, whether it’s other people’s 10-K financials, there are lots of ways to get that information.

Step 4: Study the feedback and refine your solution

Take a look at the feedback you’ve gathered and reassess your assumptions. Based on what your target market has told you, is the problem you identified a problem that people are really experiencing? Would your solution work for them? What could make it more valuable? Don’t be discouraged if it turns out that many of your assumptions were wrong. The main goals of your market research are to find out how you can make your idea better, and the feedback that you’ve gathered will help you to make a more valuable and appealing product in the end.

Pay particular attention to how the feedback relates to your core value proposition. If your research generally shows that people are experiencing the problem you’ve identified, then you’re on the right track, even if they have criticism for some of the details of your plan. If you need to think about making your product on a different platform or selling to a different type of user, you can make those changes. But if the problem that your idea is meant to solve isn’t something that people are identifying with, then the idea is unlikely to ever get traction.

What entrepreneurs have to say:

When building Aquinas, Hugh found that several of his early assumptions were proven wrong. “I assumed we would sell faster than we did. I assumed we would sell to a different part of the organization than we do. I assumed we would be selling to C-Level people, which was definitely a mistake. Almost no one sells to C-Level people — they don’t buy anything themselves, they have VP’s to do that for them.”

Next Steps

Knowing your market and how you can help them is a vital part of building a viable startup. Getting in touch with the people you hope to sell to as soon as possible will help you to shape your idea to what they need. In our next post, we’ll take a look at fleshing out your business plan further with tools like the Business Model Canvas and more strategies from our network of entrepreneurs.

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