I have a quick but important post for you all this week; it’s all about how everyone’s a liar.
Provocative and dramatic, I know, but it’s true, and not accepting it gets a lot of new entrepreneurs into a lot of trouble with their businesses. Now, I’ve talked a lot about business planning: doing market research, figuring out who your target customer is, creating business plans…and that’s all very valuable. However, it’s incredibly important that while you’re doing all of this planning you remember that the people you’re talking to, your target customers, can’t be trusted.
What I mean by this is that, while market research and analysis is super helpful and you shouldn’t skimp on it, the only real way to know for sure if people will buy what you sell is to sell it to them…and I do mean actually sell it to them, not ask them if they would buy it and take their word for it.
I see this with lots of new entrepreneurs and I’ll highlight one recent example when I was talking with an established non-profit organization that is in the process of changing how it evaluates and moves forward (or not) with launching new businesses. (Note: These launches happen within the larger organization at first but they are meant to be independent new companies within a short period of time, so they’re basically all startups and fit in well with this conversation.) Multiple team members said to me that they’ve been frustrated and not seen the success rates they want because they’ve repeatedly asked the potential customers of new businesses about the products they planned to launch and gotten positive feedback, but then couldn’t get any real buy-in once they’d spent tons of resources developing the new businesses and actually tried to sell. So what was going on here? Well, people are liars. You can’t just trust that when people say they will buy, they will buy, and then run off and invest millions of dollars into an idea because you “know” you have customers.
Now, it’s not that people necessarily mean to lie. Sometimes maybe they do if they feel badly bashing your idea but, for the most part, if they say they’re interested, they think they’re interested. It’s just that everything sounds great in the abstract but when it actually comes down to spending real money on it, they’re not totally sure of the value or of their available cash anymore.
Think about everyone who vows to get fit and eat healthy…now, I’m not saying everyone who starts a new diet and exercise plan is intentionally being a liar when they tell you they’ll be slim and trim on the beach this coming summer, but the vast majority of them are not really going to stick with it and drop those 20 pounds. People aren’t often the best at predicting their own behavior so you can’t take their statement that they will definitely buy your product in the future as a guarantee that they will actually buy it. The only way to know for sure that they will buy, is to actually sell.
Now, again, I want to stress the fact that this does not mean you should abandon all planning. It just means that you need to combine planning with some real validation with real customers. Say you’ve invented a widget that will help soccer moms with problem x. First, you want to do some research about soccer moms: how many of them are there, how much money do they have to spend on a widget, where can you best find them to sell to them, etc. This basic research is NOT time consuming and it allows you to figure out if, assuming the soccer moms do want to buy your widget, there are enough of them to sell it to for it to be worth your while. Then you go out there and actually try to sell it, or at least a prototype of it.Talk to the moms, get real money in exchange for the product, get feedback about how to improve it. If they’re actually willing to buy, now you go back to do more planning about the economics and operations of the business to figure out if the price they’ll pay for it will generate a profit based on your costs to make, sell, and distribute it. Both parts are necessary: planning and research and real world validation through sales.
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