Project Wilbur Podcast Episode 3: Validating an Idea

Title: Validating an Idea

Description:Project Wilbur Co-Founder John Emmons and VP of Business Development Brian Williams continue their four part series called "Startup Journey: From Idea to Launch" with this episode.

Show notes:

Do you have a brilliant business idea but aren't quite sure how to bring it to market? You're not alone. Every entrepreneur faces the challenge of turning their vision into a viable product.

In today’s episode 2 of the Project Wilbur Podcast, Brian and John discuss validating your idea and guide you through the essential steps to confirm your business concept's viability and ensure it resonates with your target market. They discuss transforming a budding idea into a thriving business and the key moments for reassessing pricing strategies to fuel growth. From validating your business concept to developing a market-ready MVP, this episode is packed with practical tips to help you transform your idea into a thriving business.

In this episode, you will learn the following :

• The role of customer interviews and feedback in refining the product vision.

• Strategies for building an MVP that aligns with customer needs.

• Iterative testing and data collection before focusing on generating revenue.

• Understanding how to price a product effectively to sustain growth.

• Using growth metrics to determine when to adjust pricing strategies.

• Utilizing incentives like gift cards to encourage survey participation.

• Focusing on a niche market initially before expanding to other verticals.

Social media pages or website to promote:

Website: Project Wilbur

Instagram: instagram.com/projectwilbur

Youtube: Project Wilbur

Facebook: facebook.com/projectwilbur

LinkedIn:linkedin.com/company/projectwilbur

TRANSCRIPT

00:00:00 Brian: Welcome back everybody, Episode 2 of the Project Wilber Podcast. Today we're going to be talking about validating your idea. Last week we talked about the ideation process, right, when you have that spark that captures you. So today we're going to go into the next step is, okay, we have that idea, we perceive this to be a good thing, a potential business. So now how do we go into validating that idea? With me as always is John Emmons, the lovely John Emmons. Game us up, give us some knowledge on the topic of validating your idea.

00:00:46 John: So I like to look at like, you know, basically what you're doing is trying to make sure you have sales. So the first step is like customer, you know, interviews. So you want to go through and make sure that you've come up with, you believe there's a problem, right? You've come up with the solution, and you want to go and ask people, hey, this solution makes sense. I'm providing you with this problem that we all share, and this is the solution. And like, based on reaction helps dictate what the product becomes, right?

00:01:20 John: Then, you know, you want to make sure you get from that to what would you pay for this? Okay, then you push that as far as you would. And then you go into actually selling the thing. The way this always fails is when a startup founder never talks to his customer, or her customer. And they're like, no, you want this. And I'm right. And you don't know what you want, because I'm, you know, correct. And there is some examples of that in the real world, like Steve Jobs did that.

00:01:50 Brian: Yeah.

00:01:51 John: But there was one Steve Jobs, right?

00:01:54 Brian: Yep. Well, let's talk about that for a little bit, right? The customer surveys. And I know we touched on this last week, too, you know, when I started Blue Martini Trading, I would go around and just pop into random conversations at dinner, you see a group full of people that appear to be your, what you perceive to be the target demographic and say, hey, can I ask you some questions? What is your... Do you have a system for starting? Is it a Google form? Is it, you know, how do you start conducting your surveys? Is there a step by step system that John uses?

00:02:32 John: Well, I mean, no, because every industry is different. But like, you want to make sure that you have the right demographic. So alright, let's just go through a hypothetical. So like, if I have surveys, methods, here's how they kind of break down. So one, you have a thesis, you think this is the right audience. And when you go and you start talking to that audience, you have to be receptive to what they say, but you also don't need to change what their advice is, right?

00:03:04 John: So like, if you come up with a thesis based on the problem that you experienced, and now you've built this out, right? So now you have like a MVP almost of a product. So now you're testing it out, you've talked to 5, 10 people, 100 people, 50 people, whatever the number. As long as it's more than like 10, you're probably in a good, like, I'm ready to test. When you get the data from people using the platform, you should get up to about 50 to 100. So like, these are just normal metrics.

00:03:39 John: Once you have that data, then you're probably ready to start charging for something, right? So you want to make sure you have as much possible information, and then you go into the actual revenue building. And then it goes into like the price testing, what will they pay. So like, that's the process. Now, I mentioned Steve Jobs earlier. So there's a number of anomalies within Apple. One of them, the closed system. They tell you what you want.

00:04:11 John: They don't adapt to other companies much. And they usually grow through acquisition. And then that becomes an Apple product, Beats, for example, right? So what's important to note is that that's one of the few companies where they can tell you what you want. And it's also because they got to dictate or create a brand new category.

00:04:33 Brian: And that's decades of building the brand, and they have a loyal fan bases, right? You're either an Apple guy, you're either a blue bubble in your text, or you're a green bubble in your text, right? So, again...

00:04:45 John: And honestly, the green bubble, most people get bothered by it, which...

00:04:29 Brian: Just saying, I tried to send pictures to a green bubble earlier, and they wouldn't go through, and it was really upsetting me. So...

00:04:56 John: That's the thing, dude. My mom has an Android, and every time I send her pictures of her kids, it bounces back. I cannot send. I have to WhatsApp her, and she doesn't know what WhatsApp is, and that's frustrating. So I have to email it to her. And I'm like, this is an extremely laborious process.

00:05:12 Brian: Print it and snail mail it to her. We're spiraling, we're spiraling. Okay, so back to the step one, right? Validating your idea. And in one sentence, you covered about, I would guess, about 18 months of a business, right? You went from the surveys, to building the MVP, the minimum viable product, and then to testing with your market, to generating revenues. All in one breath there. And it's easier said than done, for sure, right?

00:05:48 Brian: One thing I like to do, and you could start with a simple Google Form, go to a platform like LinkedIn, even, and you just ask people, right? You're not asking them for time, you don't need to set up a meeting. It's just, hey, drop it, it's a numbers game. I'm thinking of doing something, I greatly value your feedback and your opinions. Can I ask you a couple of questions? Would you mind filling out this form? That kind of a thing.

00:06:19 Brian: I've done that in the past very successfully. Some people say no, some people never respond to you. But what I started finding is, as long as I wasn't asking for personal information, just keep it anonymous, right? Maybe leave like a, you know, what part of the country are you in? West Coast, Central, East Coast, so you can kind of get an idea of the coasts. You know, gender type of a question, and then, you know, if they want to leave that, and then just leave the questions open.

00:06:49 Brian: So, you kind of get a baseline of what different population groups are thinking about what you're trying to do. But as long as I didn't ask for names, phone numbers, email addresses, you know, people are, they like talking, right? And they're open to giving their opinions. You know, if you only need to get, you know, 50 of it, and you got 50, you know, responses as your target, you know, maybe offer them a $5 Starbucks gift card and help them get their next cup of coffee or something.

00:07:19 Brian: You know, little ways that you can incentivize people to actually fill it out. And then you take that. So, say you do this, you've got a spreadsheet growing of information with some, you know, potential target clients or customers. What then? So, say you've done some surveys, say, you know, for sake of numbers, we have 100 responses. What then?

00:07:48 John: So, the whole point of a survey, the whole point of these questionnaires is to get that data, right? Then you start iterating. Once you start adapting, you adapt in little ways that are not super obvious, but maybe massively impactful. Because once you do a major iteration, a major pivot, if you will, that can actually change your entire business model.

00:08:10 John: So, you want to make sure that you do small measured adjustments to whatever you're doing so that it doesn't look like you're trying to do 50 different things. One of the most important things for a starter to do is to stay focused on their niche in the first couple of, like, you know, 6 to 12 months so that they figure out how to really attack that niche. Once they have that, then they can start expanding the different verticals and different, like, industries. But focus on the one that you're actually getting some movement in, right?

00:08:38 John: The second you start deviating, oh, well, it's an entrepreneurial dilemma, right? So, you start having 50 different projects that you're trying to do at the same time, and none of them get done, at least none of them get done well. They might all be generating some revenue, but you're failing. You're too close to it to see that it's happening. I mean, we've all been through that at some level, which can be very frustrating.

00:09:01 John: So, the main thing is small iterations, unless you're not making any revenue. You're not making any traction, you're not, like, you set KPIs for yourself and you're not anywhere near them, then you need to back away from what you're doing and re-evaluate the business.

00:09:16 Brian: Yeah. So, you start with the market research, right? And that part comes almost while you're simultaneously thinking of, you know, I've got this idea. I think this is a real problem, and I think how I can solve this problem, right? So, you dive into some market research, you start understanding the size of the market, the consumers who might be, you know, customers in this market of whatever you're trying to build. Then you sit down and you go talk to those people.

00:09:47 Brian: You identify who those people are. And I'm just repeating this back here just to make sure, you know, one, the audience is on the same page, and two, I'm hearing you, right? And so, you know, get the data from the market. There's tons of sites out there like Statista and, you know, you name it. There's places you can go find market demographics. Then you sit down and you actually have conversations with your potential future customers, right? Then you get that feedback back.

00:10:16 Brian: Then you say, okay, you know, I'm a solo entrepreneur or, you know, I've got a partner of mine that, you know, we work in the same field or, you know, I do startups with him in the past, so I'm going to reach out to them again, whatever the team structure starts to look like. That's a different topic on how to build an appropriate team. But then, you know, where do you go from there? Do you, is first step trying to find a CTO that understands how to code things?

00:10:47 Brian: If this is a software play, which most everything has an element of software technology to it these days. Is this, you know, sit down and build a deck? Is this go find, you know, a group like us where we have developers that can build your product for you, find a trusted partner that can help you build this. Once you get the understanding of the market, you get the understanding of potentially what some of the customers might want to see compared to your ideas. What's your, you know, go to in the next step?

00:11:22 John: So, I mean, to post validation, so like you've conducted all those surveys. You've gone through, like, here's, I've identified the product. Well, then you start figuring out what they pay for it, right? Even if it's freemium, you want to figure out like, okay, well, then who's, like, if it's freemium, I'm just going to get that one out of the way real quick.

00:11:45 John: So, freemium is the person, the user is the client, is the product. So, you've created a thing that makes it sticky. Users are on it. It's either their data or the advertiser that wants to reach those people within that data, those are the clients, right? So, whoever you sell the data to or the affiliates or whatever, those are your clients. So, you figure out what they pay. That's just FYI because I know that somebody's going to say, hey, but my product's free and I don't sell to people.

00:12:20 John: But you sell to the advertiser or whoever's buying the data, so those are your clients. Anyway, so, if you're selling a product and you're like, all right, or this solution, which is also a product, that is X number of dollars a month or single pay system or whatnot, what can you do to get them to buy it? And then you start going, YC's got an interesting paper on this. It's, you ratchet up, I think it's like every two weeks, you ratchet up 5% to figure out. And you round it to the next whole number because you don't want like, you know, $10 and 62 cents, but you ratchet it up. So, it's like a whole number.

00:13:01 John: And then you go through, when do you start having drop-off, right? As long as you're below a certain threshold, and I forget what the number is that they have set up. But the one that I usually like to stick to is as long as we are at a point where people are adopting, the adopting is in turn growing at a percentage rate, somewhere in the double digits, until that double digit growth drops down to single digits, we've got product market fit, right?

00:13:31 John: And then when your pricing is price market fit, or product market fit pricing, you've hit that, the way that you know that your pricing is too high is when you start having a drop-off below, I think it's like 7% growth, right? So, once your growth drops to below 7%, whatever the metric is that you've been doing, and let's say it's in the 15, 20 range, and you're below 10. And you're like, oh, maybe I'm okay, maybe it's going to plateau at nine, eight, like nine or eight a month, it's super healthy, right?

00:14:07 John: So, once you see it starting to drop, that's when you're like, all right, well, it's below seven, we should really like stop raising the price. You should do that every two weeks, and go through, you know, whether they're going to stick with you or not. The other thing that… the other really important one, besides total revenue, is stickiness. How long are they staying with you? If it's a SaaS company, what's the lifetime value of that customer? Are they with you a year? Are they with you multiple years? Are they with you five months? Are they with you two billing cycles, right? I don't know, but you need to figure that out, because that's a really important number.

00:14:45 Brian: Yeah. And for those that are listening that might not know, and John says YC, that's Y Combinator. If you haven't checked them out, go look. They've set many of the industry standard for startups, tons of resources there. Good place to go get some information from. So, you know, we've gone from now having that spark of creativity. You've done the market research. You understand your unit economics. You know what you want to charge.

00:15:20 Brian: You've talked with the customers. You've gotten their feedback. You've worked with the dev shop or brought in the partners, co-founders that can help you build this, if you're not talented enough to understand coding yourself. You've made the MVP, which is the minimum viable product. You're testing it with your users. You've got 100-plus testers giving you their feedback. Now you're coming in and finding the price points. Am I hearing that accurately?

00:15:55 John: Yeah, that's right.

00:15:56 Brian: That makes a lot of sense, right? And so you start somewhere low and then keep ramping up. I've actually never heard that approach before, but it makes total sense.

00:16:08 John: I like to make things simple. I mean, quite frankly, customer validation, idea, customer validation. You do the interviews. You figure out who the right customer is. You go through and you make sure, like, hey, this sounds like I thought it was this, but it's actually this, according to all these customers. And I interviewed, like, 50 people. But then you do the A-B testing. You go through all of that, like, you know, different structures because you can't make a decision.

00:16:34 John: And then once you get to a point where you're like, okay, they're kind of interested. They're willing to pay, right? And then as you go through that whole, like, you've now qualified everything. You're now doing the price testing. And then you go through the price testing. Usually the best way to do it is, like, especially in SaaS products, is you do a monthly. And then you do an annual with a savings of, like, you know, two months, right?

00:17:01 Brian: Yeah, we've all seen those structures, right? Or buy for the year for a slightly lower number.

00:17:10 John: I personally like to do for the first year. So I'll do the monthly. And then for the first year, I'll do the annual for half. Because that's a really good way to self-fund because, as I've said many times and you've said many times, the most expensive money any startup can raise is venture, you know, selling off equity. Equity is like time. You don't have more of it, right?

00:17:39 Brian: So some securities attorneys would argue that you can refile.

00:17:46 John: Sure. Or you can go through dilution events. But, like, at the same time, it doesn't change the fact 100%.

00:17:52 Brian: We're playing semantics there. Yeah, yeah. No, I totally get it. So let's talk about the MVP real quick because I think this is a good topic that needs some attention to it, right? One of the things that I see often, and, again, none of us are immune to this. I was personally attacked by this bug where they're, you know, I know what features you, the customer, are going to love, right? And oftentimes what we find is those are not the features that are actually used. And you only learn that through the journey, right? So, you know, there's a saying, fail early, fail often. Put your good enough product out there first and start testing it, right? Get that feedback.

00:18:42 John: Exactly.

00:18:43 Brian: Because that's invaluable. What is there, and I know there's no one answer for, you know, blanket for every industry or every company out there, but what are the core features? Or is there kind of an overarching theme of what the core features should be in a platform for MVP?

00:19:07 John: I mean, sure. Clear messaging that says this is the problem that I'm solving. So that's obvious. And then, you know, clearly, like, showing how you're solving that problem. So a value prop. And then, you know, you want to make sure that you've got validation on how you're solving that problem. So, like, customers that have said, like, hey, this saved me X number of dollars or this has saved us so much time. All these different components, right, that add a lot of value to the potential, you know, venture, right?

00:19:49 John: So I would probably say that that's, like, .1, .2. And then the final with when you're doing these MVPs, you want to make sure it's easy to, like, it's malleable, but you want to go as quick as possible. So getting stuff that's already pre-built, using things that are open source, even doing things that don't scale, right? So, like, if you're doing things with a Google spreadsheet, right, like, you know you're going to have to build a database. You know it's going to be complicated. You know it's going to be expensive, right?

00:20:25 John: And you're going to have to plug into, like, 30 different APIs. It doesn't change the fact that, like, you could still do it with an Excel spreadsheet, right? And doing things that don't scale is always the best way to start things out. Because if you start investing and building the product, it could be, you know, two years of you trying to figure out how to solve this problem that might already have a bunch of, like, makeshift potential solutions. I've had, I don't know, clients, companies I've worked at, oh, it's not ready to release yet.

00:20:56 John: Oh, it's perfectionist, like, I need to get it perfect. Like, no, because that's the kiss of death. Like, every single time you try to make things perfect, it will fail. Right? Because you will be building the thing that is for you. And sometimes that's right, but rarely is that right.

00:21:13 Brian: Rarely. That's a good way of putting it. We know what everyone wants because it's what I would want, right? And if I like it, then there's got to be 10 million other people out there that will, too. There might be some truth to that, but in the end, you've got to test it. So, you know, kind of let's circle back, button up some of these things and go over the main points here.

00:21:38 Brian: So, you know, last week we started off with the ideation process. Get that idea. This week we're touching on how to then, you know, take that idea and actually start forming the foundations of a business. So, you know, you do the market research. You have to understand the market before you know what questions to ask potential customers. It's a logical first step.

00:22:04 Brian: Second step, go talk to your customers. Create some simple surveys. Get out there. Go to some, you know, startup pitch events in your neighborhood. Most every major city has a startup ecosystem. You could go meet other founders. You can talk to investors. Don't ask them for money right off the bat. Just say, hey, can I ask you some questions? I'm chewing on this idea. I'd like some advice or some input, some feedback.

00:22:29 Brian: And just start talking to anybody and everybody about what you want to do. Once you get all that data back, then you sit down and you say, okay, I'm either going to do this internally or use a third party partner like Project Wilbur to do the development, right, of the MVP. And in that, I like to pick anywhere between three to five core pieces of your company that are going to be the main features, right? So develop those out. Do quick sprints.

00:23:06 Brian: If the whole build is going to take nine months, say, okay, what can we do in three months that I might be able to release to some people and have them start testing while we finish off that last six months? Because getting that feedback is so crucial to keeping your development on the right path. In the long run, I think it saves a lot more money than rather than building for nine months to a year, releasing something and saying, oh, all this is crap. We have to start over from scratch. None of this is usable.

00:23:40 Brian: So start early. Put it out there. As always, we're here to help. You can go to projectwilbur.com. Any time, you can reach out to us directly there. We're very responsive. We've been through the ring. We have developers. We've got marketers. We've all had our businesses. We've had successes. We've had failures. The whole startup story, right? We've been in the trenches with you, and we're here for you. We want to see you succeed. So any final thoughts for everybody?

00:24:15 Brian: I mean, just don't be convinced that you're right. Like, always take every single criticism as input and, like, just make the product better, right? Because whatever it is, whatever you're building, each and every time that you're like, no, you're wrong, right, maybe. But, like, it's still a data point. So once you have enough data points, it's time to make a change. So just remember that. This is important.

00:24:41 Brian: Amen to that. I agree. So until next week, we've got another great topic coming up next week. Be sure to tune into this series. We're taking you from creating or having that spark, an idea, all the way down to an exit, whether it's an M&A activity, a public listing, whatever it is. So it's a pretty cool journey that we're taking the audience on here. So make sure you come back. And until then, get to thinking, get to dreaming, and get to building.

00:25:13 VO: Thanks for listening to the Project Wilbur podcast. Make sure you subscribe on Spotify, Apple Music, YouTube, and wherever you listen or watch your favorite podcasts and shows. While you're at it, we'd appreciate a five-star rating on your favorite platforms. Stay in the loop with all things Project Wilbur by visiting projectwilbur.com. For exclusive content and updates, subscribe to our email list and follow us on social media. We can't wait to connect with you. We'll see you next episode.