Early momentum is important with new ventures. Seeing early positive results, even minor, helps you stay motivated to continue. I’ve witnessed founders grind towards a new product launch, only to lose steam because things didn’t go like they had hoped.
For example, a few weeks ago I was speaking to a founder that was about to launch a new product. The product had originally been designed for large companies and had been received well. So, he believed a natural market expansion was to offer the same product to smaller companies. The product launch didn’t go well. With larger companies he was seeing registrations of 50+ people per session. That dropped to less than ten when he targeted smaller companies.
The mistake they made is the biggest mistake that most founders make - poorly defined target markets.
In the example I gave, their mistake was assuming that because they were attacking companies in the same industry that their pain points were the same. You can have product market fit in one segment of a target market and miss it in another segment.
A target market isn’t defined by a singular input, like an industry. It’s defined by a complex set of inputs that all come together to form a well-defined target market. Being well-defined allows you to know that target market intimately and develop go-to-market strategies.
Then there are those founders and companies that skip target market research altogether.
There are plenty of other mistakes that founders make. I can raise my hand ✋ and admit that at some point in time I’ve probably made them all. Side note - those weren’t failures, just mistakes. Mistakes that taught me valuable lessons.
Some of those mistakes include:
- Lack of team alignment - I was in a mastermind group the other day and one professional was asking the group for help in getting various stakeholders aligned. Their lack of unified alignment was derailing the project they were working on badly.
- Lack of distribution - Distribution matters, a lot. Having existing distribution at product launch is why established companies often have certain advantages over new businesses.
- Over reliance of tech - I talked to a founder once that had 20+ software solutions their business was leveraging. They were pre-revenue. Using technology to solve fundamental misses in product design and models can be costly.
- No measurement - Founders can get overly focused on quantitative goals, but not having key performance indicators (KPIs) established leaves you exposed like a vehicle without a gas tank indicator.
- Putting growth above profitability - This will be polarizing. There are some models where growth is paramount. But, I believe that growth at the expense of profitability is a mistake. I’ve seen too many businesses succumb to the pressures of insufficient cashflow because they were trying to grow rapidly. In fact, just last week I was working with a temporary staffing agency that was on the verge of bankruptcy because their cashflow wasn’t keeping pace with their growth. You might think that going from $6M to $18M in three years is a good thing. It isn’t always.
- Non-founder led sales - Particularly early in a business, its key that the founder lead sales efforts. Unless the founder is completely inept at customer interactions.
- No competitors - I get this about 25% of the time that I’m talking to a prospect that wants to work with me. They believe they have a genuinely unique idea and that there are zero competitors they should be concerned about. McDonalds is competing with your favorite steakhouse for your dollars. They may not be direct competitors, but they are indirect competitors.
Any one of the above mistakes can cost you. In aggregate they will certainly sink your business. I still believe that a poorly defined target market is the worst offense. To avoid making that mistake slow down. Do more target market research on the front end, before you even start building out your product. The old ways of launching a product was Design - Build - Validate.
The new way is Validate - Design - Build.
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