Defining a Market is Most Important in a Startup

By Ross Miller, Director
Illinois Small Business Development Center

I have always heard that access to capital is what startups need most. Frac.tl recently researched almost 200 failed startups to define what caused their failure. The majority (65%) of the reasons cited by founders were about the lack of a viable and scalable business models. “Business Model Not Viable”, “Not Enough Traction”, “No Market Need”, and “Customer Development Issues” are all issues addressed by business models and customer validation. The issue is not about needing more money; it’s about developing customers and a business that can scale large enough.

I hear this more and more from angel investors and see it in the media: the time has passed when a good business plan and a cool app will get you large investor dollars. Investors want to see customers, subscribers or users of the product first. Customers want to see a product or service that addresses their needs and provides benefits.

How can a company develop successfully? Start with the problem, identify the customer, develop the solution, validate the solution with the target customers, and build a scalable business model. The perfect tool to start with is the business model canvas and the value proposition canvas. These tools are the basis for identifying your best guesses about what is important in the decision making process for your target customers. Then customer validation must be done to prove or disprove your guesses. Actually talking to the target customers face-to-face will give you the opportunity to understand what is important. Customer validation is the step that most entrepreneurs will skip. It is much easier to just solve the problem, put that product out in the market and wait for the money to roll in. The difficulty is most of the time the target customers will not identify with the problem or with the solution. That is why taking the time to talk with target customers before launching the business will help develop a better solution.

We are starting a new business accelerator which will take teams through this customer validation and business model development process. Over the course of 7 weeks, we will teach 10 teams of entrepreneurs how to interview and evaluate the feedback they get from over a 100 interviews with target customers. The teams will finish with a better understanding of what customers want and how to demonstrate the benefits to the market. Be part of the inaugural course by applying today at www.bradley.edu/bravelaunch. It is free to apply and applications are due by August 22nd. Accepted teams (2 to 4 members) will pay $500 for the program, which pays for all meals, refreshments, and materials for all 10 sessions over the 7 weeks. If you have any questions, please call 309-677-2992.