The #1 reason your small business will fail

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The #1 reason your company will fail is that you’re not talking with Cookie Monster. Be patient and I’ll explain that. As entrepreneurs, we are visionaries who see into the future. It’s thrilling to know that we’re going to change the world. We are problem solvers, and our best companies tackle the biggest problems. Unfortunately, starting a company is an uphill battle. Your competitors have more money, more brand power, and more connections. When you bootstrap a business, you need to focus your business towards goals where the leverage is highest. Building a solution to a problem is not the best you can do. You can build a solution for a customer.

Ha! That change of words seems more glib than insightful, but see if you can pass this challenge: Name the next five customers your business will sell to. If you can’t, then you’re solving a problem that’s too abstract. Your next five customers should even be part of how you introduce your business to others. Here’s an example from the business I run, Hard Data Factory. I used to describe my company like this:

Hard Data Factory uses a doubly patented technology to gather lists of events from public websites. In so doing, we’ve created the world’s largest calendar of technology and business networking events, and we’ll get sponsors to plonk their logo onto our calendar and pay us.

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Now here’s the same company, described with customer names.

Tech-savvy customers like MIT, Microsoft, The New York Times Business Section, Foley Hoag, and Polaris Ventures need more visibility into the entrepreneur community. That’s why they sponsor so many events. Now we’ve built a way for them to get seen by entrepreneurs every day, in a way that makes it easy for techies and businesspeople to click and learn more: a website and mobile app that’s a giant calendar of entrepreneur events around major US cities. Ultimately we hope to make a nationwide deal with The Economist or Best Buy.

Did you find it clearer the second time? That’s because the vision was clearer. Forcing yourself to think about specific customers grounds the solution that you’re building. You should even be speaking with these organizations, to get their feedback. Most small companies don’t start the sales cycle until they’ve built a product, so that they have something to show. But you should start immediately, when you have nothing but an idea. Don’t sell the product, sell the PowerPoint. You needn’t be ashamed that all you have is a mockup. Just say, “If I build this, will you come?” Engaging customers early brings you many benefits:

  • — Gets your foot in the door. You don’t need to engage with a VIP decision-maker early on. Ordinary employees of your future customer can steer you the right way and their attention is easier to get.
  • — Steers your product development straight, saving you time and money.
  • — Creates a relationship. As you make promises and deliver, potential customers get to know and trust you.
  • — Money may surprise you. If you’re lucky, a customer will pay your development costs.

Wow! I like that last bullet. How can you get a customer to pay your bills when you don’t even have a product? One pre-sale could fund your entire company, and you wouldn’t have to deal with pesky investors. (Investors sometimes remind me of Elmer Fudd or Yosemite Sam, running around and poking me like I’m Bugs Bunny.)

Here’s a hint. Cookies aren’t worth much to most people. If you make cookies, you need to find your Cookie Monster. Find that customer who will pay anything for what you do. How can you do that? It’s a secret I’ll give you in my next post. Or come to one of my lectures, such as my talk to the EntreTech Forum, tonight at 6:30pm at the Microsoft NERD Center in Cambridge.

Johnny Monsarrat is an MIT alumnus and the founder of Turbine, Inc., a videogame company acquired by Warner Brothers for $160 million. He now runs Hard Data Factory. He also runs a Boston arts calendar at Events INSIDER and @OddBostonEvents.