1. Who, Specifically, Is Your Bullseye Customer?
Last week a CEO called me about commercializing an internal tool their services company built to accelerate their own operations. The tool was providing them substantial internal value – would someone pay for it. Unlike many teams in a similar spot – they don’t need to commercialize. They could keep this internal tool as a competitive advantage.
The strategic question is: Is it worth even more sold externally, even after factoring in the distinct marketing, sales, and support costs.
So, who specifically will pay for this?
Not a segment. Not an industry. Which executive — CEO, CFO, CMO, CTO, COO — inside what specific kind of company, with what specific persistent frustration?
The CEO has a waiting list of 50 potential customers, names and emails. A solid starting point. Now, let’s get them on the phone and ask:
2. What’s Their Problem Worth?
After my Ask-Me-Anything about Pricing session at MinneBar20, a founder walked me through his new warehouse space optimization software. His last two roles: optimizing warehouse space, manually, for his employers. He knows the job, he knows when it goes wrong, and he knows when it goes right. Importantly, he knows what his former employers paid him.
Which means he has a data point few pre-revenue founders have, he already knows what warehouse owners are willing to pay for improved optimization: his past annual salary.
The total salary was for someone to be responsible for the warehouse optimization full-time. The value delivery model determines how much of the customer value you can credibly claim (I talked about this in #73 Nobody Wants to Use Your Software). Value delivery options run the spectrum of hands-on professional service contractually liable to completely hands-off self-service SaaS with multiple points between. Each option capturing a different share of the total value and placing a different operational burden back on the customer. Three delivery models, three price points, three distinct packages, all derived from the same value stack, all testable in early conversations.
Most founders don’t have two prior roles living inside their customer’s job. They’re building for a customer they’ve observed but haven’t been themselves. That’s fine. We can still be price before the product’s released, or even exist. It means having a 1-on-1 conversation with the potential customers (e.g. the 50 on the waitlist).
The question is whether the problem is urgent enough for the customer to take that conversation.
If they won’t take the call, the answer is ‘Not urgent’. If the incumbent solution works well enough, they wouldn’t be looking and talking. The willingness to talk is itself a demand signal: the frustration is real and whatever they’re doing today is failing in some way.
Start with ten conversations. Small enough to be achievable in under two weeks. Large enough to find patterns, early segmentation, and likely one or two early sales.
Once you have the conversation, build the Value Stack from what you heard. List every discrete kind of value solving this problem would deliver over the next year for this specific buyer at this specific organization:
- Cost reduction
- Revenue increase
- Marketshare increase
- Enterprise value increase
- Risk mitigation
- Time savings
- Career milestone for them personally
Each is quantifiable. Not precisely, but directionally and proportionally.
Add them up. Ten percent of the total is your starting price.
3. Is It Enough?
Now make a decision.
- Does the starting price support the business you want to build?
- How many of these buyers would need to say yes this year for this to be worth your while?
- Do you have access to that many?
- Can you reach them?
If the Napkin Math works, keep going. If it doesn’t, stop and reassess. It won’t get easier.
A couple years back, a client hired me to find initial demand for a new product they were considering. After three rounds of customer outreach had a waitlist of 50 interested people. But, my client didn’t want to sell to any of them – they were all too small. So, they shuttered the project. A hard and awkward decision – yes. Cheaper than maintaining a product for customers you don’t actually want – also yes.