This chapter is about "Audience discovery", the first step of your embedded entrepreneurial journey.
This starts with a great example, museums, and gift shops. You rarely find a gift shop out of museums. That's not a coincidence, museums have figured it out, they have found their audience and they sell them something they need.
Yet so many entrepreneurs try to find the "best business idea", make it a reality, and build a million-dollar business around it. The reason is that as engineers, or marketers, we are biased towards products. We think product first.
Also, we are afraid of sharing our ideas too soon and being ridiculed. Thinking product-first and fearing being ridiculed, leads us to a logical fallacy: Because we feel the need for a specific thing others will feel the same way. This is the wrong way around.
The "multi-stage validation" approach:
- Explore which audiences you want to serve
- Observe and detect their most critical problem
- Envision a solution that solves their problem
- Think of the product
Your idea comes last, it's the result of three validation steps (not genius). The goal is to find a solution to a critical problem and help your audience that way.
There's a five-stage guideline to exploring audiences:
- Awareness: Think of the possible audiences
- Affinity: Find out how much you care about them
- Opportunity: Find their interesting problems
- Appreciation: Are they willing to pay?
- Size: Can the market sustain your business?
The first step is to find your audience, you don't have to find the communities they're active in yet. Try to make a list of niches or tribes of people that share an interest. The idea is to write down as many audiences as you can and try to open your mind.
There are great ideas in the book where you can be looking for those audiences.
Find an audience that you care about. There are a few questions which you will answer with a 0-5 score, and sort the audiences based on the average score. You might notice clusters appear around your own areas of interest and audiences that share a passion or mission.
You can find the list of questions and Arvid's audiences as an example in the book.
For the shortlisted audiences, do some research by joining their communities and identifying their interesting problems. Find out if you can reliably sustain a business. Score their problems based on how exciting the problem space is to you.
Again there's a good example in the book where you can read about your audiences' problems and a score sheet of the previously mentioned audience list.
Find out how is each audience willing to pay for products.
- Their purchasing agency: Can your audience buy their tools themselves? How easy is it to facilitate a sale to them?
- Budget scope: Look up the prices of the existing services they use
Give a score of 0-5 to each audience based that you think will be paying you based on how many products and services they're already paying for and are ready to pay for.
Find an audience with size within the sweet spot, large enough to sustain your business and small enough not to attract competitors.
That number depends on how big the business has to be to support you, it differs for each founder. Double that to make room for errors.
Do the math based on how many people are in the audience group, what's the percentage of them you would think are willing to pay and how much is the product/service typically cost for them.
If the number is smaller than what you need to sustain your business, try to include more people in that audience group, make sure there are not too many customers in that audience group as that attracts big competitors and as a bootstrap founder you won't have enough resources to go against them.
Again give a score 0-5, 0 being either too big or too small of an audience and 5 being the perfectly sized group.
Analyzing the result
Once you have gathered enough information about your audiences, and you can give them a final score which is the average of each aspect, and sort the audiences based on that. Now it's time to deep-dive into the audience with the best score and find their critical problems.
This way you will have a backlog of also interesting audiences which you can use in the future if you wanted to start another business.
That's it for this chapter, the book is full of valuable information about how to do this research which I recommend you to look at, let me know what you think.