Startup Sales: Framework for Identifying a First Market Segment to Attack For Pre-revenue and early revenue companies
For many entrepreneurs, unless you pick the right first market and the right people to engage with, you won't be able to generate the traction you need to either attract outside capital or produce capital on your own to finance your startup's growth.
Hence, the way you approach and determine where to attack first will decide whether your startup gets off the ground or crashes and burns before it even gets started.
This framework is designed to help you determine where your best first market opportunities lay.
1. Identify a segment which will be quickest to embrace your offering. Time matters, there is limited time and money available for most startups.
The goal is to create a beachhead that will generate early momentum, speed your learning, and create reference points for other prospects as well as show your investors or potential investors that you are gaining traction.
In this first phase, revenue is secondary.
2. Understand that this process is about identifying a market segment, getting launched, and not about conquering the broad market.
For example, if the insurance market is a target, which segment of the insurance market has the attributes of #2 above? This endeavor is about finding a target market segment of 100 prospects, not 5,000.
3. Find a problem that needs solving now, and understand the problem deeply from the customer's perspective.
To gain momentum, you need to secure deals quickly; therefore, within your first market, you must be addressing a problem that needs solving now. Hence you need to understand deeply the problem your offering solves from the customer's perspective. Ensure you are solving a real and critical business issue (CBI), and it is causing significant pain, or the return is so high to the point that it needs to be resolved now. (e.g., significant measurable ROI, need the solution to keep the company afloat, need it to keep decision-makers job, etc.).
Critical to attaining this understanding is directly observing your customers struggle with the problem. Make sure to understand the complete problem and the stakeholders who own it. If there is a part of the problem that your solution has a dependency, you must find partners or other ways to address this as part of your whole product solution.
4. Because time matters, The decision-maker that makes the buying decision must be easy to identify and reach and have the authority and money to purchase now or can get the money to spend now.
This is a key gating point in finding the first market to attack. If you cannot reach the decision-maker quickly and easily, nothing else matters because you will be unable to capture the business you need to create momentum and demonstrate success.
5. There must be a significant number of entities within the identified segment that have the same problem. This will highlight if this segment is big enough and to be targeted efficiently.
6. Find market segments where like buyers in the segment talk to each other, as these buyers can be your least expensive and best "salespeople."
7. Do not let price be a barrier. Be flexible on pricing for the first set of customers in the target market segment.
To create quicker momentum, position your pricing to make it easy to get to "yes." As you get more customers, test different pricing approaches/levels to identify the pricing model best balancing the customer's view of excellent value received and your company's financial results.
Written by Tim Bates
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