Tag Archives: market validation

What I Hate About Market Research…

Business Planning, Business Research, , , ,

… is when the research stifles common sense and kills discussion. And I think that happens a lot. For example:analysis

  • Say you did a focus group on packaging colors. The focus group liked the green package, but what you don’t know is that the group was overly influenced by one charismatic person who liked green that day. It didn’t reflect the whole population. But now you’re stuck with green, regardless of what’s really right. And nobody in your group is going to be comfortable suggesting red or blue. After all, the research is done, and the answer is green.
  • You did a customer survey, asking people whether they liked your idea and what they would pay for a subscription. The truth behind the scenes is that the survey went out wrong to a list of people already biased in favor, and since they knew about you and liked you, they overestimated their willingness to pay. So you build the business and launch, and discover, way too late, that people in the real world, spending real money, won’t pay what the people in the survey said they would. And nobody on your team can question the advisability or the pricing “because we did the research.”

So it isn’t that I don’t want information. It’s a matter of information that takes on more certainty than warranted. I like research to be there, used, considered, but taken with healthy skepticism. If it doesn’t seem right, it might not be. Whether you call it research or not.

Does that make sense?

(Image: Adam Radosavljevic/Shutterstock)

Why I Hate Those Huge Market Numbers

Business Planning, Rants, , ,

It happens way too often: entrepreneurs proud of some huge completely unattainable market numbers. They show us billions of dollars. They think that’s a good thing, like it’s important. I hate it.

As an investor, as a business plan contest judge, or as a teacher, I don’t really care how many billions of dollars are spent on this or that or the next thing when I’m reading a business plan. That number is too big. It tells me nothing. Startups don’t reach multi-billion dollar markets.

If it makes you feel better to give me that number in passing, okay, go ahead, but don’t put any emphasis on it. Instead, give me the details on how you’re going to make your sales, and to whom, on the first day, the first quarter, and the first year. Give me granularity.

If you’re a Web-based startup, for example, show me how many unique visitors you think you can get in the beginning, and what you’re using for an estimated conversion rate (buyers to browsers). Show me how much each unique visitor is going to cost you in search engine optimization and pay-per-click search engine expense.

If you’re a restaurant, for example, show me how many chairs and tables lead to what assumptions for first-day, first-month, and first-year meals served, drinks served, and at what average price. Show me how you’re going to bring those people in the door.

I guess what this means is that I like forecasts that build from the details up to the larger numbers.

And I know that I’m in the majority, among people who read business plans, in really disliking the top-down, billions and billions kind of forecasts. When they start talking about getting only a very small percentage of an enormous market, they lose me. Those huge markets don’t split down into millions of pieces.