10 Crucial Questions for B2B Startup Founders: A Workshop at Business of Software 2009

Published by Martin Kleppmann on 18 Nov 2009.

I have a confession to make. We started a company, developed a product and got hundreds of people using it – but we still don’t know where the product is actually going.

Ok, the elevator pitch is pretty straightforward: Go Test It helps web developers to test automatically whether their site works correctly in different browsers. The technology works well and lots of people are using it successfully.

But how much does that really tell us? Is it really the web developers who need us, or should we aim at the testers, the user experience managers, the web content administrators, or the sysadmins? Are those people in big enterprises, small web consultancies or are they freelancers? Do they use PHP, Ruby on Rails or ASP.NET, and which JavaScript framework to they use? Do they have a dedicated QA team or do the developers do the testing themselves? Does their work have to be signed off by a client or are they doing it for themselves? How do they currently test their application, and how would we fit into their workflow? Do they develop websites for a particular industry, e.g. education, finance or healthcare? Do they need a big consultancy contract, do they require the product to be customised, or do they just want a straightforward self-service sign-up over the web?

It is simply not possible to serve all different market segments and niches at the same time. You’ve got to choose: resources are limited, and you’ve got to pick your battles wisely. But I am guilty of not properly thinking through the segmentation and figuring out the best way of targeting a particular niche.

For the Business of Software 2009, Joel Spolsky organised three startup workshops aimed at covering the main areas of difficulty faced by software and web startups: marketing, product pricing, and finding your first 100 customers. Exactly those areas in which I am guilty of negligence.

Neil Davidson and Simon Galbraith of Red Gate were in charge of the “finding your first customers” workshop, and they asked me to help them design the workshop. Since my startup is one of the companies in Red Gate’s “accidental incubator”, and it’s at the stage of finding the first 100 paying customers right now, Neil and Simon suggested that we use Go Test It as a case study for the workshop.

What we wanted to do is to ask a number of key questions about the market positioning of a product and aspects of the sales process – crucial questions for startup founders, but also questions which are easy to ignore if you focus too much on the technology. By discussing a case study in the workshop, the participants could practise thinking about and answering these questions in a fresh and unfamiliar context, and develop tools and techniques which they can apply in their own companies. We chose questions that are relevant to any early-stage B2B software company.

The workshops worked out really well, and so we would like to release the materials we created for this workshop under a Creative Commons license and make them available to startups everywhere. You can download the worksheet (PDF). I have also written up how we structured the workshop and what we learnt in the process.

Below I have added some notes to clarify what we mean with each of the questions. I give several illustrative answers for each, but please remember that they are not multiple-choice questions. The whole point of the exercise is that you come up with your own answers!

1. Sales objective: what are you hoping to get out of your customers?

   At first sight this seems a pointless question: of course you want your customers’ money! However, think about it a bit harder. Maybe getting some great case studies and testimonials is worth even more than the money, because they will help attract more of the right sort of customers. Maybe you really want feedback to help improve the product (feedback from paying customers is worth much more than feedback from free-riding users, because paying customers really care!), or maybe you want to learn about the sales process – what does your customer’s org chart look like, what are their key external relationships, and who are the key people you need to get onto your side? The things you can learn from a customer are potentially worth a lot more than the cash they hand over to you.

2. What is the pain point addressed by the product?

   A standard question, but worth revisiting from time to time, because the answer may not be as obvious as you think. In the case of Go Test It, the obvious answer is “needing to make sure that the site works in all browsers”. But ask yourself: why does it need to work in all browsers? To provide a good experience to all users, so that they continue using your site even if they are using an obscure or buggy browser? Or maybe it’s a matter of meeting a compatibility warranty given to a client, or passing certain acceptance tests? Is it a tool for people to cover their back within their organisation?

   Or maybe the customers currently do manual cross-browser testing, and their real pain point is actually the release cycle duration (very slow in manual testing), or the staff requirement (manual testing is too expensive), or staff motivation and turnover (manual testing is repetitive and boring, leading to low job satisfaction)?

3. What is the sales process?

   Startups often worry a lot about marketing (figuring out who to target and how to get on their radar), but neglect the following step: now that you’ve got people’s interest, how do you convert them into paying customers? Giving them a form to enter their credit card number is well and good, but what about people who trial the product but never quite get round to signing up to the paid version? Will some follow-up emails be sufficient, or do you need telesales people to get on the phone and talk to the customers? Do the customers require help importing their data into the system or even an integration project? Maybe you need to give demos or seminars at customers’ premises, or even learn to play golf?

4. What do you want your marketing to achieve, and how could you measure it?

   Your end goal is probably “get lots of paying customers”, but there are various possible intermediate goals along the way. Depending on your strategy, different things may be important. Do you want to maximise the number of free trials to which people sign up, or the number of newsletter signups, the number of Twitter followers or community members? Or would you rather focus on a small number of customers and optimise for high-quality leads and maximise level of usage? Do you want to go “viral” and maximise the number of referrals from each customer while minimising the time to referral?

   Intangible but maybe equally important aspects of marketing might be promoting a positive brand image, building a good reputation, and encouraging users to become passionate evangelists for the product. You might still try to measure these kinds of things by monitoring Twitter for keywords and informal surveys, but they are difficult to measure quantitatively. Whatever you want your marketing to achieve, remember that your resources are limited, and hence you should probably focus on two or three achievable and measurable goals.

5. What will you do to achieve your marketing goals?

   This is a question about marketing channels: how are you going to get noticed? Social media and online communities, comprising blogs, Twitter, LinkedIn, Facebook etc. are probably the most hyped these days, and for some market segments they are indeed an excellent marketing channel. But you could also consider networking in the right circles, PR (including connecting with influential bloggers and getting them to write about you), attending conferences and trade shows, creating publicity stunts, competitions and much more. Hey, even advertising isn’t dead yet.

6. How will you allocate money and time over the next 3 months?

   This does not have to be a detailed budget, but a quick sketch of a pie chart will help you to think consciously about your priorities and make them actionable. How much of your resources should be allocated to engineering, sales activities, various marketing channels, learning from customers, etc.?

7. How will you price the product?

   It’s easy for engineers like me to spend a lot of time thinking about pricing, because it’s more within our engineering comfort zone than most of the other questions on this worksheet. Yes, it’s important (that’s why we included it), but only in conjunction with the other answers. This is our only multiple-choice question, encouraging you to answer it quickly and move on.

   Do you want to publish the pricing on the website for everybody to see, or do you want prospective customers to contact you for a quote? Will you have a fixed price list, or will you negotiate pricing individually per customer? And the most tricky: if you can’t do flat-rate pricing, how will you split pricing into bands? By number of users? By length of tests? By level of usage? By availability of features?

8. What will you change about the product?

   Once you have settled on a particular market segment and strategy, certain limitations in the product will become apparent: maybe some additional features are needed, maybe the technology needs to be presented differently in order to fit with the users’ point of view, maybe some unnecessary features can be removed. The important point is that product changes should be informed by the market, not just a preconception of what users will want.

9. Top 3 things you must do in the next 3 months?

   This could be anything: marketing, sales or engineering activities. The key is just that these tasks must be actionable: it must be clear how they can be done and they must be feasible now. “Build a community of 1,000 people working in this field” is not actionable, but “set up a Facebook page, blog about it and invite all of our friends to it” is.

10. If your users are superheroes, what is written on their T-shirts?

    As a final question, remember that users are human beings too. They don’t particularly care about your product as such, but they probably care about things like doing a good job, looking good with their peers or boss, having a sense of belonging, getting to go home early, and making a difference. Your product should turn your users into superheroes: give them exceptional powers which make them proud! So proud that they will want to wear your product motto on their T-shirt. What will it say? (Hat tip to Kathy Sierra, inspiration for this question.)

If you can answer all of those, you will have covered a lot of ground and will have a pretty good idea of how your product fits into a particular market segment. And in case that wasn’t enough, here are three bonus questions from our drafts which didn’t make it into our final worksheet:

11. Which key factors determine whether a potential customer will convert?

    This question complements the sales process (question 3 above). If the sales process is about the actions you can take to convert interested people into paying customers, then this is about setting the right environment for conversions. What do customers care about? Is it the ease of integration with their workflow, the user experience, the amount of learning required, the level of support, references from other customers, key features, integration with systems they already use, reassurance that your company is not going to disappear overnight, or anything else?

12. What underlying need is satisfied by the product?

    We have already talked about the pain point above (question 2), which defines why there is a need for your product. However it can be insightful to look behind the pain point and figure out why it exists: the "need behind the need" in the words of Paul Kenny. When a customer buys this product, are they really buying reassurance (security, peace of mind, covering their back)? Or are they buying ego (competitive advantage, ability to overcome difficult problems)? Are they interested in convenience (making their life easier), saving money or reducing risk? This underlying need should determine the light in which you present your product and how you pitch it.

13. What would you consider to be success, and how would you decide whether to abandon the project?

    This is an interesting one: not many people talk about criteria for success and failure. Usually success is unbounded -- you always feel like you could do better, no matter how well you are doing. And failure is something that is not talked about, as if merely contemplating it would bring about a jinx or induce an unwanted pessimistic vibe. However, if you have a quantitative criterion for deciding when to cut your losses, you avoid giving up too early just because you're feeling down.

With all these questions, keep a few principles in mind:

• Resources are limited, so you should focus on the things which are likely to be most useful.
• “Just try it out” and “talk to our users” should be part of any strategy, but they are not strategies in themselves. You’ve got to know what you are looking for and what questions to ask the customer.
• Argue why the actions you chose are the most appropriate, given the product, the market and any constraints.

Download the worksheet (PDF) and an example we filled in (a contrived example based on the fast food industry – not model answers, just to illustrate the kind of answers we’re looking for). Please also see my separate post on how we ran the workshop.

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Photo credit: John of Austin on Flickr; Creative Commons license.

Update (2009-12-18): Added scanned example worksheet.