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So much of building a company happens before you ever earn a dollar of revenue. This phase can feel like so much work, like you’re spinning your wheels and still getting nowhere.
How can you tell whether your startup is making any real progress before people give you money?
There are 3 signals to look out for. Depending on your company and context, these may even be good milestones to target.
1. Have you gotten clear answers to tough questions?
Pre-revenue, every idea you have is based on assumptions. You need to turn those assumptions into questions, and you need to get clear answers to those questions.
For example, “I see this problem that’s really frustrating to me, and here’s how I can solve it” should become “Is this a problem others experience?”
Then you can interview 25 people in your target market about their day-to-day duties, challenges, victories, and what products or services they’re using. Does anyone even mention the problem you had in mind, without you prompting them? Does everyone talk about how big a problem it is?
Getting a clear answer — positive or negative — is incredibly valuable and tells you whether you’re on the right path. If the answer is still unclear after so many customer interviews, you may need to pivot to find a problem that’s big enough to be worth solving.
The simple first step to take is to list every question you have about the desirability, feasibility, and viability of your idea — as well as what assumptions you’re making (e.g. “my experience is the same as everyone else’s”). For instance…
Desirability:
I experience this problem. Do others?
Nothing else exist for this. How are others solving this problem, if at all?
Is this a problem worth solving?
Feasibility:
Do we (the founders) know how to solve this problem?
Can we solve it better than existing solutions?
How would we be different, or stand out in this market?
Viability:
What will it cost us to solve this problem for one person? 10? 1,000?
What are people paying for existing solutions?
What would they be willing to pay for ours?
And so on, for all of your questions. Then begin systematically getting answers to those questions. You’ll likely find that some of your assumptions are wrong, and clarify what business opportunity there really is for your idea.
Sidebar: Sometimes it’s tough to filter what you’re assuming from what’s fact. It can also be difficult to get clear answers from your customer interviews. If you’d like help with this, email [email protected] to talk through it.
2. Have you said “no” to enough things?
Pre-revenue startups are all ideas and opportunities. There’s a thousand things you could do, people you could serve, and visions of what the future might be.
You’ve got to reign that in.
You’ve got to create a minimum sellable product that solves one clear problem for one specific customer type in one specific way. (I’ll have another post on getting to this point.)
This usually means saying “no” to 1,000 other possibilities.
Have you decided what that one “yes” should be?
If so, you’ve made a lot of progress. If you haven’t found that one “yes,” then you need to continue interviewing customers and working through options with your cofounder(s) to nail down what your one thing should be first. You can also do more later after you’ve found initial traction.
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3. What signals are you seeing now that suggest people will pay money later?
Everything is a theory until people pay for it, but there may be things happening today that are good indicators people will pay you tomorrow.
Note: People telling you they like your idea or product is not one of them.
Relevant signals include things you can measure, like:
Daily active users (DAUs) on a free or freemium product
Referrals and introductions to others in your target market
Conversions at the top of your funnel (e.g. downloads or subscribes) that you can nurture towards the bottom of your funnel
Time spent viewing your content, or
Requests for beta access
The important piece for your company is to map how you will turn these signals into actual revenue. E.g. We’ll use a landing page to get 100 requests for early access, run email campaigns and individual outreach when it’s available, and then charge each user $10/mo to join.
Using the OKRs framework can help you break down big ideas into small action steps. I’m happy to help you through this if you like. I’ll have a separate post on OKRs later.
Honorable Mention
One of the most important things for your company is choosing your co-founder(s). This will largely dictate whether you will succeed or fail, and how the next however many years of your life are going to go.
It deserves a post all it’s own, but if you find a person with complementary skills, who you can trust, who you can experience both your lowest and your highest moments with, then your company is starting off on the right track.
You may actually be on the path to success even if people aren’t paying you yet — and in fact it’s crucial for you to check. Asking these 3 big questions and solidifying your founding team will help you do that.
If you are on the right path, great. If not, it’s still early enough that you can pivot and find your way.
Hi, I’m Kenneth Burke. 👋 As a Marketing VP, I led our bootstrapped startup from $0 to $20M and an acquisition. Now I help startup founders achieve product-market fit, so you can remove the guesswork from growth.
I post stories, advice, and frameworks weekly here on #BurkeBits, and share content more often across LinkedIn, TikTok, YouTube, and Instagram. If that sounds interesting, subscribe, email me at [email protected] with your current challenge, and share this with another builder.