The Worst Mistake Startups Make (And How to Avoid It)

You’ve had an idea, you think it’s a good one, and you’ve turned it into a business.

To you, it’s obvious. This could change everything! And the friends and colleagues you’ve shared your idea with all agree. “Sounds like a great idea,” they say.

The problem is none of you are the customers who have to pay for it.

Your feedback loop is biased, probably irrelevant, and that causes you to eagerly invest more in something that may be a waste.

This is the #1 mistake that even experienced entrepreneurs make: Assuming your idea is good even though no one actually wants to pay for it.

In fact, perennially, this shows up as one of the leading causes of startup failures. It gets labeled as “no market need,” “failure to pivot,” “poor pricing,” “lack of demand,” etc., but all of it means you’re trying to sell something people don’t want to buy.

The root issue is you’re making significant bets based on assumptions without talking to real customers. But there’s hope.

There are three stages you can (and should) work through to test your assumptions, pull yourself out of this mistake before it’s too late, and build a business that matters.

Who do you currently think is your target customer? Reach out to them. Ask your network for introductions to people who fit that description. Go to (free) meetups to start conversations.

What you need is unbiased feedback, even feedback that skews negative or defensive from people who don’t want to be sold to. If you have an open mind, those 25+ conversations will teach you whether:

I’ll have a separate post on how to have good customer conversations, but the fast and short of it is you need to complete the “The Mom Test” — get candid feedback from people who aren’t incentivized to protect your feelings.

Do this ASAP to keep from wasting tons of time and money building something no one wants.

You’ve learned what people will pay for, you’ve built it, and now you have to sell it.

Three lessons typically come out of this stage. First, you learn that everyone isn’t a potential customer. Even within your addressable market, only a small percentage will have the characteristics to be a successful customer.

Second, you learn that the product does not actually sell itself. What’s obvious to you is not obvious to the other person. You still have to help them see and feel and prioritize that problem so they purchase your product.

And third, along the way, you tend to learn what’s actually valuable to potential customers — what features, service, and support you have to provide to make “willingness to pay” tangible rather than theoretical.

This is a tough but necessary stage to go through. The good news is getting through it brings you one giant step closer to creating a sustainable, successful company.

Welcome to product-market fit (PMF) territory, where people are willing to pay for your creation, and they’re delighted to keep paying for it. Here’s where you want to get to:

If you have a subscription product, customers keep using and paying for it each month. If you have a non-subscription product (food, clothes), customers come back to buy more. If you have a one-time purchase product (services, equipment), your customers actively tell others about their positive experience.

Not seeing this? You need to go back to the drawing board and reevaluate what you’re selling. These metrics are how you determine if what you’re providing is truly valuable. Even if you’re getting customers, you’ve got to have the rest of this to build a real business — otherwise you’ll never make a profit.

“That which get measured improves.”

Each company’s measurement for whether there’s authentic demand for their product (another post on that coming later) will be unique. It should also evolve as you improve your offering based on customer feedback and other conversations.

For instance, a monthly subscription service may start by targeting 95% monthly retention. An enterprise software may start by targeting time-to-value within 1 month of implementation, or 10 logins per user in a month. A one-time service may measure product-market fit in customer satisfaction scores, like achieving a net promoter score of 30 or higher.

Ultimately you’ll want each of those numbers to be much higher, but you’ve got to start somewhere.

Measurement helps you avoid the mistake of assuming what you offer is valuable, but you have to make sure you’re measuring the right thing. This is something I can help you with if you like (just ask).

You need all three of these — something that solves a problem people are willing to pay for, actual purchases, and retention or customer referrals — to know that your startup idea is a viable business.

This is a process.

Be willing to take the time it deserves to get out of your bubble, test your assumptions, and talk to people.

You can start making progress today with one simple step: Reach out to 10 people you know, tell them what kind of potential customers you’re trying to meet, and ask them for introductions so you can start having these crucial customer conversations.

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.