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Lessons Learned

The 3 Questions Every New Startup Has To Answer (In This Order)

You may think you're iterating, but you might be putting the cart before the horse.

The 3 Questions Every New Startup Has To Answer (In This Order)
[Photo: Everett Collection via Shutterstock]

At some point, most entrepreneurs face what seems like a final impossibility—one roadblock so big that there's nowhere left to go. But in the startup world especially, appearances can be deceiving. Sure, the sunk-cost fallacy is real, but so is the force of conviction. During a startup's early stages, one of the most effective routes around seemingly insurmountable obstacles is to willfully ignore how difficult surmounting them will be and instead focus on taking small, practical steps forward.

How, though? In my own experience, I've found that you never get past one challenge by making a single change—it takes three. By tackling one progression point at a time, it is easier to move through the go-to-market process in particular without getting deterred or derailed. To do it, every new startup needs to answer these three basic questions.

1. Does It Work?

Whether you are providing a product, service, or solution, it goes without saying that you need to make sure it works properly. This bears repeating, though, because many startups tight on funds try to launch too early, believing that they'll just gather insights and iterate from there. Too often, that otherwise viable strategy becomes an excuse for shirking due diligence. You may refine your product later, but you need to focus on making it work before you can worry about how it'll be accepted in the market or draft a strategy to sell it. No one will buy it if it doesn’t work—consistently and well.

At SteadyServ, my startup that offers data on draft beer inventories, we knew we had to get a sensor to sit at the bottom of a keg to measure real-time consumption levels, then beam it into the cloud so retailers could monitor it through an app. We could have focused our time right away on getting the data to sync up and fuss with the UX of the app, but before we could tackle any of this, we had to build the sensor itself—which took more than a year. Without solid hardware, we had nothing.

2. Do Your Customers Believe In You?

It works—congratulations! It's only now that you should start to focus on why someone's going to buy what you've built. What value does it add to their business or lifestyle? Does your customer believe that you'll deliver that value consistently? What reasons might they have to doubt that whatever you offer is something they actually need or be skeptical that you can provide it reliably? If you're offering data, for example, concentrate on the accuracy and what insights your data provide—not just on the fact that you deliver them.

This is the phase for attracting and retaining actual customers. They can be unpaid beta users if that works in your model. The key, at any rate, is to demonstrate that you can show ongoing value—not just create it once. Once you proved this using a controlled group, you can take what you've learned from that case study and expand to more customers accordingly.

3. Have You Established A New Standard?

People didn’t believe in an online marketplace with dynamic pricing before Amazon came along, and now it's the standard in e-commerce. For your business to succeed, people must accept that what you're presenting will be the new way of doing business—the "new normal."

For many early-stage startups, that's alternately a grand ambition or a bar set too high. But it needs to be baked into your thinking as soon as you start acquiring customers. Why? Because customers are less likely to adopt a new technology or way of doing business if they don’t believe that what you're offering is where the industry is heading. They want to be on the front end of a new standard—not the first to try something that might not gain traction, then have to give it up after spending money on it.

The most important thing to remember is that you can't start with phase two or three without perfecting phase one first. Trying to do that will lead to lost resources, time, and talent when you realize you have to go backwards to fix something you rushed over, got wrong, or overlooked entirely.

By focusing on answering each of these fundamental questions—in order—you can move past huge obstacles methodically, bringing small wins to your team and business, and ensuring your success in the process.

Steve Hershberger is the cofounder and CEO of SteadyServ Technologies, a data-as-a-service company that delivers real-time performance intelligence on draft beer consumption and inventory.

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