A target market, a problem to solve, and people willing to pay for your solution.
Starting a business is relatively easy. Keeping it going and making it a success is hard. I’ve written before about the three rules of starting a successful business:
- Don’t run out of cash.
- Don’t run out of cash.
- Don’t run out of cash.
While this golden principle still applies, there’s more to the story of successful startups than just financial survival.
When launching a startup, you need cash to get your operation up and running. However, the key to sustainable, long-term success is to find your tribe, meet their needs, and do so profitably. Here’s how:
- Find Your Tribe
When you’re a small company, the best strategy is to identify a niche group of people with a specific problem, and who are willing to pay for a solution.
For example, consider a company I worked with that was involved in theatrical licensing. These entrepreneurs discovered that high school teachers face a unique challenge when adapting plays for students, so they decided to build a business to solve that problem. While selling one-act plays may not seem like a large market, it can build enthusiastic fans within a targeted audience and lay the foundation for growth.
If you further analyze the opportunity, you could concentrate on larger or medium-sized schools, gender-specific productions, or other subgroups that align with your offerings. The key is to identify and refine your audience, ensuring your business delivers tailored solutions.
This strategy applies to any sector, including wealth management, software, or services. The more specific your target audience is, the better you can address their needs and turn them into loyal customers.
- Test Your Solution and Iterate
Early-stage founders often get too attached to their initial ideas. However, the reality is that your first concept may be wrong. Instead of assuming you know what customers want, approach the market with an open mind and gather data.
I met a software entrepreneur who created realistic user interfaces to understand his customers’ needs. However, instead of immediately building a complete product, he tested a demo with potential customers, gathering valuable feedback on what worked and what didn’t. Once they validate the demand, they will develop their product roadmap.
Your job is to refine your offering continuously based on customer input. Assumptions can be dangerous—unless you have data to support your position, assume you’re wrong and adjust accordingly.
This philosophy aligns with the principles of The Lean Startup—fail fast, test solutions quickly, and iterate based on honest customer feedback. The advantage of this approach is that you don’t need as much external capital and can build a product while refining it based on actual market demand.
Remember: Customer surveys alone aren’t enough. Although people may say they like your idea, their words don’t carry actual weight unless they’re willing to open their wallets. The moment they pay, you have validation that your solution is genuinely needed.
- Ensure Customers Will Pay
Revenue is the lifeblood of any business, yet many early-stage founders hesitate to charge for their products—especially if they are still evolving and finding ways to differentiate themselves in the market.
One financial services company I worked with took pride in being different from big banks and avoiding fees at all costs. However, while customers appreciated the product, they weren’t willing to pay for it. Ultimately, the company failed because it couldn’t generate enough revenue to sustain its operations.
If you’re building something people genuinely need, they should be willing to pay for it—before it even exists. Some startups successfully presell their products months before launch, ensuring there’s actual demand for their solutions. If people hesitate to pay, it’s a red flag that your solution may not be as valuable as you think.
The Three Essential Questions
Focusing on your tribe, testing your offering, and ensuring customers are willing to pay are the keys to a successful and sustainable startup.
To validate your startup idea, ask yourself these three questions:
- Who is my target audience with a real problem?
- Do I have a product that effectively solves that problem?
- Will people pay for it?
You’re on the right track if you can confidently answer “yes” to all three.
