Validation, CALIBRATION, then Scale!

Series: What start-ups critically need - that mature companies don't.

In a prior post, we discussed the Validation phase of managing start-up risk. Once a product or service is “validated” you know one or more customer segments who are willing to pay money for your product or service, you probably have a good sense of its value to them, and the price(s) they are willing to pay. In the validation phase, you develop a strong sense of the market for your product/service and given your pricing and your unit economics, you may be able to determine how much money is to be made by pursuing this market opportunity (by further investing in it). In short you can place a value on the (expected) revenue stream(s) to be generated known as the valuation of your market opportunity. Then using your unit economics, you can justify an upfront investment to create the incremental, predictable, and hopefully repeatable in-bound revenue streams.

Now you need to calibrate your product or service

To prepare for repeatable and predictable growth, you’ll want to calibrate your business model by providing your products and services to a representative number of customers and LISTEN to their feedback. This is a good time to consider giving your product/service away or discounting it again to get the valuable feedback you need to “dial-in” your assumptions about your product, your customers and your business model.

In the technology world we call these customers your “beta” customers using a “beta” product. In other industries they may describe this phase as a “Pilot” with “charter” customers. In the marketing world they may conduct A/B tests of ads to calibrate messaging. There are many parts of your product or service and your acquisition channel(s) to calibrate using testing to increase the confidence of your business model and its thesis. You can test your product or service across a number of customer segments and customer messaging to more deeply understand their needs, their emotions, and their willingness to pay. Read further for good examples to further understand the calibration phase.