An entrepreneur describes his idea and then asks “Do you think people would pay for it?”. It’s practically implied in the question that “people” is a single homogeneous entity. The answer they are looking for is “yes – people would pay for that”, or “no – people won’t pay for that”. The entrepreneur might ask 10, even 50 people this question before deciding if the idea has merit.
Fundamentally, for ANY product or startup idea, there is someone who will pay it. People are just that diverse. We come from different backgrounds. We have different financial resources. We have different hobbies. We have different value systems. It is highly likely that somewhere out there, some group of people that are faced with the problem your product solves, have been unsuccessfully looking for a solution and are willing to pay you real $$ for your product. Just consider the $14,000 coffee machines, and $10,000 scooters. There are markets for these items. That doesn’t make them good business ventures though.
The right question to ask, is more complicated. “Are there enough people that would pay for my product, and do I have the ability to reach them cost effectively?” Not as simple to answer. This is why understanding your total addressable market size is so important. It’s also why you want to really understand your customer acquisition cost.
Things are never as black and white as we like to make them seem, but it’s human nature to be drawn to extremes. There are benefits to telling a story that takes a strong point of view. It makes information easier to process and remember. It makes us feel like we know what’s going on. We over simplify things all the time. Either a person is good or bad, a price is a good deal or a bad deal, the economy is growing or shrinking.
Problem is, it’s not true. For a lot of things in life, it’s not that big of a deal. But when your startup’s success depends on it, you better understand the issues inside and out.
Tagged: Startup