Recently, Gary Simon shared “Why Do Startups Fail?” and provided some data that showed most startups fail because they find there was no market or no customer interest in what they were trying to sell. That’s amazing–and a big problem. Why do startups keep making this mistake and how can you avoid it? Take the example of recycling. If you were to poll 100 people and ask “Are you motivated to take environmental action?”, what percent do you think would respond “yes”, 40%, 60%, …100%? If you asked them if they wanted to recycle more would they respond similarly?
Understanding customer behavior and pain points are a serious matter as a start up. When a business plan is based around an activity that is seen as ethically positive it can be even harder. Recycling is a big one. Everyone wants to waste less and recycle more, but most don’t. When doing customer research asking “Do you want to recycle more?” is a question that will not help a company understand their customers. Stay away from asking Yes or No questions. Get a potential customer to share their experience and knowledge. For example asking, “How do you recycle?” will get a story about what steps are being taken. “What do you recycle and how much time do you spend recycling?” of “Tell me you worst and best recycling experience” will also invite insightful descriptions from customers about their behavior and preferences.
Why is this important to a startup? Startups need to learn about customers so they can pivot appropriately to a solution a customer actually wants desperately. A solution work for a few people, but it needs to fit for a larger markets. Recently recycling company RePlanet closed its 300+ stores in California, citing declining state subsidies and increasing cost. They could not get enough quality recyclable material to overcome the changing cost landscape. The realities of operating in recycling are stark. Companies’ channels for quality material are highly competitive and rely on customer behavior. Being able to pivot to some better channel is critical. RePlanet highlighted new equipment purchases to increase efficiency not being enough to overcome other cost issues. Which brings me to the second part of knowing recycling customers.
Can research determine if there are enough people, with enough materials, materials in sufficient demand, that can be accessed to validate a large enough market for a company? If there isn’t enough material, the material is not recyclable quality, there is not a constant channel, or the alternative is inexpensive there probably is not a market. For example recycling cardboard is already easy, but it may often be contaminated (pizza boxes) and of little value. Waste Management once reported paying $100 for one ton of cardboard giving them $5 of profit. That’s not a good business. What is going wrong?
In response to the opening question. “Are you motivated to take Environmental action?” Valley Vision, recently found 95% are motivated to take some sort of action. Valley Vision’s Environmental Poll shows people of all backgrounds are concerned and want to take action. It is a good place to start for an entrepreneur. The research validates that people want solutions and actions taken in clean tech, but it doesn’t provide much information on the behavior or preferences a startup needs to know when building a product. Doing the additional research and customer discovery is up to the Entrepeureur. But better to dig in at the start and get intelligence on what customers really and are willing to do, rather than put a product or solution out at great cost, burn through all your Friends and Family money only to find out no one wants it.
ABOUT THE AUTHOR
Thomas is the Executive Director of CleanStart. Thomas has a strong background in supporting small businesses, leadership, financial management and is proficient in working with nonprofits. He has a BS in Finance and a BA in Economics from California State University, Chico. Thomas has a passion for sustainability and a commitment to supporting non-profits in the region.