Continuing with the previous post Not All Good Ideas Can be Good Companies, there’s a related topic that I’ve seen happen several times: an entrepreneur builds a good product, gets customers, and then realizes that it’s a poor market to be in. This is a tough one as good products, combined with some sales and marketing, often generate customers. Only, after a few customers sign on, there’s hope that the startup is off in a good direction, yet signs of a poor market become apparent.
Here are signs of a poor market for a product:
- Required Product Customizations – Customer needs aren’t consistent from sale to sale requiring heavy product customization, and the product customizations aren’t following a pattern, making for a non scalable model. Constant one-off customer requests that are necessary for the customer to get serious value is a bad sign (unless you can charge a significant premium for them).
- Acquisition Cost Relative to Price Point – Some people really want to buy the product, but don’t have budgets that warrant the cost of reaching them. This is more pronounced for products that require an outbound sales team to sell the product, thus requiring a higher price, yet the market won’t support a price that works.
- Long Sales Cycle – Related to the acquisition cost issue, some types of buyers aren’t able to make decisions in a timely manner due to things like their own budget cycle, required internal approvals, and more. Long sales cycles, especially in areas like government, education, and others can make for a tough business model.
Entrepreneurs often have “happy ears” where they want to find the positive in every situation. When it comes to the overall market for their product, it’s important to objectively assess it on a regular basis, even after signing a few customers.
What else? What are some more thoughts on a good product in a poor market?