2.4: Chapter 9 Ideation

Ideation

WE ALL FACE CHALLENGES IN our daily life. A viable business is one that addresses a challenge that a lot of people face. People pay for things that make their lives or their jobs easier. It’s as simple as that.

Remember, businesses will buy faster and pay more for products than consumers will. It’s a lot easier to get 100 customers (threshold for making a living on a B2B company) than 10 million viewers (threshold for making a living on a B2C app or website).

The average revenue per user (ARPU) of a B2B software customer should be at least $100 per month. Remember the example earlier? 100 customers paying $100 per month is $120,000 of revenue and $102,000 of profit.

What happens if your ARPU drops to $10 per month? Now you need 1,000 customers, not 100. That’s a ten-fold increase in your marketing needs, which also means more time for you to struggle, second-guess, and perhaps give up.

It gets worse. Netflix hesitated to ask people to pay $10 per month and took years to do it, so you’ll probably struggle too.

Let’s say your typical B2C customer pays $5 per month. Now you need 2,000 customers to get $100,000 per year in profit. That’s a 20-fold increase in costly customer acquisition, and besides that, we don’t want to deal with 2,000 customers. Think of all the support emails you’ll get!

This is assuming you can get people to pay. Most B2C ideas make referral or advertiser revenue. Then the numbers get even more daunting. I hear from my B2C-oriented friends that having one million monthly active viewers gets you an investor meeting. Having 10 million monthly actives gets you a lifestyle business.

That’s too much work for me. Let’s go the easier route and sell to businesses.

Idea Discovery

You need to address a pain point that people face in their jobs. The possibilities are endless! You just have to listen to your colleagues, conversations on Twitter, or sessions at conferences. If you’re struggling to get ideas, then talk to your friends. Here are some questions you can ask:

• What’s the worst part of your workday?
• What do you like least about your job?
• What could you do a lot faster if you just had the right tool?
• What task do you wish you could hand off to someone else?

People are expensive. At a typical small company, salaries are at least 80% of their operating expenses. There’s a reason why your friend can’t just hand off her least favorite tasks to a new hire. Her boss won’t allow it!

But if you could not only take that pain point but also do it better for only $100 a month, would her boss care? Doubt it. She’ll just hand you the company credit card.

That’s the kind of problem you need to solve and the kind of customer you need to solve it for. Let me elaborate.

There are many kinds of B2B customers.

First, there are users of the product who want to use it because it makes their jobs easier.

Then there are the managers who may not care about the features of your product, so long as it improves their bottom line by reducing costs or making their direct reports more productive.

Finally, there are the business owners who are looking down the field to anticipate market or competitor moves.

The customers you want are the users of the product. They give you good feedback, they are easy to identify and meet (for most people, they are their peers), and they can usually get a simple verbal approval on a $100 per month spend. Mostly importantly, there are a lot of them. As in millions.

Why not sell to managers and business owners?

Managers and owners are tricky to sell to. They are hard to get a hold of, and they want to talk the language of value, not features. Early on, you probably won’t know the value of what you’re building. You won’t have case studies with managers saying things like, “Acme Business Software has made my employees 10% more productive each month, saving me $500,000 per year.” That’s what a manager wants to hear, and they’ll also expect to sign an annual contract and get the customer support that comes with it. You don’t want to deal with this. Perhaps later on it’s okay to explore it, but certainly not when you first start.

Don’t get tempted by large contracts with big numbers. Prove out your concept first with a group of lower-paying monthly customers. The big guys will always be there, and if you want to sell up market, you’ll be able to charge more if you wait and polish off the bugs first.

To reiterate, your idea should address a pain point that a large number of people feel at work. Choose a market that you’re familiar with. For example, if you’ve worked in sales, then think about the most annoying part of a sales rep’s job. That’s what I did when I built Toofr, and it paid off.

Your idea should solve a clear pain that you’ve felt personally or people around you feel.

The other critical characteristic of a great B2B business idea is that it should never fully satisfy the customer. Their cup should never be full. They should always need more of your product.

Example: The SEO market has no finish line

A good example of a business category that will never fully satisfy its customers is the search engine optimization (SEO) market. Marketers who work to improve SEO are never done. They will never arrive at work, fire up their screens, and say, “Huzzah! I made it. My SEO is perfect and I can go home early.”

No, the nature of online marketing is the tides are ever-shifting, the challenges ever-increasing, and the whims of Google ever-changing. Even when you’re well positioned in organic search results, you need software to maintain that position, to watch the moves of your competition, and stay one step ahead.

So if you’re a data or software provider in the SEO market and provide an excellent product, then your customers will never leave you because they think your job is done. It’s not like software development where there’s a clearly defined finish line. In SEO, you need a set of software tools to constantly monitor the data and adjust your strategies.

The cup is never full. There’s no finish line. It’s an ongoing need that will never go away.

This is a great business to be in. But before you put this book down and dash off to build your SEO product, know that we’re not alone with this insight. Markets with needs like this are very competitive. The SEO software and data provision market is saturated.

Fortunately there are others. In markets like this the tendency is for demand to expand. You can still carve out your own little niche within the market and get your 100 customers.

I simply suggest that you ask this question about the problem you’re solving: Is there ever a finish line? If not, that’s a very good thing. All else being equal, I’d choose that idea over any others.

Use this Idea Discovery Template to choose which ideas to test

Before going into the testing phase, I suggest you take a deep dive into five ideas. Talk to people, friends, family, colleagues, and ask these questions below. Write down the answers for all five. Pick the one or two ideas that you’re most excited about and then start testing them in the next section.

To help determine which idea to go with, do this short exercise for five unique business ideas:

Text answers

• Describe the idea:
• Describe who will buy it:

Yes/no answers

• Do you personally need this product?
• Can you visualize how the finished product will look and feel?
• Do you already have a logo or name for the business in mind?
• Do you know where to find these customers?
• Is there a finish line?

Here’s a quick note about this technique. I asked you to write down descriptions of your product and customers first so you subliminally start to feel the business form in your head. Then, I toggle to quick tactical and emotional questions. You need to be motivated, and the best way to gauge excitement is how quickly your creative brain kicks in.

If you can visualize the product already, then that’s a very good sign. There’s enough inherent difficulty in building a business no matter what. Some of it should be fun and easy. It should feel rewarding to build because you’re solving a problem for yourself too. If you know where to find your customers and are confident they’ll never stop needing a solution, you’ll find a faster path to success.

Now add up one point for every “yes” answer. The one or two with the highest scores should move on to testing.

Idea Testing

Much has been written about how to efficiently test your idea. Tim Ferriss, Eric Ries, and many others offer great templates and examples. The basic tactic is simple: test your idea using online ads and landing pages before you start building it.

The risk of diving straight into building the application MVP is that you may have defined your MVP incorrectly. It may have the wrong features, the wrong pricing, or the wrong approach to the pain you’re attempting to solve.

You won’t know that your assumptions are off target until you put it in front of a lot of people. The point of idea testing is you don’t need to actually build your tool in order to test demand. You can build a basic page that describes your solution, your pricing, and your features, and then ask people to submit their email addresses for updates.

Granted, there’s a big leap between a prospect giving you their email address and making a credit card purchase. I am not confusing the two but I am suggesting that your success in attracting email addresses is a good and inexpensive indicator of success in attracting paying customers. It’s much better to get that data upfront than to build the wrong thing and lose a lot of valuable time and money.

You might still be wondering why I suggest you do all of this testing if the whole point is to run multiple companies at once. Fair point!

I still stand by this diligence because you want to pick winners. Parallel entrepreneurship is about spinning up the right businesses so you can accumulate 100 customers across multiple businesses faster.

Including a dud in your online business portfolio will only prolong the process. Good idea testing minimizes that risk.

Landing page testing

A landing page is a single page with a single purpose. At this point in the process, the purpose is to capture email addresses from people interested in your future launch.

Your landing page should have the following three components:

• A brief tagline (“Quickly find anybody’s email address!”)
• A call to action (“Get early access! Join our newsletter!”)
• Three or four key benefits (“Fast, easy, affordable”)

All three items, the tagline, call to action (CTA,) and benefit list should be “above the fold.” This old-fashioned newspaper term means no one should have to scroll down to see them.

Below the fold you can begin to experiment with additional information, like in-depth feature descriptions, testimonials, screenshots or screencasts, or your origin story. You can use tools like CrazyEgg to track scroll depth to see if people are seeing this content.

Finally, it’s important to test multiple variations of a landing page. I recommend just two variants to start, and tools like Unbounce and Instapage make it very easy to do this. You will not need to do any programming or page hosting yourself, and they’ll track the success of each variation (you’ll tell Unbounce or Instapage, for example, that “success” is capturing an email address.)

Also, the landing page software you choose will likely include professional design templates that are easily customized so you don’t need to start from a blank page. Choose the design you like the best and then change the colors, icons, and text, and you’re ready to go!

These are the questions that your landing page experiment needs to answer:

• How should I describe the problem my product solves?
• Which benefit do my customers need most?
• Is this an urgent need or an opportunistic need?
• How much are my customers willing to pay for it?

Let’s go through each question individually with some specific tactics to get to the heart of the question.

How should I describe the problem my product solves?

If you answered “yes” to the question on the Idea Discovery Survey about whether or not you need this tool, then start by writing the description to yourself as the customer. What description would entice you to buy? Write it down using as few words as possible.

If you’re not personally in the ideal customer set, then try your hardest to put yourself there. You may need to do some more research to figure it out. Talk to you friends, find competitors on Google, and rephrase the solution in a way that makes sense to you.

For example, maybe you’ve heard that cannabis suppliers are having a really hard time creating labels for their products. You enjoy product marketing and design and want to build an online labeling software for the cannabis industry. You’re not a cannabis seller so you can’t speak to it directly as a potential customer, but it’s not too difficult to imagine what they might want to hear.

Something like, “Quickly create compliant labeling for cannabis products.” That would be the main description of your product. Short, snappy, nothing left for interpretation or extrapolation. You make labels for cannabis products and you sell to cannabis producers. If I’m one of them and feeling this pain, I would sign up for updates.

For testing, I recommend choosing wildly different taglines on your homepage. Emphasize a different benefit or reason to use your product. Call out the benefits rather than features. Rather than say, “Acme Widgets does X,” say, “Acme Widgets gives you X.”

In the above example, the benefit is that it’s fast and compliant. A poor description would read, “Upload your cannabis products and get labels in return.”

Which benefits do my customers need most?

By testing descriptions that emphasize one specific benefit, you can use the email submission conversion rates to tell how important that benefit is to your potential customers.

Another place to test benefits is below the tagline, where you might have text in a smaller font, usually bulleted, that dives further into the scope of your product.

For example:

• Select from five industry-standard templates.
• Expert legal review included.
• Fits products of all sizes.

Once you’ve identified the best description, you can run more experiments by keeping the description the same and completely changing the benefits bullets or altering the order.

Is this an urgent need or an opportunistic need?

A silent killer of your campaign is a lack of urgency among your prospects. This can be very difficult to see in advance and is demoralizing to a solo founder. You can gauge a sense of urgency by testing the language of your CTA.

For one version of the page, make it loud and clear that there’s scarcity. Either say you’re only going to invite the first 20 signups, or that you have 50 early bird coupons to offer, or you’ll turn off the signup form at the end of the month.

Then run another version of the page that has a typical “Join Now” or “Learn More” CTA. See if there’s a significant difference in conversion. If there’s not, your customers may not have a burning need. You’ll likely see longer and more complex sales cycles. The pain may not be as acute as you’d hoped.

This doesn’t mean it’s a bad business to go into. It just means you will need to reach a larger audience and build up more slowly using organic traffic rather than paid traffic. I’ll describe these differences in the Growing chapter.

No difference between the urgent call to action approach and the standard call to action approach also means this business might be a good candidate for parallel entrepreneurship. But since it will take some time to get traction, put it up, nurture it, and slowly build the product, don’t count on it for income any time soon.

If you do get a significant increase in conversion (the urgent call to action converted more people), then you have a hungry customer market and you should move ahead to pricing and building as quickly as possible.

A quick note about testing button colors: just stop.

Don’t bother experimenting with button colors or dramatically different designs. We’re testing the crux of your business idea here and it will not be made or broken by which font and color pallette you use. You can learn this the hard way, on your own, or you can heed my advice. I hope you choose the latter.

How much are my customers willing to pay for it?

This is the easiest experiment to do. It’s cut and dry logistically and it should be the last experiment you run.

Once you’ve arrived at the best description and set of CTAs, you should keep those constant while you play with pricing.

My favorite approach is to come up with your ideal set of prices. Remember, 100 customers paying $100 each, right? The average customer needs to pay you $100, so if you have three plans, that $100 price should be in the middle.

The experiment you should run is whether or not to have a plan under $100. If you can get good conversion rates by displaying, say, a $100 per month and a $250 per month plan, then that’s very good news. You might still have a $50 per month plan, but save it for an email newsletter promotion to high risk customers. You don’t need to show it to everybody.

Far too often entrepreneurs underprice their products. The more you charge, the less work you ultimately have to do. And the fact is, most online B2B businesses are price inelastic. This means that demand doesn’t change much with pricing. Business owners usually don’t feel a difference between a $50 per month product and a $150 per month product. They won’t churn over pricing.

So if your market allows it, price high. Start high and adjust downward because it’s often easier to lower prices than to raise them.

A quick primer on the statistics of landing page testing

You don’t need to be a math whiz to figure out when a landing page variation is statistically significant. The landing page applications you’ll use to run these will do that calculation for you. However, it’s still important for you to understand what’s going on and how to interpret the results.

The best landing page experiments test only one change. Consider a case where you have two landing pages that are completely identical except for the top tagline. When you run the two variations through your landing page software, you can attribute a significant conversion rate difference to the change in description. That’s cut and dry.

But what if you throw another change in there? What if you included a pricing change along with the description change? Now you have two pages each with two variations, so to fully test this, you’d actually need to run four unique landing pages.

It might be easier to visualize it this way:

There are four variations needed to test, but you’re testing only LP #1 and LP #4! The landing page software will run whatever variations you give it. It doesn’t know that you’ve changed multiple things on both pages. So if you get a better result with Landing Page #4, you won’t know if it’s because of Description B, Pricing B, or both. You need to run LP #1, #2, and #3 too.

If you add a third element, then it gets even harder. Instead of four variations, you’ll have nine, and so on.

You might say, so what? I’ll just run the four or nine variations. If you want to pay for that traffic, then sure, but traffic costs money. People aren’t going to just stumble upon your landing page, and clicks from your Twitter or Facebook pages will have bias. As we’ll read in the next section, you’ll need to pay for ads to drive traffic to your landing pages.

The more variations you have, the more traffic you’ll need, the longer it will take, and the more cash you’ll have to pay to get the results.

It’s better to have fewer variants, ideally one change per experiment. So I suggest you run them sequentially.

Create a landing page with your best guess on each of the above sections. You have to put a stick in the sand somewhere, and a landing page with no pricing at all may lead to buyer confusion. So put your best guess down and then change one thing at a time. Start with the description, move on to the benefits and CTA, and then finally to the price.

CASE STUDY: Inlistio

1 month and 23 days. This is equal to 14.5% of a year.

That’s how long it took to go from idea to first revenue in the bank for Inlistio, a company I launched in my quest for a parallel revenue stream alongside Toofr.

It’s an important reminder of how long it can take to get your SaaS company launched and making revenue.

A friend and entrepreneur I admire, Max Altschuler, sent me an email describing his idea on July 16, 2017. He asked me, “Would you pay for a piece of software that tells you when a user or subscriber leaves the company, what company they go to, and what their new email address is?”

I told him I’d had a similar thought for one of my side projects and investigated it enough to discover some non-obvious ways to grab the data. “Wanna collaborate on that?” I asked.

“Yes. Yes I do,” he replied.

A few days later, on July 21, I had a GitHub repository for my code, a Heroku account for hosting, and very basic Ruby on Rails application live and running. (I’ll explain what each of these are later in the Building section.)

Almost exactly a month later, on August 22, I “launched” Inlistio on social media. It had actually been up and live for a couple of weeks, but this was the first time I said it loud and proud. We both posted about it on LinkedIn and Facebook.

I ultimately changed the pricing three times, and then finally on September 7, nearly two weeks after that announcement, I got our first customer. It took us just under two months to go from idea to first revenue and for the next few months it averaged only one new customer every month. It took five months to get the first $1,000 of monthly recurring revenue.

The lesson here is this: even if you’re quick to launch, getting customers and traction still takes a while. Here’s what I wrote on social media when we launched:

Today I released https://www.inlistio.com to the world with my friend and fellow sales tech entrepreneur, Max Altschuler.

From idea (when Max sent me an email describing the problem) to launch it took just under 5 weeks! Record time considering we’re both occupied with other businesses.

Inlistio alerts sales reps, business owners, and marketing leaders when their contacts switch jobs.

Why does that matter?

• Job changes cause accounts to cancel or downgrade.
• Job changes also open up new business opportunities.

How do you grow a business? Reduce churn and get new customers.

Inlistio helps with both!

I like this post because it clearly states what Inlistio does (tracks job changes) and why it’s valuable (reduces churn and increases customer acquisition).

Unfortunately, I got a lot of likes and registrations but no customers. Not a single one. I included 20 contacts for free, so anyone could kick the tires. I wanted to give some free data so I wouldn’t have to give demos for everyone.

I launched with this pricing:

Bottom tier: $199/mo for 200 contacts

Middle tier: $499/mo for 1,000 contacts

Top tier: $999/mo for 5,000 contacts

Since I had a business partner on this one and we were going to split profits, I wanted to have higher value customers. At the time I launched Inlistio, Toofr was making over $18,000 a month of profit. I was anxious to get Inlistio up there as quickly as possible.

Unfortunately, customers don’t work that way. They don’t care about your other businesses and how much money they’re making. I waited a few days and lowered the prices:

Bottom tier: $99/mo for 200 contacts

Middle tier: $249/mo for 1,000 contacts

Top tier: $499/mo for 3,000 contacts

I sent an email out to the 40 people who registered free accounts on Inlistio. Again, crickets. Of the 40 or so who signed up for free, only 25% of them actually used the free credits.

That first week was off to a bad start, but I kept going.

At the end of August, about a week after the last price change, I lowered prices again; this time by a lot.

Bottom tier: $29/mo for 40 contacts

Middle tier: $59/mo for 100 contacts

Top tier: $249/mo for 1,000 contacts

The first customer came in, finally, about a week after that last price change. It was a $29/mo subscription, but I didn’t mind. I was elated. The seal was broken!

It took another two weeks to get the next $29/mo customer and then I had my first big break, a $600/mo customer who had a lot of contacts to track. She paid three months upfront—$1,800—and I texted Max a picture of the receipt. We were both pumped!

But there was a problem. (And by the way, there’s always a problem.) The data providers I was using were expensive. Really expensive. I ended up spending nearly all of the $1,800 on servicing her account. That’s no way to run a business.

Two months lapsed before we had another customer. In the meantime, while on a Toofr customer call, I had a major insight. I was doing Inlistio all wrong. I didn’t need these expensive data providers. There was a much cheaper way to get the data I needed.

I hacked it together and ran the numbers. The cost was 90% lower so I lowered pricing again, one last time, and quickly got two more customers.

Bottom tier: $19/mo for 1,000 contacts

Middle tier: $149/mo for 10,000 contacts

Top tier: $249/mo for 20,000 contacts

I lowered the bottom tier and raised the middle tier, but reduced the effective price per contact across the board by as much as 90 percent. Since most marketers have large lists, closer to 10,000 contacts, it makes it a lot easier to attract them. I used to need to charge $1,000 for a list of that size. Now I can do it for a tenth of that amount.

Be warned, though, that lowering prices is not the best growth tactic. It’s been several months since that last pricing change and I’ve changed my approach again, removing the pricing page altogether and doing custom pricing and demos for interested customers. For those same 10,000 contacts I’m now charging $249/mo with a three-month upfront commitment. I’m attending conferences and getting great feedback.

Each business is different. The only thing that’s the same is the hustle required to figure out how to get it making money.

Ad campaign testing

Now let’s look at the tactics behind driving traffic to your landing pages.

You’ll drive traffic to your landing page experiment with an ad campaign. I recommend using Google or Facebook ads and at least a budget of $100 to accumulate 50-100 clicks.

If you have the funds, spend $100 each on Google and Facebook. I’ve seen and heard enough stories from professional digital marketers to know that failure on one platform doesn’t mean failure on another. Facebook and Google have different technologies, audience parameters, and most importantly, buyer intents.

Google AdWords

Google is the preeminent advertiser on the internet. At some point, no matter what you do as an online entrepreneur, you’ll eventually need to dive into AdWords and run a campaign.

AdWords is a behemoth of an application. A deep dive into this technology is beyond the scope of this book but there are dozens of good tutorials and YouTube videos about it online.

Google users are actively looking for answers. Consider that when you choose your ad headlines. They should read like answers to a question that your ideal customer has in mind.

Some examples are:

• How do I lower my business burn rate?
• What’s the best accounting software?
• How do I pay my contractors?
• Where should I buy my next car?

Whatever the idea is that you’re testing, the ad headline should answer that burning question your customer has. It should pop out among the Google results.

The best way to research your ad headlines is to simply do some googling on your own. Ask Google the question your customers might be asking. Become your own ideal customer and dive into Google and see what’s there. You’ll be surprised how quickly the ad headline ideas will come.

It’s a valuable exercise and will not only bring up interesting competitive intelligence in the organic results (the main area below the search bar) but will also give you ideas for headlines in the advertising results (on the right side and immediately below the search bar.)

Facebook Ad Manager

Unlike Google, most users are not on Facebook to get their questions answered. They’re passively consuming content, usually on a break from professional business. Facebook’s ads are on a column to the right side of the user’s newsfeed.

Also unlike Google, and perhaps because of this passive viewership, Facebook allows and encourages you to use images. They’ll provide a library of free stock images to use above your headline.

So your goal with Facebook ads is to grab attention. Studies have shown that images with people in them perform best. Rather than answering a question, as I suggested in the Google section, you should be provocative with your Facebook ad headline. You need to pique the interest of a passive viewer, and a compelling statistic or a bold claim is your best bet at drawing clicks.

There are several reasons why both B2B and B2C marketers love Facebook. First of all, its reach is at least as broad as Google’s. With billions of users, its potential is limitless. And because of the way it is structured and the user data it has access to, Facebook has much deeper audience targeting than Google. You can be very specific about who you want to reach.

When you combine breadth and depth at massive internet scale, you have an advertiser’s dream platform. Like AdWords, Facebook Ad Manager is overwhelming at first, but you’re only a couple of online tutorials away from figuring it out. Dedicate an hour to reading it and clicking through to create your first ad and you’ll begin to understand. It’s complex but you’ll get used to it.

Some general suggestions about setting up your ads

Follow these rules whether you’re advertising on Facebook or Google or both.

Like your landing page descriptions, choose wildly different headlines. You can copy your landing page descriptions if they fit or edit them down as needed. You’ve already done this work so you might as well reuse it.

Again, the headline should be the only difference between the ads; make sure you use the same audience parameters for both ads and the same image on Facebook.

Keep your audience broad. Audience parameters shouldn’t be in this experiment yet. Since we’re doing a B2B business, a good, broad audience is all adults (21+) in the United States. You’ll be tempted to filter down on industries and job titles on Facebook, but resist it. Stay broad while we’re just doing headline tests.

If you use Google, then you’ll need to choose keywords. Facebook doesn’t require this. Keep your keywords as broad and obvious as possible while maintaining a low cost-per-click (CPC). You should be able to get the CPC around $1. Broader terms cost more because they get more traffic, so be specific without being too verbose. Use verbs. For me, a good just-broad-enough keyword for Toofr is simply, “find emails” and “email finder.”

Organize your ads by putting them into an “Ad Group.” This is what Google and Facebook call a set of ads that share all the same parameters except the ad’s headline and/or image.

Finally, set a daily budget of $20 so it’ll take five days for you to use all $100. This way we can wash out any regular flux in internet traffic (e.g. weekends vs weekdays).

With all of that done, we wait and see what happens. If you’re using Unbounce or Instapage, you’ll see a running total of views and conversions. A day or so after you launch the ads, check back in your landing page analytics to make sure it’s working and conversions are tracking.

Funnel analysis

We now have two layers to our funnel. First, we have the ad. The ad links to the landing page. The landing page has a CTA to collect an email address. That’s the conversion event.

The full experiment funnel looks like this:

• Ad headline experiment: Ad 1 + Ad 2

  • CTR

• Landing page experiment: Landing 1 + Landing 2

  • CVR

• Email submission

Once your budget is spent, you’ll go into the ad manager on Facebook or Google and see a click-through rate (CTR) for each ad. The CTR measures how many impressions (showings) it takes to get one click. If your headlines are distinct then you should have one ad clearly outperforming the other.

A high CTR is 5-10%. Usually it’s around 1-2%. If you can find a headline that’s above 5%, then that’s a really good indicator of interest in the headline. If you used that ad headline in a landing page description then I’d be surprised if that page didn’t perform well too.

Moving down the funnel, once a visitor lands on your page, the software will register a visit and track how many visitors it takes to get one CTA completion. This ratio is your conversion rate (CVR). Since you’re only driving traffic from ads, a high conversion rate is 10-15%. Normally, on a mature page against all traffic, a good CVR is more like 1-5%.

So let’s do the math. Let’s say $100 bought you 100 clicks (that would imply a $1 CPC). Your CPC may be higher or lower, but you should try get around 100 clicks even if it means putting another $20 or $40 into this experiment.

Those 100 clicks will probably get you 10 email addresses, so your entry cost per acquisition (CPA—aren’t you loving these acronyms?) is $10. That’s not a bad CPA to start. You can get it down further by optimizing around the benefits and features that generate the most clicks.

To do this, you should be sure to incorporate the winning ad headlines into your landing page copy and focus the rest of the copy on that particular feature or related set of features. Modify your ads in a similar way, again focusing the ad headlines and copy on those same one or two features and benefits.

Each time you do this you’ll spend another $100 to $150 and be even more confident about building your product.

The true, final CPA will not be known until you launch and can actually start getting customers. If it takes you 100 email addresses to get one paid customer, then multiply the entry CPA by 10 to get a final CPA of $1,000.

I just heard you gasp.

One thousand dollars in ad spend just to get one measly customer? Yes indeed! This is yet another reason why you need to solve a real pain for real business users. If you can get the average customer to pay more than $100 per month, then you’re probably at breakeven or better in the long run on that $1,000 ad spend.

Three final considerations

Now that you know how to describe your idea and which benefits to focus on, you need to do a little bit more work before diving into building.

I believe that each of these considerations is merely a gut check. If you believe in your idea and are excited to work on it, then you’re 99% of the way there. This last bit of diligence is meant to make sure you’re in it to win it.

Technical complexity

How difficult do you think it will be to build? Talk to some engineers you know. Describe the application, what it does, and the one or two features you absolutely need to have in order to launch. If you’re not very technical, then being aware at this stage will help you push through the inevitable hurdles that you’ll encounter when actually building.

When you do this diligence, still keep in mind the difference between the finished product and the bare-bones “minimum viable product” version, or MVP. Also, caveat the technical complexity with the reminder that ultimately it will be marketing that dictates success or failure. You just need a product that works, so what you’re really testing here is how long it will take to build that MVP.

Competitive landscape

Who’s already doing this? Don’t let yourself believe you’re the only one. There’s always one or two players dominating and a handful of others playing catch-up.

Don’t let your research dissuade you. It’s simply awareness so that when a customer inevitably asks what makes you different you’ll know how to answer.

If you’re not that different in features, then you should be different in price, at least to start. So in addition to looking at a) who they are and b) what exactly they offer, you’ll need to pay attention to c) how much they cost.

I also like to check out their traffic and see how they’re trending. Alexa and Compete are great tools for this. Flat or increasing are signs that the market is healthy. A declining traffic chart could mean an opportunity for you to enter but could also mean that there’s something rotten about the market.

If someone ahead of you is failing, tread cautiously. Try to find out why. I’d much rather enter into a market where my competitors are doing well than one where everyone is struggling.

Market size

Should you focus on a large market or a niche one? Should you choose a problem that everyone has or a problem that a smaller, more specialized customer has?

If you’re looking to raise money from investors then you need to have your sights on a big market with a lot of customers. It will be difficult to get investors excited about entering a niche market.

However, the nice thing about running a small business yourself, without investors, is you can enter a small market and do very well for yourself.

What do I mean by large versus niche? An example might help.

Let’s say you have a sales background and have always been frustrated with customer relationship management (CRM) software. You think it’s too complex, too expensive, just plain too ugly. After reading this book you decide to build a simple, elegant alternative in this category.

The good news is the CRM market is huge! Salesforce is the dominant player and pulls in about $1 billion per month (yes, per month) in revenue. Other large companies in this market include Oracle and Microsoft. You can count on every business on the planet needing to purchase this software at some point. This is the epitome of a large market.

If you decided to build a general CRM application then you would be competing against these huge incumbent players. On the one hand, there are millions of potential customers. On the other hand, you have dozens of large and small companies competing with you for those accounts. Large markets are going to be very competitive.

On the other hand, maybe you happen to be a dog trainer on the side and have a great network of other dog trainers in your local community and online. Perhaps you’ve heard from them how hard it is to keep track of clients, the names of their dogs, which training packages they bought, and whether they prefer to be contacted by email or text message.

Hearing this, you might decide to build a CRM for dog trainers. Typically, niche products cost a bit more because they’re specialized and there’s less competition. In this case, your CRM features would be optimized for dog trainers and therefore your product would be completely differentiated from both the huge and smaller CRM players. Rather than having to compete online for SEO and expensive ad units, you could advertise in pet magazines and go to dog training conferences. There’s less competition but you have to look harder for customers.

Like nearly everything in business, there’s no right way to go. I merely suggest you be aware of these pros and cons when deciding whether to go after a large or niche market.

In a nutshell, niche markets will absorb higher prices but the buyers are more difficult to find. Large markets will pay less but the customers are easy to identify.

Whether your product is large or niche simply depends on how many people feel this pain today. Markets will shift. What’s niche now may be large in a couple of years, in which case you’ll be lucky to have entered when there was less competition. If the dog training market were to suddenly expand, you’d get to ride that wave as the #1 CRM for dog trainers.

Whichever market your idea fits into best, know the pros and cons above because they’ll directly impact the speed of traction you get after you launch.