Minimum Viable Sale (MVS)

One of the big things about running a business is managing risk.  As an entrepreneur I know that 25% of businesses fail within the first year, 60% have failed by year 4 and 71% have failed or closed by year 10. Given that most businesses are started with the best of intentions and usually with all the time and equity the business owners can provide these failure rates are indicative of the tremendous amount of risk.

One of the most effective ways to combat the risk and reduce the chance of your own business failing is to seek validation of your business idea early.  Very early.

Lets say you have a great innovative idea for a business. To start with you’d probably ask around to your friends to see if they think it’s a good idea or not. Chances are your friends, not wanting to hurt your feelings, will agree.  “That’s an amazing idea” they’ll say.  With the positive feedback, you’ll probably feel pretty confident about starting to build your business right away.

Unfortunately that is a false sense of validation.  Your friends are probably not your target market, they are motivated to maintain friendship rather than stomp on your dreams, and they didn’t have to put money where their mouth was.

To really get a sense of whether or not your business has legs start with getting some commitments on sales from real customers, if possible negotiate full or partial upfront payment. This happens before you’ve built anything, before a line of code has been written, before prototypes have been developed. Validate that the idea has merit from actual customers and confirm that they’re willing to put real money on the table for your solution.

Only after having made your sales and having financed the bootstrapping of your business do you actually go ahead and create what you’ve promised. With customers in place you have eliminated one of the biggest and most stressful risks in business  – the struggle to find new customers.  The remaining risk is to actually deliver what you promised below cost.

Making that initial sale is almost never easy, and getting the marketing message correct from the start is nearly impossible.  Investing the minimum possible money and time into an idea so that you can market test it can be critical.

So here’s a new acronym for you: MVS (Minimum Viable Sale). MVS refers to the absolute minimum amount of effort and money required to craft a compelling enough marketing message to land your first sale.

The MVS probably includes a presentation (Keynote/PowerPoint), perhaps a website, it might require a business plan, some mockups or even a faked version of your product. For example: a mobile app could be convincingly created in something like Fluid UI without writing a line of code that could be used as a demo in a sales meeting.

Even for a free service, the MVS is worth creating.  In some cases the MVS for this could be simply posting on reddit if people would be interested in it, or linking to an opt-in form on a website to build an initial customer list.

In other cases the Minimum Viable Sale might be a production run of 100,000 widgets in which case something like a kickstarter campaign might be a good option to reach as many people as possible.

The concept for creating that MVS is to do the absolute minimum amount of work before getting paid to actually work  on your idea. By making that first sale you’ve validated your marketing message, you’ve identified your customer base, and confirmed that your idea meets a need that someone is willing to pay for.

I’ve worked in places where the business had a good idea, identified an underserved market and put heads down for 4-5 months working on building a product only to find out after the fact that the potential customers were happy with their existing system, or the cost to change their current system was more work than it was worth.  Month’s of wasted effort and tens of thousands of dollars in development costs down the drain. Alternatively they could have started by trying to sell the solution they had in mind with the intent of getting enough cash commitments to pay for the 4-5 months work upfront.  The added benefit of getting customers before development starts is that they can help refine the features required for it to meet the needs of the market. Win-Win.

Starting a business with an MVS before you develop your MVP (Minimum Viable Product) is a simple way to get off to a lower risk start and help ensure that there is a market for your MVP when it’s finished.