Most businesses fail for the same set of small reasons everywhere. These reasons include: running out of capital, poor product-market fit, wrong timing, unsustainable unit economics (pricing), ineffective strategy, or being outcompeted by rivals.
According to CB Insights’s own analysis 70% of startups cited running out of capital as their primary reason for closing down. However, running out of cash is merely a symptom and doesn’t explain why a business might be operating at a loss. According to this analysis, market demand was the number 1 factor with both poor product-market fit and wrong market timing/conditions noted as reason for failure in 43% and 29% of cases.
Then surely if you know so many companies fail due to lack of demand, you’d go ahead and research what exactly the market demands? Why launch if you don’t know what the market demands? Because finding people who are willing to answer your questions, asking the right questions, and listening to answers is difficult. It’s easier to speculate about what people want from your own challenges: “If I’d buy it then there must be others who would”. Until you go out and ask your so-called “Ideal Customer” you can’t be sure your idea is wanted by anyone beyond yourself.
How can I ascertain market demand? Below are a few questions to consider during your research process.
Who is my customer?
Be as specific as possible. Are they a salesperson for a pharmaceutical company who sells directly to European businesses with purchasing budgets of at least €100,000 per year? Perhaps they are customer at your local farmer’s market who values organic produce.
Where do I find my customers? What communities do they visit? In-person or online?
Web forums, subreddits, sports clubs, in-person events, ads on social media are all valid ways to find our but platforms also exist that can enable you to run surveys directly with consumers, handling the distribution for you. Possibly the biggest players in this space are Prolific, UserInterviews, Respondent.io, Cint, Askable. These major players all say they operate worldwide, but when we surveyed Brazilians, they are either unaware of these systems, or the systems aren’t sufficiently localised and ~1% of Brazilians are fluent in English.
How can I talk to my customers when I find them?
Remember that unless you compensate people for their time, they are doing you a favour. The amount of information you can ask from them and receive a reply therefore varies: emails with well-thought-out questions require less effort on their part; a phone call requires more effort on their part, but you can ask more involved questions once you have them.
What questions will I ask them?
Try to avoid leading questions since friends and family often lie to prevent hurting feelings. Let those you talk to share their problems with you, listen to their answers, and understand what underlies all their comments.
For example, someone asking for a better tool for messaging colleagues might actually be asking for real-time collaborative tool so that everyone has the latest version.
What do I do with their answers?
What are the common answers that you found? Is there a cohesive product in there or is every person giving you a different answer? You may even discover that who you thought was your ideal customer, is not. The more information you can gleam at this stage the more time and money you save building later.
This post drastically oversimplifies the research process. The entire process is difficult to do right, and it’s very tempting to skip. Don’t be like 43% of these failed companies and skip it. To reach the Brazilian consumer, consider using Bossa Research, the platform co-founded and built to overcome the lack of a Brazilian focused option.