One of my current clients for Blue Sky Local

If you’ve tried to build one or more businesses, this technique may be useful to you. It may seem counter intuitive to some but it is absolutely the best way to de-risk any start-up business model, but especially web-based business models.

If I could go back and do each of my business ventures over, this is the one thing I would do differently: I would get customers on board (ready to pay or paying upfront) first.

This is because, in part, if you build the product first and sell it to customer second, you’re likely to make more mistakes since the customer (the end-user) is not engaged in the development, thus it is less likely that what is built will meet all of his or her needs. A customer who is on board and paying from the start has a vested interest in making sure your product meets his or her needs.

For example, say I was interested in launching a Groupon copy-cat website for Long Island, NY. With this business model I would talk with local business owners and get at least a few dozen of them on board. To do this I might have to prepare a little slide show presentation (but building the entire service first is NOT essential!).

Simultaneously I would tell friends, family, and strangers through various online and offline means about the concept and convince them to hand over their email address for great deals. After I’d reached a sufficient number of signups for both businesses and customers, THEN I would build the web product and launch because at that point I would know almost certainly that I would be making money right out of the gate.

What if you cannot get customers on board in advance? Then don’t build the business. It’s that simple.

There may be some skeptics out there who might reply to this by paraphrasing what Steve Jobs said, which is sometimes the customer doesn’t know what he or she wants until you build the damn thing and give it to them to try. This is true to an extent, so there will always be some sort of up front investment but it in most cases it will not require that you exceed the scope of creating some design mockups or a short power point (as in the example above).

Businesses fail because they fail to make sales. They fail to make sales because there’s no market for their product.

Sell first, not second.

We all know about the importance of conveying our ideas in effectively, especially in business when it comes to telling prospective customers what it is we’re selling and why they consider buying from us. If you’re like me, you think this is true, but you might be terribly wrong when it comes to implementation.

For example, about a month and a half ago I was out at a small party. There was a laptop that everyone was using and since Blue Sky Local came up in conversation, so I showed the website to a couple of friends. For each person who I showed the website to, he would stare at the site for a minute or two, then look up at me and say, “Ok… neat…” or “Ok, I don’t get it, like… what does your business do?” This should have been a red flag at the time, I rationalized and ignored it for several weeks. Finally, after speaking with an entrepreneur friend of mine last week, Matt Turcotte, I was re-reminded of of this feedback.

Now that I am proposing a redesign of the website (see above), I’ve realized the mistake I’ve made—that the current design and text on the site simply hasn’t conveyed the key points of our service in a simple and succinct manner so that anyone, including my mother (who is definitely not a technology person) or friends (who are not in our target market), will quickly “get it.”

The assumption I’m making here is that if they don’t understand what my business is in 30 seconds or less, how can I expect prospective clients to understand it? It’s a reasonable assumption. If your customers do not easily comprehend what it is you’re selling and why it’s valuable, they are much less likely to buy from you.

My mistake was not keeping this at the fore-front of my mind and not testing the site design more frequently with friends and family members earlier on. In addition, my desire was to convey what was “cool” about our service rather than why it is useful to potential clients.

In Review:

• When designing your website, put aside any personal desire you may have to explain why your product is awesome
• Ask your current customers or users what they find value about the service
• Test understanding of the website’s design with people outside of your target market (this may seem counter intuitive, but it’s important)
• Don’t ignore the feedback you get—take it to heart and translate it into design changes!

How does one create value?

Assume that value is a subjective judgment and not an objective measure. Value is created in two ways: through perception and function.

Paper currency has value. There is the perception that is has value: we as a society have collectively deemed it to be valuable. It is also functional: is can be traded for goods and services.

Google is valuable. Google takes the mess that is the internet and makes it easily accessible and searchable. Google has high functional value as a result of solving this problem.

Creating functional value requires having the right set of skills or tools, and perhaps a good idea or two. Creating the perception of value is an art that is just as difficult to master. Look at Mint.com. Refreshing money management. Mint. I get it. But more than that, I feel good from the moment that I have entered the site. And I am going to feel good about using it. This is a result of the near flawless design coupled with the facts, ideas, or stories behind the company’s existence.

Compare this to Buxfur. Compare this to Wesabe (not the best name). Compare this to Yodlee. Compare this to Geezeo.

The difference is clear. Some of these companies provide a more functional product. Regardless, Mint is kicking their ass because Mint has executed beautifully to achieve a more compelling perception of value.

Remember the dualistic nature in your effort to create value, in whatever it is that you are building.