Why validating business customers is a challenge, and how to effectively master it

TL,DR;

Creating products and services for business customers is far more complicated than selling to the general public. Apart from anything else, organisations are often complex and arcane structures that even their own members don’t fully understand, let alone an outsider.

Add to that the fact that you will probably have to interact with a range of interested parties, some of whom want you to succeed and some of whom don’t, and you start to get an idea of just how important it is to understand them as well as you can.

However that may be, organisations are composed of individuals. If you can find the right individuals to talk to then you can make the task of validating your idea much easier. It will take a lot more effort but the rewards are potentially high.

With great power comes great responsibility

In my previous post I discussed the reasons for validating your business idea by speaking to potential customers. I also described an approach to take to identify and recruit those potential customers for interview. This approach is most useful when adopting a Business-to-Customer (B2C) model for your startup. What happens, however, if you are creating a Business-to-Business (B2B) model? How does that change your approach to customer validation?

The justifications for validating your business idea with corporate customers are exactly the same as those for private customers. What differs is how you recruit those corporate customers and how you conduct your interviews. There are several reasons for this:

• There is a far greater distinction between customers (i.e. the individual paying for your product) and users (i.e. the individual utilising your product) in a corporate setting.
• It is much more likely that you will have to do all the work identifying and contacting your corporate customers yourself, rather than simply publishing your call-to-action and having them come to you as described in my previous post.
• There are likely to be several stakeholders who are neither customers nor users but who are interested parties with influence over the purchasing decision, making completing a sale much harder.
• Even if you can interest potential customers and address their needs your product/service may not align with the needs of the organisation they work for.
• Businesses are, in general, extremely risk averse. Unless you are an established brand, a recognised expert in your industry or have a direct or indirect link to a specific corporate customer you will have to work much harder to establish your credibility before a corporate customer will even speak to you.
• You are likely to be up against established, existing competition with bigger teams and deeper pockets than you.

When you are dealing with private customers, otherwise known as the general public, most of the time the person buying the product is the person who wil use it. When you are dealing with corporate customers, however, the person buying the product may be several levels of management above the person(s) using it. They may not even be in the same department.

For example, if the price of your product is in the £1000’s the purchasing decision will almost certainly have to be approved by a Head of Department or even a Finance Director. It is also very likely that they will not be a user of the product or service. In this case, it is critical that you consider how you address the needs of the purchaser, as well as those of the user.

You’re going to find it much easier to persuade a Finance Director to become a customer for your Automatic Widget Wrangler (patent pending) if it helps her/him to create their quarterly report on corporate widget wrangling for the board as well as helping Dave in IT to wrangle those pesky widgets.

However, you’ll only sell your widget wrangler if wrangling widgets is a painful enough process to justify paying for a solution, and if that solution works in a way that resonates with both the purchaser and the user. This is why you need to talk to them first.

Here be dragons

Organisations are complex things. One of the primary reasons for organisations existing at all is the assumption that a group of people working together can have more impact than an individual acting alone. Over time, organisations become opaque; physical documentation quickly gives way to (or at least lags far behind) aural culture.

Over time, internal groups can coalesce that interpret the organisation’s high-level goals differently to the rest of the organisation. Sometimes they set their own goals which can be at odds with the organisation as a whole. What is certainly true is that significant relationships will exist that don’t map to any official structure.

The upshot is that selling your product or service to an organisation can often be much tricker than selling to a private individual, if only because of the existence of many more vested interests.

There are likely to be several stakeholders involved at every level of your investigation, from search and evaluation to purchase and use. Each of these stakeholders will have a different profile with different associated jobs, pains and gains.

Any of them may deflect the purchasing decision one way or another. There’s only so much time available, so you need to identify the key stakeholders and create a Value Proposition Canvas for each of them (ideally validated through interviews, as described here).

Here is a rough guide to the types of stakeholders you will encounter:

• Influencers - People whose opinion is valued by the decision maker.
• Recommenders - People who know the problem exists, who are actively looking for potential solutions, and who are in a position to make formal recommendations for or against purchase
• Purchasers - People who hold the budget and who make the actual purchase. These are the people whose pockets you are reaching into for your revenue.
• Decision makers - People who make the final decision regarding purchase and who generally have control of the budget from which the purchase is made.
• End users - People who will ultimately end up using your product or service.
• Saboteurs - People who are, or perceive themselves to be, adversely affected by any potential purchase and who have the ability to obstruct or otherwise prevent a purchasing decision.

Some of these roles will probably overlap. The purchaser may be the decision maker. The end user may be an influencer and/or recommender. The point is that you have to be aware of each of these types of stakeholder and make sure you are satisfying each of their needs in order for your sale to be as smooth as possible.

You are unlikely to be able to identify, access and interview all of these individuals directly which is why you need to target the key individuals to contact. You should, however, acknowledge that each of these individuals or groups are likely to exist and the better your offer satisfies them the more compelling it will be.

Do your research

Just as with a B2C business, it is of great advantage for a B2B business to identify their niche customers and build out from there. To find your potential early adopters you are looking for businesses that:

• Have the problem you believe you have identified.
• Know they have the problem you believe you have identified.
• Are already paying to solve the problem you believe you have identified.

How do you find these businesses? If you’re lucky you may have domain knowledge from previous or current employment that points you towards potential customers. This is a good starting point, but there’s always more you can learn. If you don’t have specific domain knowledge it’s a good idea to start looking for someone who does to join your company, either as an employee, an advisor or as a board member.

Even if you do have domain knowledge, it doesn’t hurt to behave as though you don’t to find leads that you may otherwise not have thought of.

I suggest starting with online research. The simplest form of online research uses keywords to find businesses operating within your niche. Remember that it is much more difficult to start up by targeting horizontally (e.g. all businesses that have an invoicing problem) than targeting vertically (e.g. all independent physiotherapists that have an invoicing problem).

Look at competitor businesses (and you will always have competitors, no matter how unique your business idea may seem to you - more to come on that in a future post). Try to find out who their customers are.

Whether you are looking at customers or competitors you should try to learn as much about them as you can from all the information sources at your disposal. Here is a list of possible data sources accessible over the internet (there are, of course, others but here are a few to get you started):

• Annual Reports - These are generally to be found on the company website. You’re only likely to find them for larger companies but if you can get hold of them at all they can be a goldmine of useful information.
• Crunchbase - A platform for finding business information including investments and funding. Great for identifying businesses in a particular domain
• Pitchbook - Similar to Crunchbase, but challenging on the pocket! There’s probably a good reason for that, though.
• CB Insights - Utilises a combination of big data tools and algorithms, as well as sentiment analysison publicly available signals, to gather and analyse data about private companies, investors and industries.
• SimilarWeb - This is a browser tool that provides insight into and analysis of web traffic. Use it on a customer or competitor website (note that it’s only really useful for more popular sites, i.e. those with monthly traffic in the order of 10,000 visits)
• Ahrefs - A toolset for backlinks and SEO analysis. Backlinks are links from other websites, and is comparable to a citation.
• Statista - Market and consumer data analysis.
• Companies House - The UK register of company information including accounts, annual returns, registered addresses and directors.

Your aim with all of this research is to find out as much as you can about both your target market and your competition. So far you have been gathering information about organisations. What about those individuals within that organisation that you might want to contact?

The process is much the same as for the general public but the details may be a little different. If I were wanting to find a niche group for a B2C business model I might start looking on Facebook, Reddit, Twitter, Indie Hackers, and Hacker News, amongst others.

The locations for B2B customers are the same, just replace Facebook with LinkedIn (or, if not replace Facebook, move it further down the list and put LinkedIn at the top). Don’t underestimate the potential power of directly messaging or cold emailing people of interest on LinkedIn. Persistence is your friend here. Unless they specifically tell you not to bother them, keep asking. Look for former employees and open up a conversation with them. You’d be surprised what you can learn!

Above all, be clear what you are looking for.

Getting down to the nitty-gritty

If you’re dealing with business people remember to act in a business-like manner. Your interviewees are likely to be busy so treat them with the courtesy and respect they deserve for making time for you.

Set an agenda and send it out before the meeting. Give some idea of the questions you will ask, particularly if they need consideration. Allow 30 minutes to an hour for the interview and bring someone with you to take notes so that you can make the most of that time. If you need/want to record the interview, make sure to ask for permission beforehand.

Be very clear in your mind about what you want to get from the interview. What question is this experiment answering? - I’m not talking here about the individual questions you ask but what is the reason for conducting the interview in the first place?

In addition to any domain-specific questions you may have you should be looking to answer the following:

• What is your role and how long have you been doing it?
• What tasks are essential to your fulfilling that role?
• What does an ‘average day’ look like for you?
• Who do you have to interact (people and teams) with to get your job done, and what is the nature of these relationships?
• What concerns do you have about potential solutions to your problem?
• What do you consider to be the greatest challenges both externally and internally?
• What does the world look like once your problem has been solved? How do you measure and report success?
• Who else should I be talking to?

If you can get the answers to these questions you are in a much better position to understand your customer, the environment in which they operate and the nature of the problem as they experience it. This, in turn, improves your ability to assess which of the possible solutions you come up with is likely to resonate with them and result in a sale.

You will know when you’ve done enough research when you are confident that you know the following:

• Who the key stakeholders are.
• Their roles, environments, attitudes and perspectives.
• Their levels of influence and availability.
• How they stand to benefit (or not) from your product or service and how they measure and report that benefit.
• How their business will change as a result of your product or service.
• The requirements and constraints you are working within.

The take-away

Reaching and acquiring corporate customers for validation is hard work, but it is essential work if you are to reduce uncertainty and risk. As an entrepreneur who wants to succeed your goal is to learn from your customers before you build anything.

Keep the following in mind when you speak to customers (whether private or corporate) and you will reap the benefits:

• Love the problem, not the solution
• Talk to customers, they have all the answers you need
• Be prepared
• Go into each conversation with an open mindset
• Be curious
• Have no expectations (don’t pull for answers, let them come by themselves)