A step-by-step guide to building your first product, audience-first
You can listen to this article as a podcast episode here:
This article inspired my second book, The Embedded Entrepreneur. In the book, I expand on the process of finding, validating, and diving into your side business ideas.
In this article, you will learn how to use a data-driven method to find an audience for your side business. I’ve seen this approach work for several founders, allowing them to discover an audience that not only would sustain a business for many years, but also make it an enjoyable journey.
Before we get to the step-by-step guide, I would like to address one particular problem that many newly minted entrepreneurs have, particularly when they come from an engineering background: They severely underestimate the importance of an audience—with devastating consequences.
Have you ever been to a museum only to be shoved through a gift shop on your way out? The gift shops are not the main attractions, yet they contribute significantly to those institutions’ bottom lines. But no entrepreneur in their right mind would open a museum gift shop in their garage and expect it to make a profit. A store stocked with art prints and interior design books needs a very specific audience. Museums have understood that to sell art-related books to people, they need to put the store where their artsy audience already is: on their way out of an exhibition. Museums have understood a core rule of a successful business: find your audience first, then sell them something that they need. They think “audience-first.”
If museums have understood that, why do we still see so many founders creating solutions searching for a problem? Why do so many entrepreneurs strain their minds to find a “good business idea,” jump to building the product, and then wonder why they can’t seem to find anyone to buy their solution? And how can you avoid making this exact same mistake while building your own business?
It starts with the cure to all bias: introspection. Mainly, if you’re coming from an engineering background, your perspective will be biased towards creating products. For engineers, everything is a potential product. We’re trained to create products; we’re taught to think product-first. We use products. We make products, and we know products.
Sadly, that often leads us to a logical fallacy: We assume that since we felt the need for a certain thing to exist, others will have the same need. We wanted it, so others will want it too. And even when it’s clear they don’t, we push ourselves to think that if we just sell it hard enough, someone will buy what we offer.
This approach is putting the cart before the horse. It’s the wrong way around. If we build our product first and then ask who might want to buy it, we’re leaving a lot to chance. It’s like “testing in production.” You want to check if your code is working well before you deploy it to your customers. Why not do the same for your business?
The best way to keep the amount of guesswork to a minimum is a “staged validation” approach. Instead of starting with an idea, building a product, and then checking if this solves a problem for someone out there, I recommend the following steps.
- First, explore which audiences you want to help. Select the audience you think is most likely to support your business endeavors. Validate: Make sure the audience is interesting for you, has a good size, has exciting problems, and is willing to pay for a solution.
- Then, observe that audience and detect their most critical problems. Select the most critical problem among them. Validate: Make sure the problem is truly critical, people are already looking for solutions, and it can’t be easily ignored or delegated.
- Then, envision a solution that solves this problem within the workflow of your audience. Validate: Make sure that your solution doesn’t have unintended side-effects and solves their problem without adding more additional work.
- Finally, and only now, think of the product. In which medium do you need to provide your solution? Will it be a mobile app? A SaaS application? A platform? Now is the time for the “idea” and the “product.”
If you follow these steps, you will notice that your “idea” has to wait. It’s not a stroke of genius that comes out of nowhere, but rather, a carefully deliberated consequence of three distinct validation steps. It would be best if you learned first who is out there, what struggles they genuinely have, and how you can best help them. This way, your product’s chances to succeed are much higher than going with a completely unvalidated “idea.”
A Pragmatic Approach to Audience Exploration
The goal of this article is to help you find that initial audience. Let’s start with exploring which audience fits you best, and make sure it’s capable of supporting a business. In my mentoring work, I have discovered a five-step approach that produces remarkable results. It will allow you to find an audience that you can serve for a long time — and that will serve YOU for equally as long.
I will suggest pragmatic steps you can take to find your optimal audience. Don’t follow those steps blindly, as they might not work as well for you as they have worked for me or my mentees. Find what works for you, and use this as the foundation of your own personal framework to tackle these problems. This five-step approach will give you data: numbers that you can inspect, weigh, and draw conclusions from. While those conclusions will be highly unique to every founder, collecting the information is very straightforward. It will give you insights into yourself that will be extremely valuable for deciding something as important as selecting the audience that you will need to work with for many years.
The result of this exercise will be a list of audiences that you can help by building a product that solves their critical problem, resulting in the opportunity of building a sustainable business. It will be a ranked list, with the most likely candidate audiences on top, and less interesting ones on the bottom.
You’ll need to take a few notes during the process. Start with an empty spreadsheet, putting “Audience Name” in the first column.
Step 1: Awareness — Think of Possible Audiences
To find a niche audience that will allow you to build a great business, you will first need to become aware of it. Some niches are clearly visible, and some are somewhat hidden. This step is concerned with finding them.
The goal of this step is to find a group of people you want to help. It should be a well-defined group, best centered around a common interest or activity.
A tribe will work best. Tribes consist of people who share an interest, are highly interconnected, and follow the same leaders. They make for wonderful niche audiences. You might be part of quite a few tribes at this very moment.
Start with yourself, then expand from your inner circle towards the outer boundaries of the people you know.
- Which tribes do you belong to? What communities are you part of, consciously (because you participate, like being a Chess club member) and unconsciously (by affiliation, like being a sports fan)? It can involve virtual communities and real-world groups alike.
- What hobbies do you have? What do you enjoy enough to spend money on, even though it’s not essential? Examples here are things like craft beer or fixing up old cars. Find activities you have a budget for.
- What professions do you have? What kinds of jobs have you been doing throughout your life? What types of professional communities have you been part of?
- What is your significant other doing? Which groups do they belong to that are different from your groups? Which groups did they belong to before you met? When they were kids, which clubs and associations were they part of?
- What groups do your parents and siblings belong to? What jobs are they working in, what groups do they hang out with for fun? What are the things that you talk about at family gatherings, about which they have surprising levels of insight?
- What are the social circles you frequent? Which kinds of people do you interact with? Think of a party you’ve been to recently or another social gathering. Who are the types of people you click with most, and what do they do?
The list you came up with from this exercise should contain a few dozen audiences. Let me give you an example of what my personal list would look like:
For each audience on this list, I either am an expert, or I have direct access to an expert in my circle of friends and family. The full list I have collected over the last few years contains at least 300 different audiences. I bet you can come up with at least 100 distinct groups of people within a few hours.
Another way of finding audiences that you might not already be aware of is by looking at the things around you. For every object you see, think about 1) who made it, 2) how did they make it, 3) who it is for, and 4) how it is used. While 1 and 4 give you audiences immediately, 2 and 3 allow you to think about the interactions that the object went through either while it was made (think of all the many businesses and activities involved in the production chain of something like a sheet of paper: forestry, logging, paper mills, distribution, sales, marketing) or while it is being used (let’s stick with paper: pen makers, printer factories, publishers, editors, book club organizers, wedding table card printers). Most objects, when examined like that, will bring to mind a few dozen audiences.
You’ll be done with this step when you have a few dozen, best around a hundred or more audiences. You’re trying to find so many to open up your mind about what different things people do and group up around. It’s important to step out of your comfort zone and expand the horizon of what you can work with. The real impact of transferable skills lies where they have not yet been transferred to. You are trying to find those places here.
Step 2: Affinity — Find Out How Much You Care About Them
With a list of possible audiences and niches, you now need to weed out the markets you don’t care about. No business was ever successfully built by a founder who didn’t care about the people they were selling their product to. You need to care to help your customers genuinely, or you will lose interest in providing value to them at some point.
This is a very subjective step in the process. You will need to think for a few minutes about the kinds of people you expect to work within each industry. This is best done by asking yourself a few questions for each audience and giving every audience a score.
Add a new column to your spreadsheet, called “Affinity.” For every row in your spreadsheet, you will need to produce a rating between zero and ten. Zero means that you don’t care about serving this audience at all, and ten means that you want to devote your life to serving the people in that niche.
To find out how much affinity you have for an audience, ask yourself these questions, and quickly note down a 0–10 rating for each.
- Do you think the audience members need help that has not been given to them in the past?
- Do you think that the members of this audience deserve to succeed much more than they currently do?
- Do you imagine conversations with these people to be interesting, fruitful, and enjoyable?
- Do you see a more profound reason, a passion that drives the members of this audience to do what they do?
- Is the audience doing something meaningful?
- Could the people in this niche be doing something more substantial?
- Do you think you would benefit from learning a lot about the work in this niche?
When you have answered all these questions, add up the point values you gave and divide them by the number of questions you asked yourself to find the average. This number is an indicator of how much you care about the audience.
Once you have done this, sort your list by the affinity average, descending. That view alone is often eye-opening, as you will see clusters appear. There will be a cluster of things you care about because you are part of those audiences. That’s a great source of potential businesses, as you will be solving your own problems. Another exciting cluster is the group of audiences that you are genuinely interested in because a particular passion or a mission drives them. Here, you will find eager audience members, willing to try out anything that makes their job easier, because they believe it’s an important job to do.
Beware of prejudices at this stage. I suggest talking to your “resident experts” for each niche to get a feeling for the audience from the inside. Only then should you step through the questions.
Move the audiences with an affinity of 5 or less to another sheet of your spreadsheet. They’re not prime targets for now, but you might change your mind later. We’re interested only in audiences you care about at this point, as this will be a requirement for spending significant time and effort on the exploration and validation that follow now.
Step 3: Opportunity — Find Out If They Have Interesting Problems
With a trimmed-down list, you’re ready for the next step. For each audience, you will want to find out if they have any interesting problems. You’re not looking into finding their critical problem just yet, as you will only take a quick cursory view into your audience at this point, but be on the lookout nonetheless. If you see something that they really need help with, that’s a good sign.
For each audience, do the following things to find out if they have interesting problems.
- Find a few SaaS products in their space and see what problems they solve. Are these genuinely exciting problems? Does solving these problems make a difference in a good way?
- Find a community forum or social media group where your niche audience hangs out and go through their recent posts. Are people struggling with things that you would find interesting to help them with?
Here are a few places to start looking for this information, with examples for an example audience, plumbers:
- Watering holes. These are the informal communities of your niche. This is where they gather without being asked to, where they exchange information freely and without supervision.
- Facebook groups, e.g., “Plumbing Hacks And Plumbing Professional Discussions.” You might need to work a bit to get into these groups, but explaining that you’re interested in helping people and promising not to post advertisements will usually do the trick.
- Reddit, e.g. the “Plumbing”, “HVAC”, and “Construction” subreddits. People ask a lot of questions on Reddit, and they talk very openly about things they dislike.
- Twitter, by exploring the #plumbing hashtag and following and engaging with the experts who use it.
- Self-hosted communities, like PlumbingZone.com (a forum with over 30.000 professional members) or PlumbersForums.net. Spend a few hours reading the threads and follow all links to further communities and blogs to find the experts and thought leaders, then follow them on social media. The more the community looks like a website from the 90s, the better. Older communities attract and contain a lot of industry veterans.
- Slack communities. Many trades and industries have Slack groups where experts interact on a daily basis. Use Slack community discovery platforms like Slofile or many others to find potential candidates.
- Formal communities. Most trades have some organizational bodies like associations and guilds that form some sort of virtual communities. For our example, the “United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada” has a website that contains a community and listings of subchapters. Just sending an email to community representatives or a phone call can put you in touch with the right people.
- Event resources. Find the trade shows and conferences of your audience and check out their websites. Which vendors were present? What topics were discussed? Usually, keynote speakers and their talks are listed, if not even recorded.
- Literature. Every industry has writers who publish papers, books, articles, or comments. Find the popular books in the niche, read them, or find summaries to get a quick glance into the topics they cover.
I recommend spending an hour for each audience on your list. Dive as deep as you can into the industry to see what problems and complaints you can surface. Make a note of what exists, what doesn’t exist, in particular, what you thought would exist but didn’t. This is an indicator of the potential transfer of knowledge that you might facilitate.
For every row in your audience list, take a few notes about the problems you encountered (best done outside of the spreadsheet, in a Google Doc or a Notion document), and add another 0–10 value column indicating how interesting those problems sounded to you. Move the rows that don’t have exciting problems to another sheet, just like you did with the low-affinity rows.
Step 4: Appreciation — Find Out If They’re Willing to Pay
In this step, you’re trying to figure out if your audience has a budget for a solution to their problem. That’s more likely in some audiences than in others: a haircare product supplier business with hundreds of employees will have no problem paying for a customer relationship management software. In contrast, a hairstylist, although they also work in the beauty industry and have to build relationships with their customers, might not have any budget available or wouldn’t pay for this at all.
For each audience in your list, look for signs of the following:
- Purchasing agency: Can the people you’ll be selling to make their own decisions when it comes to buying a professional tool? Will you have to make classic sales, or can you sell in a more low-touch, highly automated way? The less work and the fewer people involved, the better.
- Budget scope: What kinds of budgets can your prospective customers in this niche usually spend on products and services? Look into other services that cater to your prospects to see how they are priced. Think about if people are even aware that they have a budget for professional tools.
When we sold FeedbackPanda to online teachers, they often didn’t even understand that they were self-employed businesspeople. Sometimes, you will need to create awareness within your niche that they could improve their ways in a tax-efficient manner.
The more agency and reliable budgets you find in an audience, the better. If you see people complain about solutions being too expensive or that they should be free, you can usually dismiss that, as these voices appear in every industry. However, if this is the consensus within the communities you find, beware. You might run into walls trying to convince people to exchange money for services here.
For every audience that you think is likely to pay or can be convinced to start budgeting for a solution to their problems, add another 0–10 value to their row in your list. Move the audiences that have no clear indicator of purchasing intent to another sheet.
Step 5: Size — Find Out If This Market Can Sustain a Business
The last step of finding a good audience for your sustainable bootstrapped business will make sure your business will actually be viable. Once you’re done with this step, you will end up with a list of businesses that you can build solutions for with a high chance of turning that into a business.
For bootstrappers, a market has to be both large enough to sustain your business, and small enough not to attract giant competitors. To be able to find this “Goldilocks zone,” you will need to know how big your business will have to be to support you. For some founders, this will be $10,000/month in after-tax earnings, while others will need this to be much more or a bit less.
Take that number, double it, and divide it by the price that you think your audience would pay for a software product. That will be the number of customers you need to have, at least, to get to your desired income levels.
Let’s look at an example. Let’s say you need $15,000/month to support yourself and your family from your SaaS. Doubled, that is $30,000. You have found that in your niche audience of “artisanal beekeepers in New Jersey,” the average budget for a bee-tracking SaaS is $15/month max. You need 2,000 customers. You need 2,000 artisanal beekeepers in New Jersey. If you look up the New Jersey Beekeepers Association (and yes, that exists), you find that they have eight chapters with a lot of emails and phone numbers on their website. Call a few of them and tell them that you love beekeeping and would like to help your local honey producers. The person on the other end of the line will be able to tell you immediately if you have your 2,000-people-strong audience or not.
I’ve done this multiple times, with a lot of industries. It is always very insightful, and once you know the size of a market, you have valuable information, even if you don’t get into that particular industry.
Other sources of quickly determining market sizes are social media group user counts, trade show flyers, industry reports, and sending emails to podcast hosts in niche industries.
Spend as much time as you need to figure out if an audience is big enough for your business. Then, make sure there are not millions of potential customers in your niche. If you own a small, bootstrapped, sustainable business, you won’t have the resources to go up against gigantic competitors with deep pockets. Your niche should not be attractive enough for those businesses.
Looking back at the beekeeper example, if your audience is anywhere between 2,000 and 40,000 beekeepers, that would be great. Anything bigger might mean competition from much larger businesses that sense the opportunity to take over your niche completely and serve all beekeepers everywhere.
For each audience on your list, add another 0–10 value indicating if the niche is sized just right for your bootstrapped business aspirations. Ten should be a perfectly sized market. Zero is a market that is either way too small or way too big. Move the audiences that don’t fit onto another sheet.
Tallying the Results
You now will be left with a number of audiences that have passed the following checkpoints:
- You’re aware of the niche
- You’re interested in the niche
- You’ve found interesting problems in the niche
- You’ve seen signs of interest to pay for solutions of the niche
- You’ve found that the niche is big enough for your business
In your spreadsheet, create one final column, adding the point values for each row. Then, sort the whole table so that the highest total point values appear on top.
A quick side-note: this is only a framework that you might want to customize for your own needs. You can add more columns with other considerations, or change the range of values for each column to reflect how important that particular consideration is to you. At it’s most basic, this spreadsheet will give you a hint of which audience is the most likely to allow you to build a successful and fulfilling business. I wouldn’t overcomplicate this process too much — and I’m saying this as a software engineer.
With this list, you are ready to choose your audience. Once you have selected one of the items on your list, I suggest doing another deep dive into the industry. Read up on the history of the trade, see who already sells into the industry, and how they speak to their customers.
After this point, you will stick with your audience and focus on helping them solve their problems. Finding and validating their critical problem is your next objective. Once you have done that, you can work on your solution and implement your product — knowing that you are building for a validated audience.
The great thing about this exercise is that you don’t only end up with a few really interesting audiences to get started with right away, but you also have all those other audiences that got excluded during some steps along the way. In the future, either when you sell your business or when the world changes in a major way, you’ll already have new audiences waiting to be explored again, with fresh eyes. It’s a backlog of pre-validated audiences that you know you could serve. Talk about a safety cushion.
But for now, stick with the audience that the data says is the best choice. Dive deep into the communities and tribes, and figure out what those people need help with. From there, you can build a sustainable business that solves their problem in a validated fashion, without any guesswork.