Access Your Audience Profitability

Profitability assessment is a part of Audience Discovery framework that helps us build startups profitable from day 1. To cap up, in my previous blog posts I talked about Ways to define your affinity (if you missed it - here's my blog post on this) How to test the affinity (the quiz) How to search for communities you want to serve using social platforms and tools like SparkToro (here's a link to the list) How tp make a slightly deeper research on every community by assigning tags and running some basic data analysis (see how we did it here) How to research alternative solutions and assign an opportunity score (in the same article ☝️) ​ Now, it's time to decide is there actually a business for you within these communities. In other words, are they paying customers. Or, to put it in an even different way, are their pains in this community that are strong enough that people would be willing to pay you for a solution. Getting back to your probable manual for this journey - Arvid Kahl's Embedded Entrepreneur — what does he recommend? There are obvious signs to look for when you have to decide if there are paying customers: Purchasing Agency. Can the people you're going to sell make their own decisions when it comes down to paying for your product? For instance, you want to draw a series of cartoon books. Does it make sense to target 3-5-year-olds? Probably, yes, because they will be your readers. But they don't have a purchasing agency — meaning, you'll have to target their parents as well. That leaves you with 2 target audiences = a higher marketing budget. Make sure you have it before diving in. Budget scope. What kind of budget do people in your audience spend? It's pretty easy with the B2B segment as you know exactly how much HubSpot subscription costs. So if you want to build another CRM you already know the pricing policy. You can make it slightly higher but not x2 or x3 higher without making sure your product is x10 times better which is almost impossible to achieve. As soon as you figure out these two parameters, start drawing a very basic budgeting plan. How many customers would you need to build a comfortable living keeping in mind that they will not pay more than the market average? For example, you're thinking of building a product for no-code developers. You're not sure what exactly it would be on this stage, but you've found this audience and more or less analysed their pains. You know that most of them pay $5-15/months for various products that help them build no-code apps faster (UI/UX kits, plugins, etc.). Let's presume you need $10k/ month to feel comfortable (can be any number, I've taken it as an example). Add about 35-40% in taxes plus your own expenses on the infrastructure, email automation, sales, marketing, etc. = about $19K. Meaning, you'll need 1900 paying customers every month if we presume the average price for a service to be $10. How likely is it? It's all very general. The average can be not $10 but $17. Also, taxes in your country can be 6% or 46%. You might need $2K, not $10K for a comfortable living. But you've got the idea. Do this very crude Math to figure out your odds of living happily on the income you're about to generate by serving this audience. Sometimes, you'll have to admit that the odds are very low. The next step, as usual, is to assign the Profitability score to every audience. From 1 to 5 where 5 represent your highest odds to live on this business and 1 - your lowest. But hold on a sec! Personally, I would not recommend whooshing over this stage so fast. In my experience, there are so many points where you can take a wrong turn or assume the wrong things. You see, your mind is biased here by several aspects: you like the audiences you're researching and you want to find something you can build your business on the platforms you've been researching are biased on their own. How so? Let me give you an example. Here's the data I've got while analysing the Audience that got to the top of my list - Parents of picky eating kids. Let me just backpedal a bit. I'm a mom of 2 very picky eating kids, so I feel a strong connection with this audience - this is why it got maximum points on my Affinity score list. I analysed the market, and found that there are several interesting solutions with paying customers there: First, there are several paid for newsletters on this subject that claim to have up to 10K subscribers. Secondly, there's a subscription based service where you can get a weekly list of recipes for picky eating kids for $9/month. Thirdly, there are plenty of apps in the App store that address this problem. Where did I see an opportunity? All of the apps target parents with kids that are 4+ yo. They allow kids to track their progress, gain scores, whatever. You can't offer something like this to a toddler. While parents with picky eating toddlers are actually the ones that suffer the most. First, when parents are on maternity leave they are more involved in the feeding routine than when their kids are in pre-school. Therefore instances when they experience feeding drama are more numerous at an early age. Secondly, when parents only get this problem on their hands they are surprised to say at least and presumably try to find the solution. In 2-3 years, by the time their kid is 4, they find something to deal with, and stop looking for anything else. This was my working hypothesis that I was about to prove or disprove. As you can see, the data told me a different story. Parents of toddlers (I tried to run a research on their posts) were mostly concerned about social aspects of this problem. They were sharing wins and mostly ranted how exhausted they were, how much they needed moral support. What insight would you have drawn from the data above? 1. Does it mean that I should start thinking of a solution that would provide mental support and offer the sense of community to the parents? Like a Facebook group but better? A community on Circle, perhaps, where parents would share their wins and there would be votes and badges for the Parent of the month, and the parent who managed to feed their child more times with healthy food would be praised and awarded with something? And add a 24/7 service with volunteers who would provide mental support? Plus tons of recipes and simple search over all resources. 2. Or, perhaps, the data just tells me that people come to Facebook and Reddit to rant and rave. They ask professional advice from their doctor, not on social media. That's why I have this heavily biased data from social media. How do we find out which presumption is correct? We run customer interviews! You can refer to my article here to find out how to run customer interviews on a low budget. Also, you can get my free Comic booklet DO's & DON'Ts Of Customer Interview based on the amazing book Deploy Empathy by Michele Hanson. To make the long story short: I ran 10 customer interviews with parents of picky eating kids. My group was of a diverse demographics: 90% Females (admit it but in my experience most of dads just follow the list it's hard to find a different attitude on a $100 budget) Location - USA and Canada Household income (annual) - $80-100K, $100-120K, $120-200K Working/ Stay at home First child/ Not the first child The results were unambiguous: having a picky eating kid is an IMPORTANT but NOT URGENT problem according to the Eisenhower Matrix. It is historically focused on productivity but I found that it works well when you try to decide what people are actually ready to pay for. Mostly, people pay for solving Important and Urgent problems. With Not Important but Urgent it works more or less too. But everything from the right side is a swamp for effort and energy — you won't be able to build a profitable business on it. More on Eisenhower Matrix here​ Let's cap it up Though there is a purchasing agency and a budget scope parents of picky eaters are an audience with a low Profitability score. Customers are very vocal about their problems but they don't look for a solution and are not ready to pay for them, as customer interviews have proved. ​

Access Your Audience Profitability

Profitability assessment is a part of Audience Discovery framework that helps us build startups profitable from day 1. To cap up, in my...