A friend of mine has been making small-batch, killer fudge out of her kitchen and selling out batch after batch. Her packaging is very urban hipster and she gets a good profit margin on every batch. Today she uses the (very) small business to fill in the gaps in her family’s monthly budget. She was approached by a friend representing a potential distributor who wants to include her fudge in his line of foodie-targeted products. After saying “no” repeatedly because scaling the business would create disruption in her already busy life, she decided to consider the question and formed a small team to help her think it through.
One of the first questions to answer is: “Who is the customer for this product?” The team member who brought the distribution opportunity thinks that the audience is definitely hard-core foodies. This is the best fudge he’s ever eaten, it’s got a great artisanal story, and the packaging is on point. He’s got lots of ideas for foodie distribution channels and pricing is extremely elastic for that market. Sounds great! But until we have data to support the claim, it is only an assumption. Fortunately, my friend has a record of everyone who has bought her fudge over the past 9 months. We looked to her records to validate the assumption and…most of the buyers are not what you’d consider foodies.
This doesn’t mean that the assumption is wrong; foodies might be a very attractive market for Artisan Fudge, but they aren’t her current market. So we need to gather some data to validate or invalidate the foodie assumption. We don’t have any money and very little extra time, so we need to approach this in a low-fidelity way. Here are our next steps:
- Interviews with past customers – We’re going to go talk to people who have bought Artisan Fudge in the past and understand their motivation. One doesn’t normally think of fudge as solving a problem (unless you’re an emotional eater, but that’s a totally different blog post)
, but something drove her customers to spend their hard-earned money on a premium-priced dessert.
- Interviews with foodies – My friend knows a guy who has a very successful smoked meat business. He sells turducken for $450 at an upscale farmer’s market outside of Washington, DC. We’re pretty sure that hard core foodies are the only ones who would lay down that type of green for their Thanksgiving protein. We’ll ask him if we can speak to a few of his customers about desserts.
- Set up an experiment to test the foodie market – What if my friend could share that farmer’s market table for one Sunday only and see how the product sells?
Within a few weeks, we’ll have data on the Artisan Fudge customer today and the potential of the foodie market. That will allow us to make an initial set of decisions about whether and how she should expand her distribution. After that, we can work on the rest of our long list of assumptions, validating the most critical and unknown among them.
Remember, if your team is disagreeing about some aspect of your business plan, you are probably talking about an invalidated assumption. Stop arguing and start working on how to validate it!