Most new businesses do not close because their owners were lazy. Many close because too few customers needed what was on offer, or needed it badly enough to pay for it. The scale of the risk shows up in BLS data. Of the private-sector business establishments that opened in March 2013, 34.7 percent were still operating a decade later, and the sharpest drop came in the first year, when the survival rate fell by 20.4 percentage points. Those figures count establishments rather than companies, and they do not explain why any single business closed. They do show that the early months carry the most risk.
That is a good reason to spend your first weeks on the most important question a founder can ask: is this a problem that enough people have, often enough, to support a business?
Why the problem comes before the product
A product is a guess about what will help. A problem is something you can observe in other people’s lives. When you start with the problem, you stay open to different solutions. When you start with a product, it is easy to keep defending it after customers have shown they are lukewarm.
Steve Blank, an entrepreneur and educator who helped shape the lean start-up method, made this case in Harvard Business Review. He described founders who treat their business model as a set of hypotheses, test them with customers, and revise them quickly. In his account, that habit greatly reduces the chance of spending time and money on something nobody will pay for.
Look close to home
Some of the best ideas come from frustrations you or your neighbors deal with every week. What takes too long? What do people drive an hour to get? What do local businesses still do by hand? Which shop closed and left a gap that nobody filled? Keep a running list for two weeks before you choose one. Writing problems down as you notice them works better than trying to brainstorm at a desk.
In a small town the number of possible customers is limited, so the problem needs to come up often. A problem that appears once a year is hard to build a business on. One that appears every week gives you repeat customers and word of mouth.
Test whether the problem is real
A problem is worth building a business around when the answers to these questions are clear:
- Who has it? You should be able to name a specific kind of person or business.
- How often does it happen? A weekly problem is stronger than a yearly one.
- What do they do about it today? If people already spend money or time on a workaround, the problem is real.
- What does it cost them? Lost time, lost sales, and stress all count.
- How many of them are within reach? Count the people you could serve by driving, delivering, or shipping.
Check the size of the market
The SBA recommends answering a short list of questions before you commit. Is there demand for what you plan to offer? How many people would be interested? What are typical incomes and employment levels where your customers live? Where are those customers, and can your business reach them? How many similar options already exist, and what do customers pay for them?
The location question deserves extra attention in rural areas. Draw a realistic circle around your business, whether that is a 30-minute drive, a delivery route, or a region you can serve online, and estimate how many people inside it have the problem. If the number is small, look for a way to widen the circle or choose a problem that repeats often enough to justify a small market.
Write it in one sentence
Try this format: [Type of customer] struggles with [problem] because [reason]. Today they [current workaround], which costs them [time or money].
For example: Farm families in our county struggle to get equipment repaired quickly because the nearest dealer is 45 minutes away. Today they wait days for a technician, which costs them a harvest window. That example is invented to show the format, but a sentence like it gives you something specific to test.
If you cannot fill in the blanks, you do not know enough yet. That is fine. It means the next step is to talk to people.
Do not fall in love with a solution too early
It is easy to get excited about an app, a product, or a service and skip past the problem. Stay curious about the problem for as long as you can. When you understand it well, the right solution is usually simpler than the one you first imagined.
Your next step
This week, list every problem you have noticed, pick the one that comes up most often, and write your one-sentence version. Then name ten people who have the problem. Our guide on how to talk to customers before you build anything shows you what to ask them.