I get it; you’re excited about your business idea. You’re now an expert at something and decided to take the brave leap to leave your job and become an entrepreneur.
Maybe you’re taking all those years of product design experience and launching a packaged food brand. Or, after a decade of grinding at an agency, you’re branching out to work with your own clients.
I’m certain you have the skills to deliver something truly valuable and unique to the world. But here’s the kicker. It doesn’t matter.
I’ve seen plenty of aspiring entrepreneurs race to execute their ideas, but they all fall into the same trap. They perfect every detail of their business except the one thing that will guarantee its success–customer acquisition.
It’s fine if your branding is a work in progress. It’s okay to wait until later to automate all those time-consuming tasks. Even what you sell can evolve as you learn more about what people want to pay for.
Of course, you need to offer something people actually want to buy. But I’m confident you already obsess over your product or service, so let’s put that aside for now. What I want to drive home is that you need to obsess just as much about how you’ll get customers as you do about what you’re offering.
The one thing a business can’t survive without is revenue. And revenue requires customers.Casey Milone
How I did it wrong
The first business I ever founded was a small restaurant in downtown Vancouver. I was young and started it without a clue about what I was doing. We had a great location with a lot of foot traffic. We had a small, focused menu that people really enjoyed. I worked my ass off to keep operating costs low. I even spent some nights sleeping behind the bar so I could open the next morning. We didn’t have the budget to hire more staff.
I put everything I had into that place, developing a kind of entrepreneurial grit I didn’t know was inside of me at the time.
We closed after nine months.
I assumed that opening the doors would be enough, that “if you build it, they will come.” We did have some loyal customers, and we saw enough walk-in traffic to keep the lights on. But we never really acquired enough new customers to turn a profit that we could reinvest in things like staff or advertising.
I spent those nine months working in my business rather than on my business.
What I would do differently
At the risk of dating myself, this business venture I’m referencing existed (and failed) before social media was a thing. Most restaurants didn’t even have websites at the time. So, rather than speaking about what I could have done differently back then, I’ll outline what I would do now if I were going to start a small, service-based business today.
Keeping in mind that this mental exercise will only focus on getting customers. I know that you’re a badass who is going to make something great to sell.
- Build community first
Before investing any money in a new business, start building an online community around your area of expertise. Starting a housekeeping business? Get on TikTok and start sharing cleaning tips. The key to creating great content is to make sure the information you give away for free is better than the information other people charge for.
Lean into video, and don’t worry about production value–use the editing tools built into Instagram Reels and TikTok. Your audience doesn’t want to see slick, high-end edits; they want real content from real people. Remember, TikTok is where people go for value and Instagram is where people go for brand. If you're expert enough to start a business in your field, people will want to learn from you.
It isn’t enough to post ideas online; we need to have conversations with people. Respond to comments. Find people online who you admire and engage with their content. This will not only grow your online presence but also gives you an opportunity to learn from potential customers as things progress.
Repeat after me: You don't need to go viral. It's far more valuable to engage with 100 of the right people than to be seen by a million who will never become your customers.
- Learn who’s out there
One of the most valuable things you can get from a community-building approach is knowledge of your customers. You can also use social media as a tool to study other businesses selling in your space and observe what they understand about the people buying their products or services.
If you're starting something that’s location-based, like a specialty meal box, pressure washing business or as previously mentioned, a housekeeping business, look at companies outside your area and consider their methods for acquiring customers. Pay close attention to how those companies are engaging with customers online.
Going back to starting a location-based business, once you have a good understanding of who these people are, you can start to think about how many of these people actually live in your area.
Maybe your cleaning business should focus on Airbnb listings. How many properties are in your town? How close together are they? Could you make multiple bookings in a day, or will travel time between them make that unrealistic?
Now that you’re building your online community and getting a clear picture of the kinds of customers you want, it’s time to have a lot of conversations with these people. And I mean, a lot of conversations. This may sound ridiculous, but see if you can get a minimum of 50 different people to talk to you about what you plan to sell.
If you’re opening a restaurant, this could be as easy as walking around the area you plan to open up in and asking people if they would like to chat about your venture. Be prepared with a list of questions, but leave some open-ended. If you have interviewed between 50 and 70 potential customers, you will have done the one thing that will really give you a competitive edge: took the time to learn your customer and learn how to sell to them.
- Sell what people want
This one will be hard. Now that you’ve invested all this time in learning about your potential customers, listen to what they say. So often, we go into entrepreneurship with a clear dream. We design the perfect product or develop a new take on a service that we know everyone will love. When we design products and services based solely on our preferences (or if we give in to confirmation bias in our research), we risk creating something that only appeals to ourselves.
No matter how brilliant your idea is, it’s not a business unless people want to pay for it.
There's a chance that after all this customer research, you’ll discover you’ve hit a home run and everyone you talk to is head over heels for your idea. But more often than not, you’ll learn new things about what people really want, by spending all that time getting to know them. Or even better, you’ll discover things you hadn't previously considered. In my case, I found out I was pricing my services too low.
- Scale up with your revenue
This may sound simplistic, but it’s important to pair spending milestones with revenue growth, and there are plenty of good examples of how to do that. Two well-executed examples of restaurants doing this took place here in Victoria, Canada, over the last couple of years. Dumpling Drop is one of my favorite restaurants in town, but they didn’t open their physical location until they had established a clear demand for their signature dish.
Dumpling Drop’s name is actually a callback to its founding business model. In the early years of operation, they spent the week making and pre-selling delicious handmade dumplings. Then, once a week, they posted a location around town for people to pick them up. The result was a devoted online community eager for their dumpling fix. All this before ever opening a restaurant.
Another interesting local example of this method is Syriana Restaurant & Catering, a catering company turned restaurant that built up a strong following during the COVID-19 lockdown. Before opening a physical location, they sold items from their catering menu exclusively through Facebook Marketplace.
This customer-driven growth strategy can be applied to all kinds of businesses and has the potential to minimize debt or other forms of capital investment. It also has the added benefit of forcing a business to follow its customers’ interests as it grows, rather than trying to lead customers towards a predetermined idea of the business owner.
- Learn what it costs to acquire a customer
Cost per customer acquisition, or CAC, is a term frequently used in the tech startup community. It refers to the total cost it takes a business to attract a new customer. This can include expenses like advertising, direct sales, social media marketing, or any activity that one uses to reach out and convince a customer to buy.
This way of thinking lends itself to advertising tools like Facebook or Google Ads, which have reporting features designed to track this metric. However, it can also be applied more broadly.
All you need is a way to measure the number of new customers acquired over a period of time. Then divide the total expenses to acquire new customers by that number.
Imagine you're running a home-based pet grooming business. You've been putting up flyers at local pet stores, creating a bunch of TikTok videos about grooming, and running Google Ads to promote your Google Business listing.
To understand CAC, you would track the time spent putting up flyers and creating social media content (assigning an hourly cost to that time), add that to the money spent on Google Ads and divide that total by the number of new customers. This calculation will give you an average dollar figure for what it costs to bring in new business.
The next step in this process is to understand the customer's lifetime value, or CLV.
CLV is a metric that indicates the total revenue a business can reasonably expect from a single customer throughout the relationship. This calculation needs to be developed in a much more personalized way for each business. I’d recommend starting your research with the link above.
The key takeaway is that your CAC should be substantially lower than your CLV. Or, to say it without all the acronyms: It should cost you much less to acquire a new customer than the total amount they'll spend with you as an ongoing customer.
Is all this work really worth it?
The short answer is yes. Starting a business is already a daunting undertaking. Trust me, I’ve done it wrong, so you don’t have to.
There’s already so much that goes into developing a product or service that’s good enough to sell. Building a website and the branding, scraping together the capital needed to launch, and learning to do the million other things that cost too much to outsource in the early days (for me, this was bookkeeping, ugh).
The idea of layering in this other huge project of customer acquisition can seem unrealistic.
But I’m here to tell you that the stress of doing it upfront is way less than the financial stress that can come if it’s not done at all.
Entrepreneurship has a staggeringly low success rate. In my opinion, a lack of customer research and a poor understanding of customer acquisition are the leading causes of these grim stats. Don’t be another cautionary tale. Get intensely curious about your customers. They are your path to successfully launching your company.