There’s no excuse for creating a product that doesn’t sell . . . yet many new entrepreneurs continue to spend significant amounts of time and money building products that no one will buy. That’s why Justin Mares, the 26-year-old founder of the bone broth company Kettle & Fire, made sure he validated his business by getting people to pay him money before he even had a product.
He did that by answering two questions: How many people want the product, and will they spend enough to sustain a meaningful business? It took Mares two weeks to answer those questions, and only then did he invest his time and money in developing his product.
Thanks to the success of his bone broth business, in just 10 months the company has generated more than seven-figures in online sales, and has since expanded its distribution to wholesalers, including Whole Foods and Thrive Market.
Intrigued? Me, too. That’s why I sat down with Mares to learn exactly how he validated his business in two weeks, with just $100, and no product.
Strong pain point + high demand + low competition = exponential growth
Mares came up with the idea in 2014 when he couldn’t find bone broth to buy. At the time, the only way to make the nutritious food was to make it, which took 20-plus hours to cook, and to track down ingredients like grass-fed bones that were difficult to source.
To find out if enough people experienced the same problem, Mares went to Google Trends and Keyword Planner to research keywords related to bone broth. He verified that at least several thousand people were searching online for a product that didn’t exist. With a strong pain point, high demand and few other companies capitalizing on the up-and-coming health trend, Mares realized that he could make a business out of it.
The importance of acquiring paid customers
This is where many beginner entrepreneurs would get distracted by preemptively looking into suppliers and packaging design, and understanding the existing food regulations. Instead, Mares knew that he still had to verify that his customer segment was willing to spend enough money to make his a long-term and sustainable business. Here’s how he did it:
1. Building a simple website
Rather than spend thousands of dollars to hire a web-development firm or looking for a technical partner, Mares used a drag-and-drop website builder to create his first landing page. The design of the site was dated, but Mares recognized the importance of copywriting to get his message across. He wrote a clear headline, used power words and clearly communicated the benefits of the product.
2. Selecting the pricing and payment
To keep things simple, Mares connected the payment button to his personal PayPal account. He then set the pricing at $30 for a 16-ounce product. Here’s Mares explaining the thought process behind his pricing: “I figured that I could easily sell bone broth at a profit if I charged $29.99 for 16 ounces, and I’d be able to see how badly people wanted the product. If they were willing to pay nearly $30 for 16 ounces of a product they’d never touched, tasted or smelled, I figured this was a good idea.”
3. Attracting visitors to the website
After the website was set up, Mares used Bing Ads to drive traffic to the site, as in his opinion, they offer a more cost-effective method for testing business ideas than Google AdWords. With $50 worth of ads, Justin was able to convert 17 paying customers who sent him money directly to his personal PayPal account.
This validated that enough people were compelled by the offer -- even with a preliminary checkout flow -- and that this was a product they wanted. In two weeks, Mares was able to net about $500 in revenue, without yet having a product or business license.
4. Fulfilling the orders without a product
Obviously, Mares couldn’t ship a product he didn’t have, so he sent an email to the paying customers informing them that the product wasn’t in stock, and that they could either receive a full refund or get a 50 percent discount if they were willing to wait a couple of months for the finished product. Further, Mares avoided any customer complaints by giving a full refund to anyone who requested it or who didn’t reply to his email.
Investing money and time to build the business
According to Mares: “Even with an imperfect checkout flow, and with $100, I was able to confirm that people were willing to spend $30 on my product. Once I accomplished that, it was just a matter of finding more of those people and fulfilling their orders.”
Rather than find customers for his product, Mares was able to find a product for his customers. He did this by acutely targeting his customer segment and obtaining actual presales to get enough feedback that his product had sufficient demand for a viable business.
Maybe Mares' approach isn’t the right fit for your business, but I’d argue that his process of finding willing customers before sinking a ton of upfront capital into developing a business is something all entrepreneurs should consider. If your idea winds up being a dud, you're better off knowing that after a $100 investment than a $100,000 one.