Why focusing on customers is critical for startup success

How was this content?

Launching a new startup is like swimming in a sea of possibilities. The cloud puts almost any business idea within reach and enables founders to dream big, but there always comes a time when those dreams must be tempered by reality, and that means working within the constraints of time and budget.

However, there is one other constraint that many founders don’t consider straight away: the limits of their own attention.

Running a startup often feels like juggling 50 competing priorities, and while this is often true, you can make this easier by actively choosing where to focus your mental energy.

Chasing the $$$

In the commercial world, businesses live and die based on their ability to make money. For startups, however, there can be a significant lag between hatching an idea and building a business that can earn real customer revenue.

This is why angel and venture capital investors are so critical to the early stages of a startup’s life. This early stage is often described as a startup’s “pre-revenue” period, and investors can prove crucial for providing the early funding needed to keep paying the bills until sufficient customer revenue kicks in.

However, the need for early investors can create a dilemma for founders. Many launch their startup based on their desire to solve a real-world problem for would-be customers, but quickly find they don’t have enough money to build everything they need to achieve that goal, and so investors become critical.

This means that, in addition to being focused on building something that solves a problem for customers, they also have to be attractive to investors. As a result, their customer focus can start to waver.

There is only one focus: customers

At Amazon, we believe that focus must always be on the customer. Our business is built around 16 core Leadership Principles, and first amongst these is customer obsession. We believe that leaders start by considering the customer and working backwards to create the best possible outcome for them – and this obsession has proven critical for us at every stage of our journey.

Customers give your startup permission to exist. If a startup isn’t solving a problem for customers or delivering value to them in other ways, it will struggle to build a viable revenue base.

Customers also provide critical feedback at every step in a startup’s development, helping founders to know what features and benefits they should build, while helping them understand what isn’t working.

And, most importantly, customers give startups proof that they can build a viable business, by providing them with revenue. Even if the amounts might be small to begin with, they help validate the core idea. No matter how much money investors might be willing to pour in, eventually they will expect a startup to stand on its own.

This is why investors quiz startup founders about their customer acquisition and retention strategies and how much margin they believe they can earn from each customer. Any investor will be very keen to understand what you know about your total addressable market and the potential lifetime value of your customers, because this will paint the best possible picture of your startup’s long-term potential.

If a founder is not focused on customers, they won’t have particularly good answers to these questions, and the effort they put in to courting would-be investors will come to nought.

And nothing provides proof of value like a customer’s cash in your hands.

Balancing customer and investor needs

Putting the customer first does not mean putting investors last. There are plenty of ways founders can balance the needs of both:

  1. Ensure you are running your business in the leanest possible way.
  2. Rent the computing power you need using cloud services and only pay for what you are using when you need to use it.
  3. Maximize the value of the cloud services by using cost optimisation services.
  4. Take advantage of free training, tools, and development programs.
  5. Test out your ideas for free with credits from AWS Activate.

Use customer feedback to ideate, iterate, and improve

Your customers are an essential source of feedback you can use to shape what you’re building, so invest in tools and services that monitor how your customers are responding to what you are offering.

In the world of startups, this means testing lots of new ideas, and then watching how customers react. This “test and learn” approach can be critical for putting a swift stop to ideas that customers don’t like, allowing you to focus on the ones they love.

No startup will last for long without customers, and while investors may help you bridge the gap, no investor will be interested in your idea if they don’t think you’ll ever stand on your own two feet.

So, despite the numerous challenges and choices that will compete for your attention, maintaining a laser focus on customers will ensure you are focusing on the thing that matters most, and will help you prioritise how you invest your time, money, and energy.

How was this content?