If you have ever been engaged in this process, you’ve probably had people send you articles about how shorting the page or lengthening the page or changing the sign-up button to blue/red/green/rainbow, or whatever they are supporting - increased conversions by 300%. And you’ve probably wondered how all of this conflicting data can be true. I thought about this recently when this article about burying signup buttons to get more signups made the rounds here at Backupify. Burying a sign-up button is counterintuitive, so why does it work?

The short answer is: the web is dynamic.

What I mean is, best practices for one type of website at one point in time are not absolute. Your website doesn’t exist in isolation, it exists out on the web, in relation to everything else. When people browse the web, they develop a set of expectations about how things should behave based on the sites they visit. So when everyone changes their website, it affects how visitors perceive your website, even if your website doesn’t change.

What it means for designing a new website is that you have to think about the right mixture of novelty and comfortability. If your page is too novel, people won’t be comfortable engaging with you. If your page is too average, you won’t stand out and won’t be able to highlight the most common action paths on your site.

The overarching lesson is that you need to be constantly changing, updating, experimenting, and measuring website behavior. Watch common trends (like the new long homepage format some companies are using) and try them on your site, to see if they work for your users. But whatever you do, don’t get bogged down in the “best practices” debate. It takes forever to resolve and by the time you agree on what the best practices are - they’ve changed.

Step 1: Release MVP, preferably for free.
Step 2: Get feedback, primarily from customer surveys.
Step 3: Iterate and improve until 40+% of your userbase says they would be really disappointed if your product ceased to exist.

It’s not quite that simple, but the steps are pretty well understood, and there are even some good baseline numbers you can use to qualify your application as having “product/market fit.” But here’s the problem… we treat product/market fit like it’s the holy grail, when it is only the beginning. Every startup I talk to is trying to get product/market fit, but very few seem to know what the hell to do after that. So for what it’s worth, here is my suggested playbook for the next phase - customer validation - based on what I learned at Backupify.

What Is Customer Validation?
Customer Discovery is about getting the product people want. Customer Validation is about finding a repeatable scalable business model around that product. Many first time entrepreneurs don’t realize that there are many good products that people love that are ultimately bad businesses. Customer Validation tries to figure that out as quickly as possible.

First Things First - State Your Sales and Marketing Hypotheses
At this point in your company evolution, you should have some general idea about how you will make money from this product. You should have talked to enough customers to understand what they would pay (or, who would pay to reach them), where they would go to find this product, the profile of the target buyer (it’s whoever is using your product, usually), how that person expects to buy the thing (does he/she need approval, for example?), and you should have an idea of how you would position and message your product.

Your first step is to write down all of these hypotheses. For Backupify, the most challenging part was defining the initial messaging and positioning. We are in a new market and so, like most new market startups, we compete more with indifference or other types of solutions rather than direct competitors. There isn’t a name for what we do, because “cloud backup” means “PC to cloud” and so there is no clear term we can use to harvest SEO or PPC demand. We sometimes say “cloud to cloud” backup, but that hasn’t really taken off. We also focus on “gmail backup” or “google apps backup”, but those have small search volumes.

So how do you position and message in a new market? You have to sell vision. Product features are less important at this stage because people don’t have established buying patterns or guidelines for the product segment. So, you have to talk about all the great things you can do now that you couldn’t do before, and tie into broader themes related to your product category. For instance, we tie into businesses moving to the cloud, and talk about backup as a best practice on premise and in the cloud.

Next, Figure Out Your Channels
Where do you believe you will connect with customers? Where will they hear about you? Where will they click through to go to your site? Where will they buy your product? Will they buy from you or from someone else? If you are a consumer product, you probably want to test some viral component, but we are primarily a B2B product, and backup is too boring to be inherently viral, so that wasn’t an option for us.

What we did at Backupify was run a lot of controlled experiments. In particular, we focused on 5 key direct lead gen experiments with 5 different sources, we experimented with the Google Apps reseller channel, we experimented with inbound (content, tools, etc), we experimented in the Google Apps Marketplace, and we experimented with cross product traction (a consumer version of Backupify that makes you think about a business version). Each turned out to have different advantages and disadvantages, and some didn’t work at all.

Focus on Your Cost to Acquire a Customer
Here is where I think a lot of startups make mistakes when going through customer validation. Too many focus on optimizing their funnel too early. In particular, they focus on visitor -> trial or trial -> paid conversions. Why? Because it’s more fun and internal facing to keep fixing your website or playing with your trial process. It’s like product work, and your early team was probably product centric, so they prefer it. If you do this, you are falling into the worst mistake that startup founders make which is doing what you like to do, or what you are good at, rather than doing what needs to be done.

Remember that your goal as an entrepreneur is to deploy capital effectively, and one of the most effective ways to use capital is to de-risk the business. This means investing in areas that help you learn about the market. The riskiest part of your funnel is the top of funnel, because that is the part over which you have the least control. Let me say that again. Focus on top of funnel the most, because that is where you have the least control. Your customer acquisition options are largely external and dependent on market structure, thus they are out of your control. Your conversion rates once users hit your site are primarily internal and under your control. If you find a scalable lead generation source, you can optimize later for visitor -> trial conversions or trial -> paid. Focus on figuring out what part of your customer acquisition costs are going to come from driving top of funnel. Obviously you will have to do some work on the site, building landing pages, etc. But 75% of your efforts should be on top of funnel.

Don’t worry about pricing at this stage. Don’t get hung up on gross margins. Don’t overanalyze all the pieces of your business model that you can optimize for later. Set a price, and focus on what it costs to acquire a customer because that cost is going to be a HUGE factor in how attractive your business model looks over the long term. In fact, I believe startups should understand COCA first, and build their business model around that later.

Test and Invest
This is the time at a startup where you can start to increase your burn rate a bit. It costs money to test customer acquisition, so don’t be afraid of that. At Backupify, we will allocate $10K - $20K to test a customer acquisition channel. Then if that channel is effective, we start investing more and more, slowly, making sure our results scale. This is ultimately what customer validation is all about. It’s about knowing that if I buy an ad at this place for $5000 and it generates $25,000 in long term customer value, then I still get a similar result at a $50K investment rate, or $500K, or whatever it is. You need to understand where you think your channels will max out.

How do you know if a channel is successful? We think of it in two ways. First, we have to do something, so back when none of our channels had attractive COCAs, we still invested in our lowest COCA channel, even though it was technically unprofitable. But as we ran more experiments, we measured them in two dimensions: COCA payback, and scalability. Those may not be the right dimensions for you. It depends on your product and market.

Optimize and Iterate
Once you find one or more channels to drive customers, then you can start optimizing the rest of your process. We have a certain target customer acquisition cost because we assume we can make it more efficient as we learn more and optimize everything else for that channel. And then, as the market changes and matures, you should revisit some of your old experiments and try them again, to see if they make sense.

How To Know When You Are Done
When you have iterated on your messaging, positioning, and funnel to optimize them for your best customer acquisition channel, you are ready to start scaling. This is where you invest more and more and make sure all your early results hold at scale. You should understand your metrics from top to bottom for this channel, and you should have a good idea how much money you can pour into it before these numbers break down from saturation. This is the point where you can finally build a reasonable revenue plan (even though your investors will ask you for one way way before this point) and start to measure yourself against the plan. As long as your are at or above plan and the customers are individually profitable, you can keep investing. For SaaS companies, investors usually want to see $2M - $3M in ARR before they feel confident you have validated your sales and marketing processes.

It has bothered me for a long time that so much is written about product/market fit, and not much is written about the next steps. Part of that is because the next steps vary more across business types than the early steps, but part of it is because customer development is overall relatively new, and not many companies have been through the customer validation phase. I hope this summary of what we did at Backupify is helpful. Feel free to email me with specific questions or comments.

My goal with this post is talk about Focus and what it really means. I will address some of the issues that cause different people to disagree on Focus and propose a way to think about Focus that I think may be helpful.

To set the stage, I want to use the company I know best, Backupify, as an example of why defining Focus can be elusive. Every CEO has to define what their company stands for, but this can often be done on many levels. When I define Backupify to investors, I talk about the long term future. I talk about building the defining data management and protection platform for cloud data. I talk about the data graph, all the things you can build on top of the platform once you understand how the disparate data sets for a company are all connected in a single data store. But I wouldn’t say that Backupify is “focused” on that. At the moment, we backup a handful of SaaS services but almost all of our revenue comes from Google Apps backup. If I want to define our Focus, I could do it at many different levels.

For example, maybe building a SaaS data management platform is too broad, so I will Focus and just build a SaaS data backup application. But that’s too broad as well, so maybe I will Focus more and just build a Google Apps backup application. But maybe that is too broad as well, so I will Focus even more and build just a Gmail backup application, ignoring the rest of the Google Apps suite. But then I could Focus even more and build a Gmail backup application that only targets companies with 100 or more employees. Then I could focus even more and add an upper limit, and build a Gmail backup tool that only targets companies 100 - 200 employees. Then I could Focus even more and build a tool that only backs up the last 10 days of email for companies with 100 - 200 employees. At first it starts sounding smart to Focus, but the mantra that more Focus is always better breaks down at some point and sounds ridiculous. You eventually Focus to the point where you just have partial product functionality or a very very small market.

And of course, outside of product dimensions and customer segment dimensions, there are other business dimensions where focus could come into play. Are you focused on revenue? On reaching cash flow breakeven? On market share? Or on sticking with your vision and your core product in your core market. These decisions matter. It seems like every B2B company will eventually face the dilemma where a large client representing significant revenue wants to buy their product, but wants some special feature or customization. Whether or not you do the deal depends on Focus. If you are focused on revenue first and foremost, you might. If you are focused on cash flow breakeven, you might, if the contract helps you get there. If you are focused on the long term, on owning your market segment, and this customer doesn’t fit your market segment, you will probably pass. So what’s the right answer? Are you focused? It seems like Focus can be interpreted to mean nearly anything. And the truth is, Focus is highly context dependent. So how do you know if you have Focus?

I think about 4 criteria when I think about Focus. What people really mean when they say you should Focus, is that you should Focus at the right level, in the right context. If your activities match up to these 4 criteria, I think you are probably focused. Here they are:

1. Goal Alignment - Your company should have some sort of goal or goals. Depending on your size and maturity, they may be short term goals or they may be longer term goals. If your activities are all moving you towards your stated goals, that is one step in staying focused.

2. Resources - Focus is highly dependent on level of resources. If you are Apple, you can be focused while attacking multiple markets with multiple new products simultaneously. If you have $1M in seed funding, you can’t. If you have Focus, you have a product scope and customer segment scope that is appropriate for the level of investment you can make.

3. Value Chain Consistency - Businesses are built around value chains, which are basically the way that you do things - the way you take inputs and turn them into outputs. Your value chain should be consistent. What I mean is, your overall strategy has to tie together and be reflected in the decisions you make at various points in your value chain. If an activity fragments your value chain, you probably don’t have Focus. For example, if your goal is to differentiate yourself in the market by having crazy good fanatical support, then activities/products/customer segments that you engage where support doesn’t matter or fanatical support is hard to deliver, etc, then you probably aren’t focused in those situations. On the flip side, if you serve one customer segment, and almost everything is the same to go after another customer segment because buying behaviors, price and packaging expectations, support expectations, etc are all the same, then you can probably still have Focus while going after more than one customer segment because your value chain remains the same.

4. First Things First - Peter Drucker says “Do first things first and second things not at all.” If you are engaged in activities that are moving your “first thing” forward, then you are probably focused even if, to an outsider, you don’t seem to be.

If your activities meet these 4 criteria, then in my opinion, you are probably focused.

The problems with understanding Focus are that it means different things to different people. It is also highly context dependent, and has a lot to do with available level of resources. If you are a first time entrepreneur, everyone will inevitably tell you that you need Focus. You will think you are. They will tell you that you aren’t. If you really think about it, you will start to get confused about how you know if you are focused. Some companies that seem to be all over the map are really quite focused. And some that seem to be very straightforward and focused are actually all over the map when you look behind the curtain. The key is to think about what the right level of Focus is for your company, in your context, with your level of resources, with your stated goals. It can be a little slippery, and Focus will inevitably change, particularly in the early days. But think it through, then stick to it, and reap the rewards of Focus.