Are you building a product/service that is not viable?
90% of founders waste 6 to 18 months of their time and tens of thousands of dollars before realizing this.
But what if you could avoid this costly mistake in just 5 minutes?
Ash Maurya, creator of Lean Canvas, shares a simple yet powerful “Rapid Viability Test” that has saved founders millions. Based on Fermi estimation, this test helps you answer one crucial question before you write a single line of code: “Should I build this?”.
Here is the link to the YouTube Video this article is based off of:
How I Helped Founders Save $2,000,000 Using This Simple Test
Most business failures occur before product development even begins. Take CloudFire, for example – Ash Maurya wasted 9 months and $47,000 building a photo-sharing product with 500 paying customers, only to discover its business model was mathematically unviable for growth targets. This test helps prevent such heart-wrenching scenarios by revealing fatal flaws early. It’s designed to validate your business model’s viability in minutes, not months.
Your 5-Minute Rapid Viability Test: A 3-Step Action Plan This test forces you to think deeply about your business model, not just your product.
1. Step 1: Goal Sizing – Define Your Minimum Success Criteria.
◦ Forget 5 or 10-year forecasts. Instead, ask: “What’s the smallest outcome that would make this startup worth 3 years of my life?”. Three years is typically enough time to achieve product-market fit.
◦ If you’re seeking investment, this often translates to a $10 million Annual Recurring Revenue (ARR) business by the 3-year mark. This becomes your target revenue goal for the test.
2. Step 2: Customer Sizing – Estimate Annual Revenue Per Customer.
◦ Don’t defer pricing. It’s integral to your product, customer base, and market viability.
◦ Determine “How much would a single customer pay you annually?”. Be realistic, but for this quick test, rounding up for simpler math is acceptable.
3. Step 3: Market Sizing – Calculate & Verify Customer Need.
◦ With your annual revenue per customer, calculate: “How many customers do I need to hit my minimum success criteria?” (Target Revenue / Annual Revenue Per Customer).
◦ Next, verify if your target market can realistically support this number of customers. Consider conversion rates – a 1-3% conversion rate is typical for $50/month products. Even at high conversion rates (20-50%), a broken model will quickly become apparent.
◦ Remember, Fermi estimation doesn’t require perfect numbers, just accuracy within an order of magnitude.
The Power of Pivoting: Steve’s Story – Steve initially envisioned a VR platform for price-sensitive software developers, aiming for $50/month. To hit a $10 million ARR goal, he’d need 10,000 customers from a market of only 2,200 (or 22,000 with 10x growth), requiring an impossible 300,000 to a million leads. The model was broken.
Instead of giving up, Steve asked, “What if I could charge 10 or 100 times more?”. He pivoted his customer target to architects, who could justify $5,000 per project, or $50,000 annually per firm. Suddenly, he only needed 200 architectural firms, a highly viable number given 70,000 firms in the US alone. The same technology, a different market, a viable business. This test not only reveals flaws but guides you to a path of success.
Once your model passes this 5-minute test, you can then refine your estimates with tools like the Traction Roadmap to create a more accurate, milestone-driven timeline for implementation and growth in 90-day cycles. This crucial validation step will save you months and potentially millions in wasted resources.
Your Action Checklist:
Rapid Viability Test Checklist:
• Define Your Goal: What’s the minimum annual revenue (e.g., $10M ARR) that makes this venture worth 3 years of your life?
• Size Your Customer: What’s the annual revenue you expect from a single customer? (e.g., $1,000 or $50,000)
• Calculate Customer Need: How many customers do you need to achieve your annual revenue goal? (Goal / Annual Revenue Per Customer)
• Size Your Market: Is your total addressable market large enough to realistically provide that many paying customers, considering typical conversion rates?
• Analyze & Pivot: If the math doesn’t work, can you adjust your pricing, target customer, or solution to make it viable?
The video has a link to the FREE Toolkit.
Enjoy: SAW 0038
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