How to Identify and Kill Bad Startup Ideas Masquerading As Good Ones (ITS Classic)

I'm Brian Squadato and this is the Idea to Startup Podcast brought to you by Tacklebox. We accelerate ideas into real companies through the Tacklebox membership and we think through Startup Strategy every Wednesday on the Idea to Startup Podcast. You're here because you're thinking about an idea, or you're ready to launch something, or you already launch something and you're running full steam ahead. We're here to help with the counterintuitive stuff. Onto it. Today, we're going to help you kill some bad startup ideas that are masquerading as good startup ideas. This actually might be my core value. And if that sounds a bit odd as I run a business to help you start startup ideas, it shouldn't. Having a framework to tell you how and when to kill the bad ones is a huge part of being an entrepreneur for three reasons. First, working on the wrong idea means you aren't working on the right idea. Second, startups are going to be emotional as hell and give you more mixed signals than your ex. So, having objective framework that will help you separate yourself from your idea to evaluate whether it's worth continuing is essential. And third, having that objective framework will help you identify new ideas that fit it. If you don't know what you're looking for, you're never going to find it, which again is something an ex might have told you, or maybe I'm projecting. Anyway, the best strategy I can find continues to be striving to be less stupid rather than striving to be smarter, and this is a great opportunity to flex our not stupid muscles. More than 50% of our most successful founders from tackle box are running businesses they didn't show up to tackle box with. We helped them kill the thing that didn't have potential and helped them find the thing that did. I have an inbox full of emails that say things like, "I cannot believe I was about to spend $50,000 on a dev shop for that idea." So today, we'll wait into the logistical and emotional waters of your ideas true potential. The framework we're going to use has three pillars. First, finding and evaluating the real risk of the idea. Second, predicting its organic growth potential. And third, predicting whether you'll actually be able to get a first batch of customers to convert. You're going to have tons of confirmation bias around your idea, and all babies are cute. So the job of the framework is to balance that out and to be inherently skeptical, like a bouncer checking IDs at a college bar. We'll get our answers for all three pillars with data from customers. None of these answers are sitting around in your apartment. As always, going through these things with an idea is way more fun than going through them without one, so we're going to zoom into our mini-time machine to go back three weeks to when I got my favorite type of email. This subject line read, quote, "This idea probably stinks, but I still can't figure out why." I was intrigued. I read on. "Hey, bud," the email started. "Nope. I love a "Hey, bud." It usually lets me know the person isn't going to be asking for something or selling me something. Please don't use that little bit of knowledge for evil salespeople. Don't kill Hey, bud." It continued. I listened to the episode where you spoke about the dig out of a whole markets. The markets where the fundamentals simply don't work. You mentioned electricians and plumbers. I think the exact stat was that 10,000 electricians retire each year and only 7,000 join the industry and that there will be a shortage of about 600,000 plumbers by 2027. As it is note, the numbers are spot on. I'll link to the episode he's referring to in the show notes. Well, he wrote, "I have two brothers. One is an electrician and the other is a plumber. And I can confirm they are absolutely swapped. I work in tech and I don't make even close to as much money as they do, but the work is brutal. They're basically on call seven days a week and they get calls at every hour of the day. And since they can't risk a bad review on Google, a single scathing one star review from someone who's toilet flooded saying the plumber didn't get there when they said they would consync a small business. They have to stay on call. Their family always jokes that they're drug dealers because at dinner they have two phones each sitting on the table, neither ever stops buzzing." The email continued, getting to the idea. When I asked them what's changed about the industry the past five years, they always say two things. First, there's more inbound and fewer competitors, so they're completely overwhelmed. And second, now their whole business runs through text message. This seems like it'd be more convenient, but it's actually a disaster, a short two-minute phone call becomes a long text thread where the customer might not answer for 20 minutes. My brothers end up texting all day while driving the jobs, which means they either need to pull over every two minutes or drive and text, which is dangerous. So my idea is an AI for plumbers and electricians and contractors and whoever else spends their days texting with customers. My brothers say 98% of the texts ask the same questions. We could easily build a database of responses and have the AI answer scheduling things, give ETAs, even pricing and maybe invoices. Then we could set it up to prompt Google reviews, which is the lifeblood of the industry and way more effective over text. It basically be like a personal secretary handling customers all day, but for 150th of a cost. So my question is, what do you think? What do I think? I don't know, bud. From the outside looking in, it looks kind of tasty, but I'm curious to see what our system has to say about it. The one thing I do know is that based on the description of this person's brother, being a plumber sounds pretty draining. Sorry. Let's all forget about that joke and toss this idea into the gladiator ring and see if it gets the dramatic thumbs up or thumbs down. We'll pick it apart. After? A little smooth jazz. Hey, we've changed tackle box a bit. It's taken a long time, but we did it. It is now a three month program built to help you test, build and decide on an idea before you quit your job. 90 days to get something up and out and find out if anyone cares. We'll give you a clear path in six coaching sessions along the way. It's 20% off now at gettaclebox.com with Code Winter 2025. Let's build some stuff, huh? Back to it. Part one, how to find and evaluate the real risk. When I ask founders about the risks of an idea, they always talk about the risk to them. They won't be able to find a developer or they won't be able to raise money or they won't be able to get another job if the thing they're building fails. Sure. This is natural. I call it Harry Potter syndrome because in our own little movies, we're all Harry Potter, the chosen one, the boy who lived. No one ever envisions themselves as Ron Weasley or heaven forbid, never long bottom. But in the wise words of my dad, no one cares about you. No one is thinking about you, ever. You're a bit part in their movie, which means we need to see the world through their eyes, not ours. And that is the risk piece. Humans by nature are not apex predators. We are middle of the food chain, which means we're nervous and angsty and skeptical and our first instincts aren't about the potential and opportunity you might provide. It's about the risk it might bring. Loss of version is our core driver. Human nature certainly isn't changing, so we've got to live in that world where potential downside drives decisions, not potential upside. We need to know what the biggest risk our customers think we present is because that'll be our biggest first obstacle. The way to view the risk as an entrepreneur isn't as something we'll need to tip to around, but as our single biggest opportunity. Our job is to flip the risk so our customers see it as a strength. That is how all the best businesses work. You show up and are meaningfully, unapologetically different and different for a reason. But that means you have to make different, palatable. There are two parts to this. First, the deeper and more urgent of a whole your customer is in, the more willing they'll be to try something different to get themselves out of it. If you're drowning and someone throws you a rope, you aren't going to ask if it's organic. Selling to customers with urgent problems is easier than selling to customers without urgent problems, which is a wildly obvious statement. But one, I wish I could force entrepreneurs to repeat into the mere 10 times before they went to bed each night. Every business is a business of trust. In the amount of trust you need to build before a sale is in direct relation to the size of the whole your customer is in. Your goal is for the customer to be in the position where they say, "Hey, I will try anything." And second, you need to immediately call out the risk your customer sees in your different approach and hit them with a counterintuitive and sometimes a little bit obnoxious. Well, actually, as to why this approach is in fact less risky and gives them a dramatically better chance of reaching their goal than the status quo. Here is an example. Here is a company in Tacklebox right now launching their own conference. This is in an industry that historically has tons of conferences. These conferences are always in places like Vegas and there are booths and parties and awkward happy hours or people shake wet hands after holding sweaty hikens and I'd imagine everyone goes home with at least like three swell bottles. Anyway, this company realized that the reality of these conferences are misaligned with their stated goals. If you're looking to leave a conference with 40 new strong targeted relationships, it ain't happening. If, on the other hand, you're looking to leave with a hangover and a robe you took from the belagio, you're in luck. So their conference is going to be virtual and targeted. You are put in 15 Zoom meetings a day with highly vetted potential partners for a 20-minute intro, pitch, or demo. You also get access to a portal which has more information on everyone attending and everyone you met with. There are satellite locations you can go to in person if you want where you can mingle and hope for a little serendipity, albeit with regional people which is important in this business. The conference was built from the ground up by saying if we wanted to help people make lots of great connections in a short period of time in 2023, how will we do it? You'd assume that since this conference is virtual, it's less expensive, but in fact, it's more expensive. You're able to do this by calling out the risk with marketing like this. Quote. A virtual conference that gives you 10x better ROI than an in-person conference ever could. We help you get in front of 40 to 60 people who can change your business in a setting where you can best show off your value. Or you can get cornered by three random people for two hours in a holiday and express in Scottsdale. Your choice. They don't shy away from the fact that it's a virtual conference and that everyone will think that's a risk. They charge at it, like Buffalo to a storm. Put the risky thing in big, bright lights, address the elephant in the room, then explain why it's actually better. The risk is important to think through early on because humans don't make decisions in a bubble. They ask their friend or boss or spouse. Someone on the marketing team says something like, "Hey, we're considering this virtual conference." And the boss says, "What the heck would we ever go to a virtual conference?" And the employee says, "Well, actually, it's much better bang for the buck if we're trying to get in front of serious prospects and give them our best pitch." I think a marketing early on is the argument you arm your customer with against the skeptical person who's going to call out that big risk. The, well, actually, that's counterintuitive, but makes it clear that you know what's really important for their business. The reason you're different is better. All the way back to our good friend with the plumber and electrician as brothers. I emailed him and told him to reach out to his brothers to ask why handing off communication with customers would be risky, why it would never work, why they'd never do it. He did and said the answer was clear. The text messages were customer service, and that was quarter their business. His brothers said that even if they screwed something up or took longer than they quoted or had to charge extra, if they were punctual, reliable, and responded to texts, if it seemed like you were available and cared, that superseded everything else. Good reviews, they said, weren't based on how well a water softener worked. They were based on responsiveness. They were based on giving off the feeling that when the customer spoke, they were listening. Interesting. And insightful. It's too early to tell, but if that's the risk, it's going to be tough. We're going to have to call it out and highlight it and beat it. So when an electrician tells their electrician, "Body, hey, I'm going to use this service that handles my texts," and the other electrician says, "Are you nuts? You're going to trust a freaking robot to speak to your customers. You can coach the first electrician through your marketing to nail the well, actually." Actually, they might say, "The response time is instantaneous since the service is always on." Also, the AI doesn't get frustrated and has the patience to answer endless messages from the customer, and the time estimates are better since it syncs with Google Maps or whatever. But now it's clear that if you're handling communication, this part is incredibly sensitive and needs to be addressed. And if you can't convince your customers to hand off the reins, the business is sunk. Customers own the risk, find it, then put it in lights. If your customer seems open to you flipping the risk, and if you have an idea that hits on that specific risk and mitigates it, then you've got a great shot. Nothing more powerful than a customer who says, "Well, actually," to someone skeptical of your business. Part two. Predicting the organic growth potential. Woo, that last one went a little bit long. Luckily, this one is straightforward and short, and my favorite, the value scale. I've spoken about Kunal Shah in the past, and I just cannot say enough about him. One of the best entrepreneurial minds out there. I'll post some of his stuff in the show notes for the curious. My favorite thing he talks about is the Delta 4 scale. Basically, if the current process a customer uses to solve a painful, urgent, frequent or expensive problem is a 4 out of 10, and you make something that's an 8 out of 10, two things are going to happen. First, your customer is going to change their behavior and adopt your thing. And second, they're going to tell absolutely everyone they know about it, and you're going to grow. This is how you predict organic growth potential. It's also how you predict a product customers will ignore. Here's an example of the latter. We've had companies apply to tackle box for years trying to replace Excel. There are certainly companies like AirTable or Notion that have offered tools to new customers that never used Excel, but basically every company around before 2018 uses Excel to anchor most processes at the company. And if you ask people whether they like Excel, sure, they'll say it's fine. Maybe it's a 6 out of 10. Maybe a 7? Some people actually love it and read it higher. The problem here is there isn't enough delta above a 6 or a 7 to build a new product. Theoretically you could build a 10 out of 10 out of a gate, but that's unlikely. Replacing a 5 or a 6 or a 7 out of 10 probably won't happen with your first product. You need to be hunting processes that are 4 out of 10 are lower. Anything good enough won't be replaced. Processes that are horrible will. And anything that doesn't improve more than a delta of 4 won't be bragged about. Incremental improvement isn't braggworthy, and no one brags about something that isn't braggworthy. Think about your life. What is the last thing you bragged about or heard people bragging about? So the big question becomes, is there a potential for a delta 4 jump for our friend helping out the plumbers and electricians? First, do they see the current process of texting and managing customers as a 4 out of 10 or less? And second, would there be a huge value jump if that was taken off their plate? I've said my favorite way to build products is to identify your customers entire process for getting somewhere they really want to get, then building a product that removes the hardest step. Is communication the hardest step? Is it braggworthy? Back to our friend. I asked him to talk to his brothers about this, to ask open-ended questions about the biggest problems they had that they needed solved, and eventually, if needed, to steer them towards this problem to hear how huge an impact it had solved, the results were mixed. Both brothers, our new friend, started listed a bunch of problems before communication. They talked about pricing. They heard that other small businesses were essentially implementing dynamic pricing when they were overbooked, charging people 3 or 4x what they normally would to push up in the line. They talked about gas prices from all their driving. They talked about onboarding new clients. When I asked about messaging customers, they said it was definitely annoying, but it seemed like it wasn't a 3 or 4 out of 10, maybe a 6 or 7, and each admitted that it was kind of nice to be the point of contact for their customers, to feel like you knew them a bit when you walked to the front door. So, indeed. If current messaging is a 6 or 7 out of 10, now, the idea is pretty well sunk. No one is going to adopt something for a Delta of 1 or 2, and they certainly won't brag about it, on to the wedge. Part 3. Predicting whether you'll actually be able to get a first batch of customers to convert. The last pillar of the framework is about conversion logistics. Can you actually get someone to buy from you? A great way to attack this one is to treat your startup like a much smaller project and ask the question, "How can I get started? What's the fastest way to execute on the core thing I'm doing?" Then, try to get a customer to work with you. The best way to do this is through a wedge product, and the way to find that wedge is through our old rivers and dams method. If you aren't familiar, I'll pop the episode on rivers and dams in the show notes. But the basic idea is that your customer is on a river to some place they'd really like to go. Along the way, there are dams. They're able to navigate some of these dams, but others stop them cold. Your job as an entrepreneur is to pick a dam and solve for it, to help them move further down the river. The dam you pick might not be the whole thing your business is going to do eventually. It's usually something very specific to your first customer. This acts as that wedge, and eventually you expand. There was a company called Manage by Q getting started in New York City maybe eight or ten years ago with the big plan of managing the cleaning, scheduling, logistics for all the remote and small mixed office spaces that were popping up. To get started, they focused on a specific dam in the river. Most of these smaller, shared co-working spaces didn't have someone sitting at the elevators to tell guests where to go. There were lots of companies in the spaces, so finding the person you'd come to have a meeting with was often tricky and embarrassing for the company that worked from that space. Manage by Q's wedge was simply an iPad that they gave to these work spaces to put at their front desk. When guests got off the elevators, they'd sign in and a message would be sent to the person they were meeting with to come and grab them. They built trust with this feature, then added more apps to the iPad, one for cleaning, vendors, maintenance, and on and on. You'll only be able to get first customers if you're able to offer a wedge product, something urgent and painful that'll create a Delta 4 jump. Even if it's a subset of the thing you're going to build eventually, you got to start there. Finding this is hard, and my recommendation is ethnographic research, just watching your customer go through their day, and that is what I recommended to our plumber and electrician friend. And he did it. He even went one step further. He acted as the AI, responding to all the incoming messages, his brothers got on their phones while he rode shotgun. That is how you start with a project. He ended his ride along with a ton of thoughts, by far, one led the pack, "It's nuts," he wrote. They drive back and forth across four or five towns all day. There is no thought put into routing. I asked them if they'd thought of this, and they said, "Of course, but there's so much more that goes into it when people are available, how long a job might take, something that's urgent that needs to get prioritized." Honestly, our friend said, "Messaging is definitely a problem. They get messages all day, and there are only like ten answers that the AI would need to learn." But they're so worried about the interaction. It might require too much trust to start, but I think there's something to routing. So I'm going to go on a few more ride-alongs and start figuring out the backend flows, where customers come from, how they sign up, how they get on the schedule. Maybe there's filtering to urgency, maybe dynamic pricing eventually. Right now, they use a few tools for this, but they don't really work. They're pretty broad, he ended. A great wedge is specific. When X happens, I need Y to happen. I asked a friend about that, and he said, "Maybe they can send me the jobs they need to get done the next week on a Sunday, and I can build out a plan for them that's based on shortest distance-driven, maybe." So our friend carries on, thrashing away, riding along his brother's drive from house to house, and I love it. That is the way to think about these things. And as I'm sure you've noticed, if you have access to your customers like that, gluing yourself to them is a superpower. Not to tie the wedge thing in a knot, finding that first problem is hard and critical. Treating it is a project. If you're in the business of helping plumbers save time, hop in the car with them and help them save time, is always the way to go. The answers are always as close to your customer as you can be. The end. Most startups fail, which is why you've got to be smart about jump-and-ship when the thing you're working on is heading that direction. Startups are a numbers game, the more you're able to do, the more likely you'll be successful with one. The faster you drop the bad ones, the more time you've got for the ones with potential. First, identify the core risk. See how your customers think about it, and see if you can flip it around as your differentiator. Second, gauge the step up and delta a solution would have for your customer. If you make the thing, is it brag worthy? Will they fall over themselves to tell people about it? Third, find a wedge and get started. A unique, specific problem that you can solve, pursue micro-projects to test it out. And if all else fails, it feels like we should all just be plumbers and electricians, right? It seems to be crushing it. That sure be a shock, like electrician, ugh, sorry. This was the idea to start a podcast brought to you by Tacklebox. It is now a three-month program built to help you test, build, and decide on an idea before you quit your job. It's 20% off now at gettacklebox.com with Code Winter 2025. Have a great week.