In our exuberance for action, it's too easy to rush out of the building and start the problem discovery process. It's even possible to quickly find clusters of problems, pitch an offer, build a quick MVP, and charge from day one -- which sounds like exactly what we should do. So what's wrong with this approach?

The danger is that if you don't set your minimum success criteria (MSC) goal upfront and extrapolate it backwards, you don't know if your metrics are good enough until one day you realize that charging $50/year will require 200,000 paying customers to meet your $10M ARR goal. Worse if you factor in churn, that would require signing up 100,000 new customers a year which breaks the model. You are serving the wrong customer segment!

Here's the kicker, you didn't need to spend 6 months to build an MVP to get to this conclusion. You could and should have done this day one. The model would be much more viable if instead of $50/yr, we could charge $50/mo. That's a 12x reduction in the number of customers needed to hit the goal.

This begs the obvious and important question: Do we have a $50/mo problem we could solve?

Notice the framing, it's constraining the value of the problem, not some arbitrary price you stick on your solution. **

So the point of the traction modeling exercise is using your MSC goal to figure out what constitues a big enough problem worth solving to hit your goal.

There are really only two inputs here:

• the annual revenue per account (ARPA)
• the number of customers needed to hit the goal

And only five ways to hit the goal.

Christoph Janz, an angel VC, created a fun visualisation that uses a hunting analogy. Being a VC, his visualisation targeted building a $100M business at exit. We adapted this for the $10M ARR MSC shown below:

The power of this kind of thinking is realising that there are only five ways to build a $10MARR business in 3 years. It helps razor focus which customer you target (rabbits, or deers, or elephants, etc.) and define your customer acquisition strategy.

• Hunting mice, for instance, will require low cost of customer acquisition and aiming for organic channels - word of mouth, or virality should be a priority.
• Hunting whales, on the other extreme, would require long sales cycles with high-touch interactions with many actors possibly.

What if I have multiple price plans?

If multiple price points translates to hunting for multiple customer segments, as a startup you don't have the resources yet to build that. It's also a recipe for losing focus. Building a repeatable and scalable channel to just one customer segment is hard enough -- and all you need to hit the goal.

That said, it's perfectly fine to explore multiple customer segments (1-3) during the problem/solution fit process but the outcome shouldn't be pursing all of them, but pursuing the one most viable starting customer segment.