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  • Writer's pictureSylvester

Risk Footprints & Exit Strategies: How to Prepare for Failure of Your MVP

You know how the song goes, “You gotta know when to hold ‘em, know when to fold ‘em, know when to walk away.” This is sometimes the hardest part of starting a business venture or building a new product. Failure is scary, especially when there is a lot of money involved, and some business leaders are more inclined to ignore the possible risks than to face them head on and prepare for the possibility. Here’s the irony: when you prepare for failure, you’re better equipped to succeed. In this post, we’ll walk you through how to assess your risk footprint, metrics to help you evaluate your status, and response strategies when your MVP is struggling to survive.  

Know Your Risk Footprint Before You Build

As mentioned in our post, “Five Features of a Cost-Effective Dev Strategy,” a crucial step in the business development process is to define the cost of failure so that you, your business partners, and your investors can understand the potential risks and look for ways to reduce that “risk footprint” with a lean strategy. Your market research and the development of your product and technical strategies are important preparation that should help clarify the hurdles your product might face. You can prepare for those hurdles by building as much flexibility as possible into your plan. The cost of failure needs to be less than your total project budget so that you have the capital to adjust, iterate, and pivot without rocking your financial stability.  

Is Your MVP Struggling? 3 Signs to Watch For 

As we covered in our post, “Meaningful Metrics: How to Measure Your MVP’s Success,” Key Performance Indicators (KPIs) and metrics play a crucial role in assessing the viability of not just your custom solution, but your business. Some business leaders and developers might argue, why build analytics into an MVP if the results are going to be statistically insignificant with your initial user base? But there are a couple of risks with this mindset. First, you can’t accurately define KPIs without metrics, which means you can’t plan for your product’s failure or success. Second, statistical significance is not the only reason that metrics matter. When you’re pitching your platform to investors, they’re looking for signs that your team is building with growth in mind, and that you have your finger on the pulse of your product. They need to know that you’re not building blindly, and that you’re prepared to adjust strategy if there are signs that your MVP is struggling. 

With that being said, here are three struggle signs to watch for: 

  1. Lagging revenue metrics. The most crucial metrics that determine the viability of your product are those related to revenue. The MVP that gets built ultimately has to serve the greater well-being of the business, otherwise it isn’t serving its intended purpose. If your Cost Per Acquisition, Conversion Rate to Paid, Average Revenue Per User, Customer Lifetime Value, etc., aren’t trending towards sustainability, this is a red flag. It can take a lot of time and iteration to reach revenue KPIs; the data points along the way are there to help you define your product’s viability and know whether it’s time to pivot or pull the plug.

  2. Limited user engagement. We cover this in our Meaningful Metrics blog, but acquisition and engagement metrics are key indicators of whether users want/need your platform, and whether they want to stick around once they’re there. If user engagement is lagging, it’s time to dig deeper with customer interviews and surveys to find out whether their issues can be corrected through feature iteration, or whether it’s a product-market fit problem.

  3. Negative user feedback. Evaluating user feedback from interviews and surveys requires discernment on your part, but fundamentally, it comes down to whether the overarching theme of the feedback highlights specific actionable, feasible next steps for iteration, or whether it signals a fundamental lack of market resonance. Let’s say you’re building a B2B enterprise platform to accelerate transactions between small businesses. The platform costs $10/mo, and would require roughly 8 hours of user setup (importing documents and data, customizing policy preferences, etc.) If the user’s feedback is, “This is too hard to use. I don’t think I’d put time into it to make it useful for me,” this might seem like an opportunity to iterate and make the features easier to use. But we would argue that it is actually a warning sign of poor product-market fit; the user is telling you that their problem isn’t serious enough, and your product isn’t good enough, to make it worth their while. 

How to Choose an Exit Strategy When Your MVP is Struggling

Once you know your risk footprint and have your finger on the pulse of key performance metrics, it’s not only important to give yourself the flexibility to succeed, you also have to create contingency plans for possible failures. What if your product struggles to gain traction with users? What if you struggle to gain another round of funding? How will you know when your MVP is in danger of real failure – which metrics should you be watching for? When is it appropriate to pivot and relaunch, and when is it appropriate to cease operations? These are the questions your team needs to spend time with in the early business development stages. You might face unexpected challenges you couldn’t possibly have accounted for (looking at you, global pandemic), but contingency plans based on concrete KPIs will prepare you for making mission-critical decisions in the heat of the moment with clarity and integrity.

If your MVP is struggling, you only have so many options. To decide which exit strategy is most appropriate, you need to pay attention to what the overarching themes of your user feedback are highlighting about your product’s potential:

  • Iterative Improvement and Relaunch – As mentioned in the above section on metrics and feedback, iterative improvement and relaunch is only a viable option if your users are giving you concrete, actionable feedback to improve your product, e.g., “I need to be able to import my data from my pre-existing tool” or “I need to invite my co-worker to collaborate with them on the platform.”

  • Pivoting to a Different Market or Niche – If persistent user feedback indicates a stronger demand or untapped opportunities elsewhere, then you might find success by pivoting to a new market or new audience within the market. Is there another use case for your existing product features that makes sense? For example, if your education-focused MVP faces limited traction with school systems, you might pivot to the corporate training market. You’ll have to conduct new market research to find viable alternatives and determine whether the pivot is feasible. 

  • Licensing or Selling the Technology – This is rarely an option for most MVPs unless the technology you’ve created is particularly unique. Generally speaking, an MVP isn’t developed enough to make licensing or selling worthwhile for buyers, and all the more true if it is struggling to gain traction with its intended market and there is no clear pivot to another niche.

  • Ceasing Operations and Lessons Learned – It’s tough but true, sometimes products fail. They fail most often because the business runs out of capital before they can achieve product-market fit. Again, be mindful of user feedback – is their problem serious enough, and is your product good enough, to attract and retain their business? Sometimes our ideas just aren’t strong enough to pass the test. In this scenario, there are a lot of logistics to work out, from contract considerations to user transition strategies, but the bottom line is to lead with transparency and integrity. Your investors and key stakeholders have been generous with their time and money, your employees and developers have given their all to building this product, your users have given you their data and money. Be honest about the path ahead, and take time to conduct a post-mortem so that your team can learn from the experience and use those valuable insights for future ventures. 

Your Guide on the Path to Success

You have to be a bit of an optimist and a risk-taker to found a startup or build a new product. After all, the average fail rate of new startups is nothing to sneeze at. But there are steps you can take to reduce your risk footprint, and we have some ideas about that outlined in our new eBook, “Founders’ Guide: 4 Mistakes to Avoid When Building an MVP.” Filled with insights from Mile Marker CEO Daniel Litvak, who has brought more than 30 products to market to date, this eBook is a crucial resource for founders and business leaders like you who want to learn to spot the risks, account for them in your business plan, and succeed. Download your copy today.

About Mile Marker

Mile Marker is your strategic partner for Agile software development. Created for founders, by founders, we offer strategic software at startup speed. We specialize in aligning your technical work with your business goals through collaborative planning, offering a multidisciplinary development team, and ensuring ongoing support for your software. If you’re searching for a software development company or need a technical partner, start the conversation with an introductory call.


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