Background:
Mike Trotzke is CEO of Cheddar, a Bloomington, Ind., firm within the portfolio of SproutBox, a development company he and Marc Guyer co-founded in 2008. Trotzke and Guyer also co-founded Worldview Multimedia consulting in 1996 and sold it in 2000. They then launched Resite Information Technology in 2001 and sold that in 2007. Cheddar is a usage-based billing platform driven by an application program interface (API) that allows platforms to communicate in real time.

The Mistake:

I never worked at another company, so I had to jump into things to learn how they are done. One of the things I talk a lot about is smoke testing. You test a product’s marketability before the product exists. It’s pretty practical to someone starting anything.

One particular company I worked with built an entire application going through our development process. They spent hundreds of thousands of dollars to build something no one ever downloaded or used. This comes from making a product and not doing any testing of whether anybody would use it.

It was a customer-service app for geo-location-based customer service. You pull up the app and you can complain about the food you just had. The app contacts the owner and manages your request for contact. People can pay to have that immediate contact.

The main method to distribute this app was to put up signs asking people to call a number if they have a complaint. Why not put up table tents first and see how many people downloaded the app?

After that mistake, they started running Google ads and Facebook ads. For example, “This product is not available in your area yet, but we’ll notify you when it is.” The idea was to see if the messaging on Facebook would draw people in. You could sell it through a placard on a table.

The Lesson:

What’s interesting and what I found through smoke testing is that we ended up building different products because of it. We would start testing the messaging first to see what would get traction, and that would define what we build. You have the same amount of effort and work taking that approach.

But at the end of the day it means you have a better product because you’re actually building what a customer is seeking. You figure out how you’re going to sell the product. In software, that is the biggest factor in price. You get that right and you start to learn.

I used Facebook versus Google. You get to understand if you have to push or pull the product. Do I need to explain this or tell someone about it? No one ever searched on Google for a social network that limits me to 140 characters. Twitter was not necessarily something people were looking for. There are other things people are already looking for.

You can find out before you build your product. That defines your pricing and the team you need to hire. It makes for a better product and gives you the information you need to build the company. Most importantly, if it doesn’t work, you have not lost money. You’ve spend a few hundred dollars on advertising versus a few thousand dollars building something people don’t want.

Follow Cheddar on Twitter at @get_cheddar.