Building a product today isn’t as challenging as it used to be. With automation tools, fast website platforms, DIY builders, and countless innovations, getting started is easier than ever. However, building a successful product goes beyond just creating something. It’s about choosing the right platform to present your idea, delivering the right message to the right audience, and doing it all with purpose and meaning.
Having a team of experts backing your idea and guiding you through the process—from scratch, with care, focus, and strategy—can make a world of difference. Today, we want to introduce one of the tools we use: Letters of Intent (LOIs) for SaaS validation. Consider this: if you’re an early-stage founder, especially if you’re non-technical, building a product without proper validation can be a costly mistake. In fact, 42% of startups fail because they create products with no market need. To avoid this, you should focus on validating your idea before jumping into development. One of the best ways to start on the right foot is by using a powerful tool called the Letter of Intent (LOI). This tool demonstrates customer interest before you even write a line of code. However, using an LOI isn’t just about collecting signatures—it’s about leveraging it as part of an experiment to gather insights into desirability, feasibility, and viability. In this post, we’ll show you how to conduct this experiment, what success and failure look like, and how documenting these insights can help you refine your product idea.
Why You Shouldn’t Build Without Validation.
Building without validation is like flying blind. You risk wasting time and money on a product no one wants. Instead, focus on customer conversations, data collection, and feedback loops to ensure that your product addresses real needs. According to CB Insights, lack of market need is the top reason startups fail. To avoid this fate, you should validate three key factors:
- Desirability: Do people actually want this?
- Feasibility: Can this product be built?
- Viability: Will it be profitable?
Project Example: When Jules struggled to gain traction in the market, we implemented an LOI experiment to validate market demand before investing in further development of their digital product. By engaging directly with their target customers, we saved tens of thousands of dollars and months of development time—proving the power of strategic validation over guesswork.
How to Document the LOI as an Experiment.
Once you have gathered all the ideas, information you need, we can move on to effectively secure LOIs. It’s important to treat the process as a structured experiment using methodologies like Strategyzer’s “Testing Business Ideas.” And for you we’ve broken it down into a simple guide based on the DFV we used before:
Step 1: Document Your Hypotheses Start by writing down your key assumptions:
- Desirability Hypothesis: Do people really want this? Will it address their pain points?
- Feasibility Hypothesis: Can we build this? Are there any technical barriers?
- Viability Hypothesis: Will our target audience pay the price we intend to charge?
Step 2: Design the Experiment Frame the LOI as part of an experiment to validate these assumptions. Your goal might be to secure 10 LOIs in four weeks from potential customers who agree to a pilot test. Measure success by how many LOIs you receive and the insights gained.
Step 3: Conduct the Experiment Once your LOI is ready, use a pitch deck or prototype to communicate the product’s value. Track desirability (enthusiasm for the solution), feasibility (technical challenges mentioned), and viability (willingness to pay).
Actionable Tip: Use these conversations not only to secure a commitment but to uncover deeper insights. Ask questions like:
- What is your biggest pain point with user engagement?
- What tools are you using today to solve this?
- How would this solution fit into your workflow?
- If you had a magic wand to solve X problem, how would you do it?
- How much is this problem costing you today?
These insights will help you refine both the product and your understanding of the customer’s needs.
Success and Failure Criteria for the LOI Experiment.
Once your LOI is ready, use it in conjunction with a pitch deck or prototype to reach out to potential customers. Each conversation should be treated as part of the experiment to gather the data you need to start building your own learning on your market, users and buyer persona. For example:
- Desirability: Are ideal customers convinced about the product and its ability to solve their problems?
- Feasibility: Are there any technical challenges mentioned during the conversations, such as difficulty integrating with their existing systems and tools?
- Viability: Do customers show interest in transitioning to a paid plan after the pilot? What pricing feedback do you get?
Success Criteria:
- 10 LOIs signed within 4 weeks.
- Positive feedback on the product’s potential value.
- Confirmation that the product can integrate with essential systems and tools.
Failure Criteria:
- Fewer than 5 LOIs signed, signaling a misaligned value proposition.
- Feedback that reveals technical barriers or lack of enthusiasm for the product.
- Lack of interest in transitioning to a paid plan after a free pilot.
If your experiment fails, don’t panic. Use the feedback to revisit your product’s value proposition, adjust your target market, or refine your pricing strategy. In today’s digital landscape, validating your product concept before development is essential. Tools like LOIs provide critical insights into market demand, feasibility, and profitability, ensuring you build a product that resonates with your audience.
Here at Nolte, we help founders like you make data-driven decisions and avoid costly missteps, guiding them through each stage of the product life cycle. We can help you avoid costly mistakes and, most importantly, build products that people actually want.
Download our free templates for Experimentation Using LOI.
Ready to turn your vision into reality?
Get in touch with us to learn how we can support you in running these crucial early-stage experiments.