Rules of Thumb

Key Principle

Collected heuristics from across the 24-step framework, organized by phase. Each rule is a one-line actionable guideline distilled from Aulet's methodology, with step source for traceability.

Why This Matters

During execution, founders need fast reference points -- not full re-reads of methodology. These rules serve as guardrails and diagnostic triggers. When a rule is violated, it signals a specific step that needs revisiting.

Market Selection (Steps 0-2)

• Audit yourself across eight dimensions (knowledge, capability, connections, capital, name, experience, passion, commitment) before picking an idea (Step 0).
• Segment markets by end user and task, not by purchasing institution or technology capability (Step 1).
• A market opportunity = a specific end user + one or a handful of applications (Step 1).
• Do primary market research; if a complete report already exists, someone else has likely already entered (Step 1).
• Listen in inquiry mode; if the customer senses a sales attempt, data quality is destroyed (Step 1).
• Observe end users working -- "people sometimes say things that are contrary to how they actually do things" (Step 1).
• Narrow to 6-12 candidate markets using the seven criteria, then pick one beachhead (Steps 1-2).
• A group is one market only if all three conditions hold: similar purchasing, similar sales cycles, word of mouth between them (Step 2).
• Pick a beachhead and commit -- the greater risk is over-analyzing rather than acting (Step 2).
• Resist the optionality trap: deselecting markets is not surrendering upside, it is concentrating force (Step 2).

Customer Definition (Steps 3-5, 9)

• The End User Profile must make the customer feel like a real, identifiable person -- if a team member cannot picture a specific human, it is too vague (Step 3).
• Choosing who not to serve is as important as choosing who to serve (Step 3).
• The deepest pain signals are identity-level frustrations, not feature gaps (Step 3).
• Size the beachhead TAM in dollars per year, not user count -- revenue forces validation of both demand and willingness to pay (Step 4).
• Aim for a beachhead TAM of $20M-$100M per year; below $5M is too small, above $1B means insufficient focus (Step 4).
• Use bottom-up counting validated by top-down sizing; top-down alone systematically overestimates (Step 4).
• Entrepreneurs systematically inflate TAM -- target a conservative, defensible number you trust (Step 4).
• Build the Persona from a real person, not a composite -- composites allow projection, a real individual is falsifiable (Step 5).
• The Persona's top purchasing priority maps to what keeps them awake at night -- what gets them fired or promoted (Step 5).
• Post the Persona fact sheet on the wall; visual presence prevents drift toward abstract market thinking (Step 5).
• Validate stated preferences against revealed behavior -- end users often genuinely believe what they say but act differently (Step 5).
• The Next 10 Customers exercise (Step 9) is the first integration test of all prior hypotheses -- if you cannot list 10, your definitions are too broad or wrong.
• In two-sided markets, demand-side enthusiasm is the easy half; supply-side validation is the venture-threatening constraint (Step 9).

Value and Product (Steps 6-8, 10-11)

• Map the full life cycle use case including discovery, acquisition, payment, and support -- not just product usage (Step 6).
• Two-sided markets require two separate use cases, each with the Persona woven into every step (Step 6).
• Define the product after the customer, not before -- product-first thinking gets lost in the sea of a large, general market (Step 7).
• Draw the product spec visually (storyboards for software, diagrams for hardware) -- drawing forces convergence and surfaces latent disagreements (Step 7).
• Do not build at Step 7; premature building creates sunk-cost attachment that resists iteration (Step 7).
• Express the QVP in units of the Persona's top priority, not your most impressive benefit (Step 8).
• Map the as-is state before the possible state; without a concrete baseline, the "possible" state is a claim without context (Step 8).
• Underpromise and overdeliver -- one overpromise can destroy the reference-customer relationship the entire beachhead depends on (Step 8).
• The QVP must fit on one page and travel without the founder in the room (Step 8).
• The Core must satisfy three criteria simultaneously: exclusivity, protection priority, and compounding investment (Step 10).
• Once agreed upon, the Core should not change without substantial deliberation; frequent changes signal the team is not building the Core effectively (Step 10).
• If the Core cannot translate into benefits the Persona cares about, find a better market rather than changing the Core (Step 11).
• The status quo -- not rival products -- is often the toughest competitor (Step 11).
• Do not divert disproportionate energy to "crushing" a similar startup -- optimize for the customer, not against a competitor (Step 11).

Acquisition and Sales (Steps 12-13, 18)

• Map all six DMU roles: champion, end user, economic buyer, influencers, veto holder, purchasing department (Step 12).
• The champion is "the straw that stirs the drink" -- without one, no one pushes the deal forward internally (Step 12).
• Neutralize the purchasing department; do not sell to them (Step 12).
• If DMU patterns do not emerge across first customers, revisit Steps 5-6 (Step 12).
• Price below the individual purchasing authority threshold to eliminate entire process steps and shorten the sales cycle (Step 13).
• A sales cycle longer than your cash runway is "usually the kiss of death for the first product of a brand-new business" (Step 13).
• Enter the short-cycle segment first, reach cash-flow positive, then expand into longer-cycle segments (Step 13).
• Hidden complexity in the acquisition process kills as effectively as long timelines (Step 13).
• All products must transit the three sales phases (missionary, mixed, order fulfillment) as fast as possible (Step 18).
• For low-LTV products, prolonged missionary selling destroys unit economics (Step 18).

Economics (Steps 14-19)

• Beachhead + follow-on TAM across 10 or fewer markets should exceed $1B for venture scale (Step 14).
• The bowling pin strategy leverages two existing assets: Core expertise (adjacent markets) and customer relationships (upselling) -- do not conflate the two paths (Step 14).
• Business model choice has far larger influence on profitability than pricing decisions (Step 15).
• Changing business models after customer adoption is extremely difficult -- choose deliberately (Step 15).
• Do not build revenue on exploiting customer naivete (penalty-dependent models) -- competitors will offer penalty-free alternatives (Step 15).
• Price high initially and offer discounts; it is always easier to drop a price than to raise it (Step 16).
• LTV is profit, not revenue -- apply gross margin and cost-of-capital discounting (Step 17).
• LTV must be at least 3x COCA; the 3x buffer absorbs variance, funds operations, and generates profit (Step 17).
• When LTV appears too low, check all six considerations before abandoning the product (Step 17).
• Small retention improvements produce outsized cumulative profit gains (Step 17).
• Wrapping a low-margin core product with high-margin services can transform unit economics (Step 17).
• Always use top-down COCA: total sales and marketing spend divided by new customers acquired (Step 19).
• Bottom-up COCA underestimates by 10-20x -- the iceberg effect (Step 19).
• COCA should decrease over time through sales process optimization, word of mouth, and tactic refinement (Step 19).
• Word of mouth is the strongest COCA reduction lever -- pre-qualifies leads, shortens cycles, eliminates discount pressure (Step 19).
• Staying focused on the beachhead market amplifies word of mouth and builds rep expertise (Step 19).

Validation and Launch (Steps 20-24)

• Extract 5-10 key assumptions from all prior steps; each must be decomposed into a single, narrow, testable statement (Step 20).
• Verbal validation is insufficient -- "actions speak louder than words" (Step 20).
• Distinguish lighthouse customers (their purchase triggers others) from linchpin customers (their refusal blocks others) (Step 20).
• MVBP is not MVP: it must deliver value, require payment, and start the feedback loop (Step 22).
• Vision creep is the default failure mode of MVBP scoping -- the long-term vision must not inflate the MVBP (Step 22).
• Manual processes are legitimate MVBP components when they accelerate time to customer feedback (Step 22).
• Separate hypothesis failure from experiment failure -- iterate the test design before abandoning the idea (Step 21).
• Test in the real environment -- artificial settings produce artificial behavior (Step 21).
• Favor behavioral observation over self-report -- revealed preference beats stated preference (Step 21).
• Meaningful tests can run for under $100 in under a day; expense and delay are not valid excuses (Step 21).
• Validate both usage (the dogs eat) and monetization (someone pays for the dog food) -- either alone creates a false positive (Step 23).
• Organic pull is categorically different from push-driven acquisition; pull signals product-market fit (Step 23).
• Beta-to-paid conversion rate at the moment customers must pay is the true test (Step 23).
• Do not expand beyond the beachhead until achieving 20%+ market share and cash-flow positive status (Step 24).
• The Product Plan will change; its value is in forcing consideration of possibilities, not rigid adherence (Step 24).
• Re-rank deferred features by real customer data, not the founder's original vision (Step 24).

Related References

• implementation-playbook -- Full sequencing, iteration triggers, anti-patterns, and diagnostic questions.
• product-plan-scaling -- Post-MVBP expansion roadmap and bowling-pin triggers (Step 24).
• persona-purchasing-criteria -- Deep Persona construction methodology (Step 5).
• unit-economics -- LTV calculation, COCA formula, and the 3:1 viability gate (Steps 17, 19).