The Overpay Test

Who would overpay for what you’re building?

Like, absurdly, dramatically, wildly, proudly overpay for it?

And when a friend or colleague asks, “Why the heck did you pay that much for that thing?” they’ll say, “Because I literally had no other option. I have to think about ____ more than anyone else, and this company is the only one that focuses on people that need to think about ___.”

People overpay due to unique scarcity and constraints.

So, we need to know what’s scarce for your customer and what constrains them and build a product that’s a reaction to those two things.

For example, let's say you’re a lawyer who wants to use AI to help with legal document processing. It takes forever to review and draft standard legal docs, and you could reduce that time by 70% while improving accuracy and decreasing cost.

Great.

Your first customers will be the ones who have already felt this pain acutely and are desperate for a solution. They’ll be willing to use an early, imperfect (concierge MVP) version of this product because the pain is so crippling for them.

Maybe that’s mid-sized regional firms in high-volume real estate markets like Texas or Florida. They're currently spending lots of money currently on manual doc review and can’t use other AI tools because their documents are unique or their business runs on software other AI companies don’t support or something else you find during interviews.

The key is matching your product's disproportionate value to your customers’ disproportionate needs.

If your first customers won’t overpay, you likely haven’t found that sweet spot yet. Intent tests and concierge MVPs with imperfect customers will often get you there — they’ll help you find the nooks and crannies where that value could be hiding.

A fun exercise:

Think about what you overpay for. Why do you do it? What’s scarce for you, and what are the constraints that lead to you overpaying? What do you get from it?

In general, I’m fascinated by anything people overpay for. If you take that seriously — digging into things with huge margins, particularly with the same form-factor as your product — you’ll learn a ton.

Some business books cost $9.99 and some cost $39.99. Why? Scarcity and constraints.