Zero to Startup – Making the Business Case for your Bright Idea
Never before in history has it been so easy to start your own business.
A broke 20-something has a chance of success that’s comparable to that of a businessman with a few notches under his belt (provided that broke 20-something has a bright idea, common sense, motivation, a couple ounces of courage and some animal-like persistence).
Well, if it was that easy, everyone would do it.
Woke up with a groundbreaking idea? Startup. Focused a few thoughts on a cool solution to that nagging problem of yours? Startup.
But before you pour your time and savings into an entrepreneurial journey, let’s first consider one thing: is it worth it? Does the need for your business idea actually exist? And is the market as big as you think it is?
It’s critical that you uncover these truths about your market. Doing so will allow you to validate the business case for your idea and form your market validation plan, ultimately transforming that idea into a living, breathing business.
We call that going from zero to startup.
And while there’s no cut and dry, yellow-brick road that you can follow to go from zero to startup, there are failures and successes that you can learn from and rough blueprints you can follow to help you get your ass in gear.
This article will focus on those (mostly research-based) steps to get you moving forward and guide you in your quest to building out your market validation plan.
Step One: Is there a market for your idea?
First thing’s first – does the market exist? It’s easy to assume that because you’re dealing with a problem, lots of other people must be dealing with the same problem.
To verify that the market you’re intending on entering has enough pull, use any (or all) of the following tools/platforms to do some research.
Method 1: Keyword Research
It goes without saying that this is one of the most powerful categories of research tools on the web, especially when it comes to identifying, characterizing and quantifying search terms.
Keyword research tools allow you to determine not only what people are looking for, but also how many people are looking for it and the overarching pain(s) that they’re trying to solve the kinds of problems they’re looking to solve.
Here are a few of my favorite keyword research tools:
- Keywordtool.io – it’s free
- SEMRush – To get the most out of it, you’ll have to have a paid account
- Google tools
- Keyword Planner – free with your Google AdWords account
- I always suggest looking at the “Searches related to “insert search query” at the bottom of an SERP – this will give you some unique ideas.
They’ve all got their strengths and weaknesses (and unfortunately not all are free), so you’ll have to consider what’s right for you.
As search engine algorithms become smarter, people are becoming more aware that they can type in an exact, “spoken word” query. By that I mean that people search Google as if they were in a superstore talking to a customer service representative. More and more, queries like “what’s the best email marketing tool,” or “a competitive intelligence tool that’s an add-on” are becoming commonplace. So searches are becoming more humanlike, and search engine algorithms are able to index, organize, and retrieve data in very human ways.
Remember, you’re not only looking for the size of your audience, but also the scope. What types of problems are people experiencing that an idea like yours could solve, and how are they phrasing these problems in online search queries?
It’s important to recognize all of the topics that sprout up from the need you’re trying to solve. Keep your eyes (and ears) peeled for new keyword ideas and branches that align with your solution.
Method 2: Social Platforms: Google+, LinkedIn, Quora, Reddit and Facebook … did I forget any?
Social media sites and blogs allow you to seek out, connect with and understand potential users and product evangelists.
Plus, they’re great avenues for you to spy on competitors and see the types of communities they’ve built and the product features and marketing strategies that appeal to those communities.
Keep this in mind: one of your goals is to figure out whether or not what you’re building will fit in nicely with a prospective customer’s existing day. To do that, you’ll need to have a thorough understanding of the processes that are currently in place, and how easily your product can integrate into those processes.
With all of this information in mind, you’ll be able to start formulating an understanding of what your market looks like, who your customers are, what they need, and how you should go about cornering your segment of the market.
Through keyword research and social community identification, you’ll automatically begin to form assumptions about your prospective audience.
Write these assumptions down (even the obvious ones) because the next step is to validate them.
Step Two: Validate Your Assumptions About Your Customers
There couldn’t be more of a marketing cliche than the following saying: “understand your customer’s needs.” But as with most cliches, there’s a whole lot of merit to this saying.
Take those assumptions you made about your customers and start testing them. Begin to validate the presumptuous nature of your thinking by (you guessed it) – networking.
Some people thoroughly enjoy reaching out to people online and going to marketing events and tradeshows, while others wholeheartedly dread these types of activities. Whichever one of those categories you fall into, you’re going to need to have personal contact with your market.
You’re looking to get concrete, community-driven answers for questions like:
- Who’s your ideal customer? (Age, gender, work experience, life experience, disposable income, etc)
- What, exactly, are they looking for? What interests them?
- What is the game-changer for them, and how can you most easily sell this game-changer?
- How can you acquire them?
- How can you monetize them, now and in the future?
By having a thorough understanding of who your ideal customer is, you’ll be able to tailor your product to them (and ultimately achieve the perfect product-market fit).
At this stage (if not earlier) you should have an idea of how you’re going to build out the first version of the product – your prototype. How can you construct your prototype to meet the needs of your customers and seamlessly integrate into their day-to-day engagements?
We’ll talk more about prototypes in this series, but one thing to remember is this: there’s no perfect time to start designing and building your prototype – but the prototype should be based on the assumptions you’ve made and validated about your target market.
Step Three: Identify the Risk Factors
Identifying risk factors is an integral part of your market entry research – so don’t save it until last. Always be vigilant of the inherent risks associated with your business.
Below I’ve listed 3 prominent risks commonly associated with software startups, and here you can read a more thorough breakdown of the risks that should be considered when turning your idea into a business.
- Market Risk – How stiff is the competition? How can you corner the market? How well do you know your customers?
- Technology Risk – Will product development be so complicated that it will consume all of your resources? That is to say, are you developing a groundbreaking solution that will change the way people see things, or are you building atop something that’s already established?
- Financial Risk - How costly will it be to build and market your product? What are you willing to get paid? What about your co-founder? Can you work on the product fulltime, while marketing it full time, while bootstrapped? According to your timeline, at what point will you require some sort of outside investment?
Step Four: Some Ways to Prove Your Idea
There are a few ways to test risk and prove the viability of your startup to yourself (and anyone else who needs proof):
- Proof of concept – Usually involves having a working prototype that’s been adopted by users and has a relatively high rate of retention. A great team with a great idea and enough resources should aim to achieve a proof of concept by getting a solid user base onboard.
- Letter of Intent - I love stories like this, where founders come up with super crafty ways to get buy-in for their product. It’s a short case study so read the whole thing (it’s the first one on the page). Essentially these guys designed a 2-3 page PSD wireframe with the groundwork laid for the UX and the major features being the selling points. They did a little networking, and got interested companies to sign a Letter of Intent to use a working prototype of their product as long as it solved the pain points discussed in their meetings. Genius.
Letting go of the career path you’ve chosen and making the giant “leap of faith” to take your idea from zero to startup won’t be a walk in the park.
So work hard to set yourself up for success.
You can do this by validating that your customers exist, and that your assumptions about customers, your market, and how your unique sales proposition integrates into all of that are true. Do this and you’ll ultimately arrive at your market validation plan.
There’s no right way to begin a company, and since we work with software startups every day, we always love hearing about cool founding stories. So if you’ve got an awesome story to tell, we’d love to hear about it. Feel free to send me an email or leave a comment on this post.
And next week we’ll continue the zero to startup journey by discussing what you can do to reach an ideal product-market fit.