The startup scene is abuzz around the globe and it is all very exciting. We read about hundreds of new startups launching every day and hundreds of startups shutting down and closing shops. It’s very exciting to start something innovative with a dream to scale it to the global level but it’s equally devastating when startups run out of money while scaling and must shut down.
In this article, I’d like to cover some very basic things which should be considered by any startup founder even before they start building the business or product. These will help save them from that disappointment and devastation after spending months on something which was not validated properly.
Is it a real problem?
The very first question to be asked is whether the product you are going to build is solving a real problem. Try and test the idea out with your family and friends and ask them if they would pay for this kind of product.
It’s not always a bad idea to build something which already exists in the market because it’s all about executing something in a much better and innovative way to capture that market share. So, look around if there is any close competition in the market and see how they are performing.
If the competitor is doing well that means your product is validated by your competition and you can be rest assured that your idea has been validated by someone else already.
Need or luxury?
You want to make sure that the product you are building is not just a luxury but a need. You will come across people while discussing your idea who might say “it’s nice to have” but you want to make sure that you build something which is a “must have”. In other words, is your product a “pain-killer” or a “vitamin”? Everyone needs a painkiller but vitamin is optional.
Think about whether people would rely on your product or business idea to do their daily chores. Does it have enough stickiness which would keep them using your product?
Even CEO Larry Page uses the “toothbrush test” to determine whether a company is worth buying. He’ll ask, “Is this something you will use once or twice a day, and does it make your life better?”
Market size and opportunity
Another important thing to think about is the market size and opportunity. Doing your numbers is very important in this case. Take an example if you are targeting the real estate market, you should have the answers to the following questions –
1. Are you targeting national sales or regional sales?
2. If you are going after national sales, what’s the total monetary size of the transaction?
3. What percentage do you plan to capture out of the total pool?
4. What percentage is captured by your competition?
5. What is the average transaction size?
6. What would be your revenue if you successfully capture the anticipated market share?
Once you have completed your research and have the answers to the questions above, it would be very easy to devise a marketing strategy to capture your target audience. Not only that, you would feel much more confident facing any future investors if you know your numbers. Investors will also have more trust in you because you have done your research and you know what you are going after.
Surveys to gauge interest
The next little step in the process which can help your further validate your business idea or product is to launch a single pager signup page. Run a marketing campaign with a very limited budget to attract people to this page and then check how many people sign up to use the service.
This way, not only will you be able to gauge interest but also be able to build an email list to target the launch of your product. Those people joining your email list early on can become early adopters and can help you strengthen idea with their feedback.
There are so much more you can do to make sure you are building the right product but if you can go through the above-mentioned process, you’ll know that you have done enough to validate your product or idea. The next step is to then start thinking about the Minimal Viable Product and a strategy to penetrate into the market.
There will be ups and downs throughout the journey but if you are doing things the right way, you will have that extra confidence and then persistence is the key.
As a startup founder myself, it’s always devastating to see businesses shutting down with so much blood and sweat being put in by the fellow startup founders. Hopefully this article will help some of the future founders to avoid those pitfalls and make sure they don’t end up spending a lot of time on the idea which is not a right market fit.