Building out the opportunity
When you find an idea you feel confident in, you have to take advantage of the situation and start digging in to see what you and others think of it.
This includes a lot of different steps such as:
1. Market research
2. Competitive analysis
3. Pricing structure
4. Sellability
5. Customer Feedback
6. Risks and rewards of executing the project
7. Financial projections
8. Technical due diligence
9. Roles & Partnerships
10. Growth strategies
and more.
Regardless of whether you're in an established business with existing or new product lines or a new business trying to build out, you have to understand these steps so you can properly apply your knowledge to the opportunity.
Keep in mind when a business is executed appropriately, it is good for both the world and yourself; you only get the money because you help other people.
Market research
This involves:
1. Looking at the size of the market.
2. Looking at how the market is split between different companies.
3. Understanding if you want to be the first into the market or if it's something that you'd prefer to wait on.
4. Understanding if you can capture a reasonable part of the market to make the venture worthwhile.
5. Which section of the market does each vendor serve? Is it down-market, mid-market, or up-market?
Keep in mind, especially when starting out, projections can be overly optimistic.
You'll learn to reign it in over time, but it's easiest to communicate with direct experience than through a lesson.
Competitive analysis
This dovetails in and around market research.
Depending on how you structure your offering, you may or may not have as many competitors to deal with.
For instance, building a new project management software offers little returns in a packed market.
Building on top of existing ones though opens up different relationships that didn't exist before and you can pivot in more ways given feedback from experts.
Furthermore, you can gain insight into whether you're really competing or not based on different price points and market segments.
Pricing structure
This is one way that you inherently communicate the value of your product to customers.
Make sure you're price competitive or a premium perhaps with a freemium or free trial.
Lowering your price communicates a lack of confidence in abilities and isn't something you want to communicate to others.
Premiums though make people feel like they're driving a Cadillac or Ferrari.
It's high-end and is something everyone would want.
Do not engage in price wars.
This will only lead to a race to the bottom of low prices and take the company with it.
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Sellability
Is this something a client actually wants?
There's no sense in selling something no one finds interesting and should be based strongly on customer feedback and user research.
Customer feedback
This is often handled by dedicated user researchers or product people in bigger companies or founders at smaller companies.
The point being, understand if your customers want this and if it is actually useful to them.
Oftentimes, you want to collaborate with teammates and design a succinct set of questions that gets the information you need without overburdening the customer.
Risks and rewards
There will be risks we can't control and risks we can control and it's best to enumerate these so folks working with you understand the range of issues a company could hit and how they will be mitigated as much as possible.
Rewards are also expected whether societal, financial, or more and it's best to enumerate what you have here so people are aware what you're driving towards in the project and if the outcomes are worth the risks.
Financial projections
These will be based on the business you're trying to launch and oftentimes will be based more on feel than an actual formula.
When setting these up, I keep in mind the pricing structure, the ability of the team to execute the plan, the sellability, and customer feedback portions to get a sense of how a product will be adopted.
Even then, stick with realistic conservative measurements and move from there.
Technical due diligence
This gives us pause to understand how we would approach the problem and break it down into consumable chunks that people can work on.
It also allows us to see if we have gaps in our knowledge or if we need to outsource some work to people we know can do the work better.
Roles and partnerships?
Each company will have folks with unique strengths and you need to build off that when executing a growth strategy.
At the early stage, all folks need to pitch in to help with sales and marketing and if not everyone is willing to do that, it might not work out.
Other than that, everyone should have distinct lanes they execute against.
As you grow though, you'll get money and can start niching down more over being generalists focusing on the things you're good at.
Growth strategies
These are plans for how the company plans to grow and in what order.
If you're a product company, it's best to generate as much revenue as a single product company for as long as possible and then branch out into tangential niches to start padding the revenue more.
As you grow, though, you may hit revenue set points you just can't break through and that's where a review of inefficiency within the business structure and a review of competitors to help you understand if an M&A is worth it.
This lets the new entity or business reset at a higher valuation and give it more resources to pursue an adventure against upmarket competition.
Building to scale
As you go through this, you'll get a sense of the complexities of the business and product lines and see how businesses are different from each other and how you can out-compete them based on market strategies.
It's not hard, but it's definitely something to consider as you build the company.
Plugs
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We bring worldwide expertise and can be contacted through the LinkedIn company page or by scheduling directly with Brad Messer on his profile.
Venture Builder & Investor with a focus on AI startups
8 个月Sorry folks! Meant to post this tomorrow! Probably got things messed up this past weekend.