The value of a startup ideaBusiness
Everyone knows starting a business is hard work. But how important is the idea itself to finding success?
“So what about an app like Uber, but for hairdressers?”
“Imagine this: Facebook– for dogs.”
“It will be the first 100% gluten-free food delivery app!”
Working in software we get a barrage ideas from friends, family and clients. Whether the idea is great or not so much, all aspire to be the next million-dollar tech startup.
The conversation will inevitably roll around to the following question: “Well, what do you think this idea is worth?”
Genius as an idea may be–say the world really has been desperate for a way to socialize through their dogs–unfortunately it’s not the idea that determines success.
Ideas are incredibly difficult to turn into real products. It’s even harder for these products to find their market and become profitable. The majority of ideas never make it past the idea stage because of a lack of time, money and knowledge about getting a business started.
Therefore it’s not the idea that’s really valuable, but rather the methodology used to implement an idea.
What is important for startup success:
This can start with something as simple as a Google search and then expand to a full feasibility study that includes market trends and analytics.
The most crucial factor, however, is to determine who potential customers are and engage with them. For example, if you wanted to build a Facebook for dogs, you would find and interview dog owners. Do they follow the social media accounts of other people’s pets? Are they interested in finding playmates for their dogs? What are the limitations of existing social networks in connecting pet owners?
The main idea of this research is to discover what problems your potential users need solved.
The product you want to make should have a clear offer of value to users.
Not only that, the product should be invaluable. Is it so good that once users try it, they need to have it?
Uber is a great example of this. In essence their value proposition is: “traditional taxi service is flawed and we make the experience painless with on-demand, cashless rides that don’t require you to give directions to the driver.
A validated idea is one that has been tested and shown to have an excellent chance of being profitable.
For example, email client startup Superhuman was able to do this by getting more than 100,000 people signed up for their waitlist before their product was even released. They had engineered interest through buzz around their exclusivity and unique onboarding process. These signups gave them the green light to invest their efforts fully into the project.
Finding a way to test an idea is tricky but absolutely essential. You could find hundreds of dog owners interested in your pet social networking idea, but if you don’t get some kind of proof that they would actually use it, the app is not worth building.
An idea that incorporates a monetization strategy is a business. A product can be amazing, but it won’t survive long if it’s not profitable.
Many strategies exist to monetize a product. These include advertising, purchases, subscriptions and even selling data. For example, Foursquare sells the data it collects from users, showing relevant points such as the most visited places in a city.
Where purchases are involved, it’s key to test if customers will be willing to pay and at what price. One example of such a test is a website with a dummy “buy” button (without a finished product or payments implemented) to collect information about how many visitors would be willing to purchase the product.
Some will say funding is all important while others believe it can be a negative that detracts from building a sustainable business. In any case, a funding strategy should be examined to see if it’s right for the type of product being made.
The degree of formality of a business plan will largely depend on the product. For startups whose direction may pivot, a business plan could quickly become obsolete.
Regardless, it’s important for all types of startups to articulate their goals and plans in some way, both to help strategize internally and to have something to show potential investors.
A business plan should address all of the previously discussed elements. Additionally, it should have:
- A marketing plan
- Financial projections
- A business model and plan for how to scale. It’s necessary to identify what resources are needed to get started and how much they cost, and to create a funding and revenue plan.
The right team
It could be argued that the people behind an idea are the most important element of success. Invaluable characteristics include technical knowledge, business savvy, startup experience, leadership ability and sales skills.
Typically it’s the solution to a problem that’s more important in making an impact in the market, rather than the novelty of the technology used. However, in some cases the technology itself is critical to the solution.
For example, a product could use a unique algorithm that makes it superior to any of its competitors. Algorithms that use buyer behavior data to display targeted ads are an example of this in practice.
This is an implementation plan from a technical perspective. It should breakdown what needs to be accomplished and in what amount of time. The main benefit of this at the beginning stages is that it helps define what resources are needed, preventing unexpected costs.
Ideas are just the spark that gets a business started. For a startup to find real success, solid business skills and great planning are essential to getting there.
We love to chat about ideas! Feel free to contact us.