Generating profit from startups is not as easy as it might seem. Too many entrepreneurs make the mistake of resorting to wishful thinking and over-optimistic predictions, creating copies of existing products or assuming their idea is feasible without testing it or placing enough emphasis on the role of technology consulting in the project. Making money is about being able to predict market performance and staying focused and driven. And of course, in the cut-throat startup market, survival is impossible without a competitive advantage.
Every startup begins with an idea. The more original the idea, the better. Your first step can be to take a mainstream yet flawed idea and try adding innovation to it. Another option is to combine existing solutions into a new product.
For example, combining a social network for doctors with a mobile health monitoring system. You enable popular features of social networks in a wearable device that tracks patients’ health parameters. The resulting solution will target a narrow professional market.
What is different?
- It unites doctors and patients
- Doctors have 24/7 access to patient data
- Doctors can substitute each other by sharing patient histories
- Patients can get on-demand consultations
During this stage, startups typically turn to IT consultants to evaluate their idea. Afterwards, startup owners often disappear because the idea alone was not strong enough to obtain financing from investors. To avoid this, check your idea’s viability.
Basic idea: checklist
- Does your idea improve an already existing product?
- Does it combine two or more existing solutions into a novel product or service?
- Did you prepare the documents
- Highlighting your product,
- Describing the architecture of your product,
- Outlining your business value?
- Did you have your idea evaluated by technical experts and business analysts?
- Is your idea novel and unique enough?
- Did you consider the pros and cons of your solution?
- Did you study your competition?
- Did you conduct a thorough market research?
- Did you plan for add-ons or other accompanying products?
External consultants will offer a fresh perspective, point out the pros and cons, study the competition and the market, test your idea’s longevity, and help you plan for the future add-ons, updates, and cross-selling products. Such an in-depth analysis takes from two weeks to a month.
Proof of concept
Proving the viability of your concept takes from one to six months. It is a stage where you have to demonstrate that your project will not hit any hidden rocks, problems of the last mile or other challenges. However, if these are expected, you need to prove that you have the ability to overcome them with minimal damage to your business. Before you begin, understand why this stage is important with the goals below.
Proof of concept: goals
To demonstrate to potential partners and investors that your idea is profitable, you need toestablish viability.
How to proceed?
- Test your product in focus groups.
- Document the test runs, spot technological failures, plan the methods to overcome these failures.
- Eliminate bugs to improve the product on an ongoing basis.
- Collect user feedback and adapt the product accordingly.
- Formulate the business strategy.
During this phase, you need to demonstrate the product works not only in theory but also in practice. One way of doing it is to involve a representative sample of your target audience and document the outcomes of the test runs. Developing a marketing strategy that embraces available opportunities for growth helps you understand your potential for reaching long-term goals.
Testing your concept in focus groups is more valuable than striving to make a perfect product in isolation. User feedback can make or break a startup. Do not be afraid to introduce a flawed product and ask users to help improve it. Users who contribute closely become emotionally invested fans, organically expanding your customer base.
Develop prototypes to see how many people are interested. An actual product speaks louder than any product description, a sales pitch, or a document. Promoting and selling your product builds your reputation and supplies you with the figures to show to partners and investors.
Proof of concept: checklist
- What challenges will your product encounter in the future?
- Have you cleared the legal issues such as permissions, license and patents?
- If you encounter legal issues, how much time and money will you need to fix them?
- What problems of the last mile can you predict?
Missing a single crucial aspect at this stage may affect the budget and derail the project entirely, so you have to thoroughly investigate potential problems and their possible solutions. An example of potential issues can be a situation when libraries have to be coded from scratch or new modules have to be purchased, tested, and automated, thus requiring extra funding.
Minimum viable product
A minimum viable product (MVP) is a product that is not at its final stage yet but that already has a commercial value and can be sold on the market. At this stage, all licenses must be covered. The product should be cleared for commercial use. That’s the stage when you convince investors that your product works and demonstrate that they can get a return on their investment because of the solid marketing strategy you have developed.
Minimum viable product: checklist
- Is your product focused on one unique feature that sets it apart?
- Have you eliminated all the extras and focused on the basic functionality?
- Do you have a plan to bring your product to market?
- Do you know your target audience?
- Are you implementing product improvements based on user feedback?
Extending your product
A smaller but more flexible product is easier and cheaper to develop further. ‘Spaceships’ take too long to build, which your competitors can use to their advantage, showcasing their products at expos while you are still busy perfecting yours. A smaller product will be easier to extend with more upselling features and updates, expanding your customer base as you go.
Taking your product to the stock market or selling your company to a large vendor will be the next level for your business to aspire. As you have done the heavy lifting, you can now reap the benefits of your hard work.