This is part 2 of the post we published last week. When you come up with an idea, two things are important: first, is this a good idea and second, will people buy my product and how big is the market.
A textbook would tell you to do market research to learn empirical data and buy market data from big research firms. Large companies might do it like this, but this is a time consuming and expensive process. Besides, the quality of the result is often questionable.
What you do instead, is start talking about your idea to prospective customers. Sometimes it takes you three conversations to figure out that your idea has major flaws, sometimes you need to talk to 20 or 30 people to verify that the idea is good. Or perhaps, you do all your research online and see what people say in forums and open discussion boards. Spend time to create an idea, which resonates, an idea which is feasible for you to execute, and something people would consume – better want to buy. Understand the value of your product or service and the ecosystem around it.
You iterate through the same process again and again, alter your concept, turn a few knobs here or there, or pivot, until you get good feedback. Sometimes, you need to make a mockup, or a prototype, or produce crisp Keynote slides, or perhaps, make a video to get your point across. There is no formula to this – whatever works for you.
Important is, that you are quick about determining whether you go into the right direction, restart the cycle, alter the model a bit, back up a bit, until your are happy with your product definition. You might find out that your idea is not good, and get an idea for something different much better while you speak with people.
But careful, do not just abandon an idea because you got a new one. You still need to proceed with something, and always picking new ideas never gets you ahead.
The next big question is how you can make money with your product. This is in the digital age not an obvious question since a lot of services are free. You may only come closer to answering this question while you are building a prototype and have a released product.
Important is that you see potential and that you foresee a market which is large enough. Keep in mind, that with any market, you will not capture the complete market, likely just a tiny fraction, you need to pay yourself a salary and that of your employees, AND you want to make it worthwhile for your investors, too. Scale is the keyword here. Is the market large and can you scale your business?
If you cannot immediately figure out how to make money with something, make at least sure, that you build traction like a strong user base. Many online businesses started to build traction and only years later figured out how to make money with their millions of users. The takeaway is that you need to comprehend the mechanics behind your market, how it works, what makes it tick, and what you need to do to penetrate it. Again the ecosystem matters, too.
If you made it until here, you have come up with something we call a Business Model. You might have spent months to get here, but gained valuable insight, much more valuable than the guy who wrote a Business Plan on lots of vague and made up data. Instead of hard data, you have an understanding of value and mechanics, of your customers, the market, it trends, your competition and compliments – and the ecosystem surrounding it. You did your homework and learned a lot of things along the way. At that point you are not just an MBA behind a Word processor, but you are in fact en entrepreneur. You created a formula on how to build a business – your business.
The Business Model is what you need to sell to investors. What else do you need? You need a way to present the Business Model.
People are lazy these days and nobody reads through 20 or 50 pages explaining your model. People may not even read through three pages. A good start is a pitch, which you can tell anybody within 3 minutes, and a crisp Keynote slide deck no larger than 10 slides. You may want to hire a graphic designer with help with your slide deck to capture your audience.
The rest is that you go out there, present as often as you can, collect feedback and refine your presentation. It depends on how credible you can make your concept. This is an art, but it can be learned. Most tech entrepreneurs are introverts, and they learn – and so will you. (SB)
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