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Launching a startup business

Launching a startup business


Finding a Problem to Solve

In this article I am going to cover how you can find a problem to solve as a start-up. Many people ask, “what is the best way to find a problem to solve?” Most problems aren’t worth solving, but there are ways to systematically explore the world to find the problems that will let you build a large and profitable start-up

Personal Experiences

One of the best ways to find a problem to solve is to reach back into your personal experiences. What have you found that irritates you? What was a pain? What was slow? What was expensive or cumbersome? Whenever you have negative thoughts about a product or service you have identified a pain. Every pain has the possibility of being turned into a business if it is serious enough to a large enough group of people

A good example of this is my friend Sabilah. Her aunt got dementia. It became increasingly difficult for her cousins to look after her at home and hold down full-time jobs and raise their children. So Sabilah opened a residential care home for senior citizens with dementia. She quickly expanded to having four care homes due to strong demand.

A good way to mine your personal experiences is to keep a small journal. Every day write down all the things that you complain about or think negatively about. If you overhear other people complaining about something write those down as well. As you do this write down who is making the complaint and what product or service that they are using. This will give you a rich seam of problems that you can mine for business ideas.

Market Opportunity

A different approach is to look for market opportunities. A market opportunity is a gap where product or service could be sold but no one is selling it yet.  One of the best places to look for market opportunity is when something changes. Newspapers record all the big changes in your country each day. Every change or trend means that some businesses will find life harder. Others will grow up in new spaces.

A new political party coming to power will mean demand for people who can put their policies into practice. It will also mean opportunities where budgets are increased or decreased. I once started a consultancy entirely based on a government’s decision to build a high-speed rail line. I knew that there would be demand for specialised engineering consultancy for twenty years due to the $15 billion project.

To look for market opportunities read your favourite paper each day. For every article ask the question “How can I make money out of this?” There will be a temptation to say, “But I don’t have….” Don’t worry about that. The goal is for you to get practiced in identifying problems to solve. Ideas are numerous and almost worthless. The practice of systematically looking for ways to make money is incredibly valuable. When you find the right problem to solve the money and resources you need are often easier to get than you think.

Technological Change

We live in a world of unprecedented technological change. My parents lived through three changes in the way you heard music: Live, on the radio and on an LP. So far I’ve used about ten radically different technologies to listen to music. In almost every industry that you look at the rate of technological change is accelerating. Each change makes many existing systems obsolete and creates a need for new technology. This is a huge opportunity

A good example is a US company called Ovation. Restaurants used to get feedback from customers by putting a telephone number on the receipt. Customers were meant to call it and get a chance at a free prize for their feedback. Ovation puts the feedback form on an iPad by the checkout counter. Then it collects the data in the cloud and shows it to the restaurant’s head office in real time. The company manages its restaurants far better and customers are happier.

To find a problem worth solving use this approach. Take any existing business and a couple of pieces of technology. These could be an app, the cloud, artificial intelligence, RFIDs, GPS or anything else. Then brainstorm to see what you could do with them to make the business better.

In this article I’ve looked at three ways to generate problems that are worth solving for a new start-up

  • Mining personal experience
  • Looking for market opportunities
  • Investigating technological change

What is really important to remember is that most of these ideas are worthless and won’t work. That’s ok. The more ideas you look for the more chance you have of finding the ones that will take off and change the world and your life.

Checking It’s A Real Problem

Once you’ve found a problem to solve you have to check that it is a real problem. There are three simple ways that will help you decide whether it is worth looking at further. They are different ways of asking – does the customer care? If the customer doesn’t care, it’s not worth your time pursuing.

Do People Complain?

When things are going well people don’t complain. That is often a sign that a product or service is working well. When it works well it is meeting the customer’s needs. Why would the customer change? There are reasons why people will change what they do if everything is working well. It is a lot harder to make it happen.

A good example is the mousetrap. In Disney’s Tom and Jerry this is made of a spring attached to a piece of wood. When the mouse takes the cheese the spring tension is released, and the bar breaks the mouse’s back. It’s very easy to engineer a mousetrap that is more humane, quieter, kid friendly. The reality is that the cheap simple mousetrap is good enough. No one complains. This is not a problem worth solving.

When you think of a problem that may be worth solving see how many other people have the problem. I will often bring the topic up in conversation and see if people mention the problem I have found naturally. If they don’t that is a red flag. I will carry on and raise the problem and ask them how serious it is to them. If they are not really interested that’s the second red flag. What I am looking for is people who complain strongly. You must find lots of people with the same problem

Does It Make People Go Wow?

The second sign that you have found a problem worth solving is when you find people who clearly say, “I wish you could solve that problem”. These are typically people who find the problem an intolerable irritation in their lives.

A brilliant example here is the hassle of arranging meetings. A typical conversation for business people starts “Let’s meet.” They then take turns offering each other dates and times until eventually they find one that works for both. This can take six or seven emails or five minutes of conversation. This is a huge loss of time for some people. When Calendly said that it was working on the problem the response was “Wow!” 

The wowest problems are rarely ones that everyone cares about. Calendly’s super easy meeting scheduling is really useful for business people. Children, soldiers and pensioners don’t really care. It’s important to think about a problem and think about who feels the most pain. Talk to different people in different sectors about it. Search for the right audience and then dive deep.

Do People Currently PayFor A Current Solution?

The final good sign that a problem is worth solving is that people already pay for a solution. It’s a fact of the world that people rarely spend money on things they don’t care about. If you find a problem that people are already spending money to solve AND they are still complaining, it’s worth investigating further.

Cyclists were tremendously excited when the first GPS devices came out. They were able monitor how fast they were going and how hill the road was. This helped them train better and faster for the Tour de France. The problem was that it was also important how hard the cyclist was working to keep the bicycle speeding along. When Garmin offered a device that tracked speed and heartrate they knew that there were thousands of cyclists who weren’t satisfied with the GPS solution. That made them a billion-dollar company.

Often existing solutions won’t really solve people’s solutions. You can’t tell that from the advertising. You need to get out of the building and talk to the real people who have the problem and ask them about existing solutions. Why does it work? What problems does it solve? What do you wish that it did better. It’s the last one that shows you the real opportunity.

In this article I’ve looked at three different ways of see if the problem you want to solve is worth solving. We looked at

  • Seeing if other people complain a lot about the problem
  • Finding people who care a great deal about the problem
  • Looking for people who pay for an existing solution but are unhappy with it

The most important thing – get out of your head, talk to real people, talk to as many people as you can. That is the best wat to check that it is a real problem.

Testing Your Solution

In this series we’ve talked a lot about problems and not much about solutions. That’s because the single biggest mistake of entrepreneurs is to build something before they know what problem the customers want solved. What the entrepreneur thinks is not important. What the customer thinks is. In this article we’ll look at three quick ways of testing your solution

The No Code MVP

Technology is all about automation. All it does is let you do things faster and cheaper than you can do by yourself. When you build a technology, solution it is expensive and inflexible. Changing it hurts. To test your technology solution, try and figure out a way to fake it without the technology. A lot of the time you can do this in a couple of hours and test on real live people without them knowing better.

I worked with a start-up that believed that they could make lots of money by using people as human billboards showing video adverts in crowded places. What we did was to tape some iPads to them and play Coke adverts from YouTube. The volunteers walked through a shopping centre with someone watching passers -by to see how often people looked at the advert. It was a total failure. The success was that they wasted no money and time learning that.

To do this yourself map out the process and figure out the simplest, quickest and cheapest way of getting something that works. It does not have to work well. It will be really, really ugly. It will help you understand what exactly you have to build. Even better as you show it to customers they will use their imagination and point out the flaws and benefits in the solution.

The Sales Pitch

An even simpler approach is the sales pitch. What you do is you talk to a customer who has the problem and you tell him your proposed solution. Then you ask him to pre-order. If no one thinks that the solution is good enough to pre-order then the chances are that your aren’t solving the problem. That’s really blunt, but better to find that out before spending money on research and development. Better a free failure than an expensive one.

Elon Musk is probably the most famous person to have done this. He sold a promise of technologically advanced electric cars. Tens of thousands of people paid sizeable deposits for a Tesla. That gave Elon lots of confidence that there was both market demand and people would pay for his new product. If no one had made a down payment would he have gone ahead? We can only wish that Ford had done the same with the Edsel.

To test your solution with a sales pitch you should first find a good number of your ideal customers. Your Aunt Flo may love you and say nice things about your sales pitch. If she doesn’t have the pain and won’t buy your solution, don’t test your pitch on her.   As a sales pitch is so cheap and easy to do it is often worth doing hundreds or thousands of time. It is an incredibly effective use of time

The Role Play

The last approach to testing your solution is to use the role play. Role playing isn’t limited to dungeons and dragons, your bedroom or HR training sessions. It’s a great way of walking through how the solutions works with a pretend customer to map everything out in detail. What you do is to take the role of the expert explaining how the solution works. Someone else takes the role of the customer and asks questions.

A good example is using the Uber app to order a taxi. Imagine taking the imaginary phone and explaining to the customer. “What you do is put where you want to go and then tap the ‘Request Ride’ button”. The customer pretends to do that and then asks, “What happens next?” You can then walk him through the whole scenario. At each point he is sure to ask – “What happens if I do this?”

This is worth taking really slowly. The ‘customer’ needs to be in role. Whenever you hit a road block you need to stop, pause and rework the solution. As you figure out the user journey it will become increasingly clear how practical or unworkable the flow is. Once you have it working then move onto real customers. This is often a follow up to the sales pitch.

In this article we’ve looked at three ways of simply testing your solution before you invest lots of money into the business or the technology. These were

  • Creating a no code Minimum Viable Product
  • Getting pre orders with a sales pitch
  • Roleplaying how the solution works in detail before building anything

 Spending money on solutions that work is so much cooler than spending it all on failures.

Making Your First Sale

In this article we’re looking at how to make your first sale as a start-up. One of the biggest mistakes that many start-ups make is to invest a lot of time and effort in their solution. Then they discover that no one will buy it. Now, I’ll give you three ways to avoid that problem

Day Zero

Day Zero is the day you start your start-up. That is the day you should make your first sale. I’ll be honest. You probably won’t make your first sale on Day Zero. You should be talking to customers and seeing if you can make it happen. The only reason that companies stay in existence is because they make sales. If they don’t make sales everything else is pointless.

A great example is the process that Lean Start-up Machine takes in their workshops. Entrepreneurs come in, pitch their ideas to the crowd and form a team. They are sent out almost straight away to get customers. That is less than three hours after the team is formed. Most come back having discovered they are solving the wrong problem. Some come back with cash in hand.

Taking action on this is very simple. Everyday you get on the phone or meet customers in person and persuade them to buy. You do this continually until the sales process is smooth and the money is rolling in

Sell Before You Build

A different approach is to sell before you build. When you build a product, an app, a website or a service you are risking your time and capital. You don’t know whether a customer is going to buy what you make. A better approach is to sell your product and collect cash before you commit to anything.

One of my customers, Lux and Nyx, had big plans for a luxury handbag. Lisa, an accountant by training, felt that making the bags in China was too big a risk if she didn’t know that people would like them. She raised $25,591 on Kickstarter to fund the initial production runs. Customers paid for her solution before she spent a penny.

Crowdfunding is one approach. There are many more customers out there who are prepared to pay you in advance for your solution. The caveats are that you have to offer a solution to a significant pain. You also must be credible. The customer must believe that you can deliver on their trust in you.

Build Your Email List

This last approach is more about traction than direct sales. Many start-ups focus on building the solution. They forget that it takes as much time and effort to find customers as it does to build the product or service. Marketing must start as early as possible. The simplest way to do this is to build an email list.

Harry’s, the shaving brand did this with a simple ‘Coming Soon’ webpage. The page had a simple statement of the value proposition and a signup form so that the customer would hear about the launch. With some marketing Jeff Raider had 100,000 email subscribers before he even launched the product. With some modelling he was confident that he would have enough customer for his first production runs and Harry’s launched to massive success.

It is incredibly simple to set up a very basic single page website that just captures email addresses. A domain can cost less than $10, Wordpress and Wix can cost less than $5/month and an email provider can be had for free if you have less than a few thousand subscribers. As you revise your value proposition and your brand through the development process update the website. Test your marketing ideas and build the number of subscribers ready to launch.

In this article I’ve covered the importance of focusing on getting sales early. These included

  • Selling from Day Zero
  • Selling before you build
  • Growing your Email list as your build your product

Using these three tactics will give you confidence that the business will be a success and the early cash to make it so

Deciding What to Build

I’ve said it before and I will say it again and again. Building what you want as an entrepreneur is the fastest route to failure and disillusionment. It is incredibly important that you make a good decision about deciding what you should build. In this article we cover in detail three ways on how you decide what to build as an entrepreneur.

Talk to Customers

The first thing to do is to talk to your potential customers. This is what is called a customer centric approach. Often customers have very clear ideas as to what would be good solutions to their problem and what will not be. They are almost always willing to talk at length to you if you tell them that you want to solve the problem and want advice.

One B2B start-up that we worked with in Indonesia spoke to almost 400 businesses before they understood what they needed to build. Three years later they had mace over $200 million in sales. Most start-ups, in contrast, speak to less than ten potential customers before they start the business. 90% of those start-ups fail. The numbers are stark. The secret to success is to build what customers tell you is going to solve their problems

Not everything that an individual customer says should be taken literally. This is why you need to talk to lots. The more potential customers you talk to the easier it will be to identify the crazy impracticable wish list ideas that they have, and the features that they will pay handsomely for you to deliver.

MVP

The next stage is to build a minimum viable product. A minimum viable product solves the customer’s problem. It just solves the customer’s problem. It has no bells and whistles. It doesn’t look nice. If you are not embarrassed by it you have spent too much time and money developing it. It is the next step after the prototype. Call it a commercial prototype.

The MVP is important because it gives the customer something that they can test. It allows them to use your solution in their business environment and see if it works. If it fails, they’ll tell you how and you can improve it. That is when you are glad that you didn’t perfect it because you now need to redesign it. If it works well, you have great validation and potential product-market fit.

When you start work on your MVP the most important thing is to have a clear mandate from your customers what is absolutely necessary to solve the problem. Everything else is unimportant. You will want to add lots of things in. This gives you psychological comfort but slows the process down and increases your risk. It also confuses the customer. Ship early. Ship when you are embarrassed,

Test on Customers

The final customer centric approach to deciding what to build is to test the product on your customers. This is often a slightly later activity than your MVP. This is typically called beta testing by coders. At this point you have a fairly clear idea what the customer wants and you now need to polish and take the MVP through to being a commercial product. My preferred approach here is called user testing.

User testing works by giving a prospective customer, or someone roleplaying the customer, the product and asking them to use it. This can be anything from buying a book on your new e-commerce website to using a new vacuum cleaner or trying your online knitting course. You give them a set of tasks and record what they do as they complete the tasks. This enables you to see how customers use your solution to solve their pain.

When I was working with a customer with a triathlon website we recorded 15 customers navigating through the website to complete the sales funnel. Almost half of them did activities that we had never considered to be relevant to the funnel. As a result, we changed the user interface and increased sales by 17%

In this article I’ve looked at three different ways that you can test what you are building on customers and get invaluable feedback. These were:

  • Intensive customer interviews to determine what they think the best solutions are
  • Building a minimum viable product so that customers can test your solution at the earliest possible moment
  • User testing your product on customers to get invaluable feedback on which features they really want, and which are unnecessary

Following these tips will help you design and build products and services that customers absolutely love and which will significantly grow your sales.

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