Startups must originate with two key components: 1) an entrepreneur, 2) a product idea. Too often, entrepreneurs have fantastic product concepts but fail to consider requirements to commercialize the product. The early days of developing a business should include development of a quality business plan. This includes the business structure, financial requirements, proposed expenditures, milestones, and commercialization strategy. Failure to develop the business model early enough leaves too many pitfalls for the entrepreneur.
Many times in extended diligence reviews, the entrepreneur is ultra-excited about the product. They feel the product will sell itself and simply making it and being first on the market is enough to be the dominate player. This “build it and they will come” attitude is common but, many times the buyers or users do not show up. Building a successful company requires strategic planning and thinking about all aspects of the business and identifying weak areas and plans to resolve those weaknesses.
There are many considerations, but a few thoughts to discuss with your team are:
Users: Who are the real users and why do they want your product or service? You may feel they cannot live without it, but keep in mind they have been without it already. Find a way to conduct a survey of prospective users. The information should help identify the users desires, likes, and/or dislikes about your product. Such premarket surveys can occur via questionnaires or meetings. Get to know your potential users’ likes, wants, and needs. Use the info to improve your product and marketing plans.
Market Size: Once you identify the users and the prospects of their adopting your product, you can develop the size of market. Perhaps, only 25% of the users would readily adopt the product. If these people are scattered all over the world, how will you make them aware of what you have. In many cases, the ramp rate of the product is calculated using a projected adoption rate. The estimated market and adoption rates will allow you to estimate your sales growth and market capture. While only 25% would consider adopting the product, perhaps only half of them would really be buyers.
Marketing: How do you plan to make your users aware of the offering? Simply putting up a website may result in an extremely slow ramp rate. Perhaps it the company would never sell enough products to reach cash flow positive. If your prospective customers are scattered all over the world, it may be difficult to market to them at a reasonable cost. Perhaps your users read a single news site, business journal, or magazine. Well-placed ads may be an important piece of your marketing. Conventions where your users frequently attend can allow direct meetings to market product. Keep in mind that in the launch period there are no revenues. Costs are a concern and mass media marketing campaigns are expensive. It is important to understand your market, how to reach the users, and to develop the least costly means of selling the products to them.
Sales: All too often, a sales force is required. Knowing the number of times a sales call is needed to get a conversion is important to identifying the number of sales staff required. The number of offices sales staff must visit is the other important piece of the puzzle. If your users are located in 3,000 offices in the USA, the offices may have aggregates of the users. For example, assume the total users are 10,000 and they all reside in the 3,000 offices. This means a single office call could allow for direct contact with 3 or more users. Sometimes, 60% of sales occur in only 40% of offices. This would imply only 1,200 office visits may allow for capture of 60% of the market. Knowing the number of times a visit is required can help estimate the size of the required sales team.
In short, selling a product requires extensive planning in order to capture the market. Constant assessment of progress during and after the product launch will ensure timely execution of any necessary adjustments. “Build it and they will come” is not a strategy or a plan it is a movie. If you want to make money, PLAN FOR SUCCESS AND DEVELOP A REAL BUSINESS STRATEGY!
You can follow Taffy Williams on Twitter by @twilli2861 and you can email him with questions at email@example.com or contact him via company contact info in the website. More Startup information is contained in his personal blog.