Whether your idea came to you in a burst of inspiration or whether it’s something that’s been germinating for years, you’ve decided the time has come to turn that idea into a real business. You’re ready to execute. But how can you give your idea the best chance of success? What does it take to turn a great idea into a profitable business? These seven steps will guide you through the process.
1. Make Sure You Thoroughly Understand the Problem You’re Aiming to Solve
Successful companies solve a problem. Stitch Fix eliminates the pain of wandering around the mall, wasting time wondering how to put together fashionable outfits. Lyft prevents the frustration of calling a cab, waiting for it, and fishing around for change. Even companies like Starbucks that sell “nice-to-haves” are solving problems — they provide a sense of community that was previously lacking or give people an easy way to express their identity.
The companies that survive long-term are the ones decreasing pain and increasing pleasure. Before you get too far developing your idea, be very clear on exactly what problem you’re solving, how widespread it is, and how others have attempted to solve the problem.
2. Identify Your Market
After you’ve identified the problem you’re solving, you’ll want to dig into understanding who has the problem, how painful it is to them, what solutions they’ve already tried, and what they’re willing to pay in order to solve the problem. What are they looking for in a solution? Why haven’t they been satisfied with existing solutions? How will the solution need to operate in order to fit into their everyday lives?
Explore social media groups, industry organizations, online forums, and other places where your potential customers hang out. Listen to what they’re discussing — are they talking about the problem you aim to solve? What are they saying? Also, talk to as many potential customers as you can, one-on-one. The ability to ask them pointed questions is invaluable.
3. Craft a Monetization Strategy and Financial Model
Consider how broad your market is. Is is large enough to bring in your target revenue? How will you reach this market? Are there influencers or groups you can partner with to reach them? What will that cost? And how will you deliver the product? What will be involved in building the product? What about customer service?
While it’s impossible to accurately predict how much revenue you’ll make your first few years in business, you can create a strategic monetization strategy and an informed financial model. This step is essential to ensure your idea is financially viable.
First, outline how your product or service will be generated and the costs involved. Then, craft a marketing and sales plan for how your product will be sold and delivered to the customers, and find out the associated costs. This process should give a clear idea of your operating costs.
To create your financial model, research the size of your target market and how many customers you’ll need to serve in order to make a profit.
4. Gather a Team of Mentors and Supporters
At this point, if you don’t have a group of people around you that you can go to for advice and encouragement, focus on building one. Look for other entrepreneurs who have created companies similar to yours, experts in your target industry, those who have marketing experience, those who are financially savvy, and a few cheerleaders who will help you stay positive when you face challenges. No one builds a successful business completely on their own.
5. Build a Proof of Concept
A proof of concept gives you something to test with potential users. Testing will ensure you know how to develop the best first version of the product and will save you time and money in the process. Your proof of concept will also be essential when it comes time to raise capital. Investors will want to see a proof of concept that’s been tested.
Your proof of concept should look essentially the way you intend it to when it launches, with the basic functionality it needs in order to fully solve the problem. It may not have all the features or be fully built-out on the back end, but it should function in a way that you can get accurate feedback from users.
Even if you’re not building a physical product, a proof of concept can be valuable. It might take the form of the website you’ll use for marketing and delivering your service, or an app that serves this purpose.
6. Test and Iterate
Once your proof of concept is built, gather potential customers and have them experiment with it. Record details of how potential customers interact with the product and take notes on how it could be improved to better suit their needs, be easier to use, or better fit into their existing workflows. Look for how intuitive the interface actually is, and find out if you overlooked any important functionality.
7. Identify Sources of Capital
These days, there are many different ways to raise funds for your startup. Most experienced entrepreneurs will recommend bootstrapping at least the first phase of your business — researching, crafting your monetization strategy and financial model, and building your proof of concept, if possible. Other options include loans from friends and family, crowdfunding, bartering, and small business grants.
Once your proof of concept has been built, other options open up to you, including startup competitions, incubators and accelerators, bank loans, venture capital, and angel investment. Do your research to understand the pros and cons of each type of capital, and choose which ones make the most sense for you and your goals.
During each of these steps, you’re going to need a strong dose of persistence. The reason they say “ideas are a dime a dozen” is because execution takes not only dedicated action but also mental stamina. It can be tough to keep going when you face challenges and start second-guessing yourself. But if you’re systematically working through these steps, you can have confidence that you’re doing due diligence and giving yourself the best shot at success.
Want to chat about your new idea for software or an app? Get in touch!