11 September 2017 | Jack Fisher
Statistics suggest that over 90% of startups fail, but what is the reason for this? Why are so many startups failing before they even get their feet off the ground? We believe there are some key steps that every startup should be taking to ensure that their business succeeds. At Pogo Studio we do a lot of work for startup businesses, and we’ve also been through the journey of a startup ourselves. Therefore, I believe we can offer some advice to those of you out there who are thinking of starting a business, or who have just begun the journey of a startup. So, without further ado, let’s get started.
The first, and arguably most important step that every startup business needs to take is validating the idea. This applies to startups in all industries, there really are no exceptions. Market research is your best friend when you’re trying to validate your business idea, and this should be done long before any operations are up and running. It’s important to understand your target demographic when you’re conducting your market research. You don’t want to be asking middle-class mums if they would be using your product when your target market is low-income teens. Once you know who your business is targeting you can get out on the streets and start talking to people. If you’re stopping people on the streets you don’t want to be asking more than 10 questions, most people are in a hurry and don’t have time to be bothered by you. The most effective method is to set up a focus group, which will give you more time to ask all the questions you have and dive deeper into the responses. If you want to know how to ask the right questions then I recommend you read ‘The Mom Test’, which outlines exactly how you should and shouldn’t ask your questions.
The second step that every startup should be taking is building an MVP (Minimum Viable Product). An MVP is your product in its most basic form, created as cheaply and quickly as it can be made. This allows you to test your product on your customers at a low cost to find out what they think. This is how you will discover if the people who said they would use your product when you did your market research were being truthful, or if they were just trying to be nice. The whole idea behind the concept of an MVP is that you minimise the risk of failure. If your business fails at the MVP stage, at least you didn’t waste thousands on perfecting your product, only to find out that there was no market fit.
Ok I know I said that validation was arguably the most important step I was going to cover, but I think it would be stupid not to admit that the absolute most important thing in any business is money. If the business is making money, you can forget all the other points because clearly, you’re doing something right. Despite its importance, money is one aspect of a startup that is often overlooked. How is it going to make money? What does the pricing structure of the product look like? Will this cover the overheads? Salaries, office space, tax, the list goes on and on. It’s important to get this nailed down right from the word go. As the business owner, you should know exactly how much money your business is spending, and how much it is earning. Right down to the last penny. If you are a tech company then the best model you can go for is Software as a Service (SaaS). Charging your customers a monthly fee for your product is all the rage right now, and for good reason. It guarantees income month to month, even if you don’t make any further sales. But are your customers willing to pay for your product in this manner? These are the sort of questions you need to be asking yourself when you are developing your business.
Route to Market
“If you build it, they will come”. This motto is a trap, and one that unfortunately a lot of entrepreneurs fall into. It suggests that if you build a solid product, the customer will pay for it. It sounds like it makes perfect sense, but it simply isn’t true. Every business needs a proper marketing strategy that will outline their route to market and ensure that customers will engage with their product. Think about it. If a small startup creates a teleportation device, a product so great that you simply can’t believe it, you’d assume that the creators of this product would become millionaires overnight. But what if nobody knows about their product? What if the teleportation device already exists, but nobody has heard about it. Would the creators still be millionaires? Would the startup be successful? No. The business would fail, the creators would be broke, and most unfortunate of all – an amazing product would never make it to market so we’d never get to teleport across the world to hang out in Honolulu on our lunch break. So, what are the best ways to get your product to market? There are countless, the most common (and cheapest) ways are social media promotion, google, ads, SEO, and blogging. It’s important to keep in mind that everyone will be doing these, so although these methods are effective you really need to do something special to stand out. The truly great marketers out there will create some online content so great that people can’t help but share it, creating a viral effect and providing natural growth for your business.
Outsource any development work
Every startup will need a website at some stage in its lifecycle, and in today’s digital age, most startups will also need an app. This leaves you with two options as the founder of a startup – hire some developers, or outsource your development work. The answer to this may seem obvious (especially since I’ve given it away with my sub-heading) but a lot of startups fall into the trap of hiring developers that they don’t need. This can become an extremely costly business decision. Going with this option means you are stuck with multiple developers whose salaries and pensions must be paid for, and worse still, often don’t have any work to do once the website and app are built. The alternative option is to outsource your development work to a third-party, who will charge you a fee in return for building you a website/app from the ground up. This allows you to get everything built without going through the costly and timely hiring process, and saves you money on salaries which can be better spent elsewhere.
And that’s about it. There is obviously more to building a successful startup than just these 5 pointers, but I truly believe that if you follow these steps then you can make your business one of the 10% that succeeds. We started our business at Entrepreneurial Spark, a start-up accelerator that provides support and mentorship through the toughest parts of the journey. If you are based in the UK and thinking about starting a business, you should check them out here. If you want to get in touch with Pogo Studio to learn more about anything I’ve discussed, or if you are looking to use our development services, please email us at - email@example.com