3 Tips for Starting Your Business
Author: Katerina Thomas
Startup advice is confusing. Can market research really tell you if there’s a business opportunity? Do you really need a business plan? And do you need external funding sources to start? Let’s find out.
In this episode, Katerina talks about..
Part 1: How to conduct market research.
Part 2: How to ‘spy’ on your competition.
Part 3: Business plans are not necessary for small businesses and to do instead.
One of my favourite business and entrepreneurship books is The 7 Day Startup by Dan Norris.
It’s written in simple language and conveys a very simple message.
Dan struggled for 14 years before starting his successful company WPCurve.
WPCurve is like an insurance for your WordPress website.
You get unlimited WordPress bug fixes at just $69/per month.
WP Curve helps business owners to build their businesses without worrying about WordPress.
You also get 24/7 access to the world’s best developers for maintenance, support & unlimited small jobs.
Dan is from Australia.
First, he started his Web design & development agency and ran it successfully but then failed.
He then started a SaaS product, called Inform.ly, which ended as a failure too.
The idea for Inform.ly was to summarize people’s key metrics into a simple single location.
And whilst he managed to get 4,000 free users, in the end, he couldn’t get enough people to pay for it.
He realised that analytics wasn’t something that small business owners paid for.
So how much did he spend on this idea?
$60,000 and 12 months on it to build a grand total of $476 in monthly recurring revenue.
That was offset by about $2,000 in monthly costs.
So $476 money in, $2000 money out.
It took Dan too long to launch and that was his big mistake with Inform.ly.
The idea wasn’t great. And, Dan could have figured that out much quicker and saved himself a lot of time and money (and stress).
It took Dan 6 months to put up a payment button on Inform.ly and another 6 months to come to terms with the fact that people didn’t need it.
And then he started WPCurve and succeeded, but how?
Part 1. Market Research
When you want to start a business today what do you do? You go online, and search for information on How to start a small business, right? And what search usually comes up?
You get a list like:
Conduct market research. Because market research will tell you if there’s an opportunity to turn your idea into a successful business.
- Write your business plan.
- Fund your business.
- Pick your business location.
- Choose a business structure.
- Choose your business name.
- Register your business.
- Get tax IDs.
Let’s take the first three steps on the list.
Conduct market research. Can market research really tell us if there’s a business opportunity?
And, how much market research do you need to do to be sure there is a demand for your idea or a product?
You can do some primary data market research, asking people via surveys.
But how do you know that people in your sample are representing your target market?
A representative sample is a subset of a population that reflects the characteristics of the entire population. So instead of asking everyone, you just need to survey a small number of people.
But how do you know they are telling you the truth?
If your idea or a product solves a big problem and it solves it in a unique way then you may have a bit more confidence that that people would go for it. But you don’t really know until you launch.
I’ve recently come across a post on the Forbes website which suggests you need to be sure about your business idea making money now and in the future. But, how can you be sure?
How do you know your idea will be profitable in the long run?
Markets today are so volatile that it’s almost impossible to make any projections.
Part 2. Do you need a Busines Plan?
Another piece of advice is to write a business plan and fund your business.
The question here is Do you really need a business plan?There is no one size fits all answer to this question.
Some businesses might need a business plan, but others don’t. The amount of work and detail required in the business plan will also vary.
It will vary depending on the size and nature of the business, and the industry in which this business operates.
You do need a business plan if you want to get a bank loan. There are secured and unsecured personal loans. Using your property as security is known as a secured loan.
An unsecured Personal Loan is a type of loan where you agree to repay the money back in full. And that usually happens over an agreed length of time along with interest.
There is a high failure rate among small businesses and startups, so is this a good idea to get a bank loan?
No plan survives contact with customers, and that’s a good thing in a way because it means you can change your plan according to Steve Blank an American entrepreneur, educator, author and speaker.
Generally speaking, a business plan is not essential for most small businesses.
You can start small to test the viability of your idea without borrowing from the banks.
So how can you start small?
One way is to go into markets that already have demand for similar products.
There are many tools you can use to see keyword search data for products, services and solutions.
I like using the Keyword search plug-in and Ubersuggest (check out Niel Patel’s website).
If people already searching for a product that means there is a demand.
But what about competition?
Part 3: Getting a Clear Perspective
Competition can often drive the prices down, hence you need to think about your uniqueness or unique selling point or USP.
How do you identify your USP? By knowing who your competitors are. You need to check them out.
And, how can you do that? You can sign up for their email newsletter.
Get their Free stuff, and then check what they are saying to you, how often and so on.
You can get a lot of intel done this way.
You also check their products, if they are selling on sites like Amazon where purchases are verified then read what people say about their products. Then if you are selling similar products improve what’s missing. Figure out how to be the best.
This exercise will allow you to identify your unique selling point. Ask yourself what makes your business more special. And, how is it different to the other competitors out there?
Think about pricing and how you will reach your customers. Ask yourself where you fit in the market for my target consumers.
But don’t price yourself low.
Think how you can be unique, people pay extra to get better quality/greater products, products that can solve their problems.. in a different way.
As per channels, check out the social profiles of your competitors, and which channels are they using. If they are consistently using these channels this means their customers are on these channels too. If they are running FB ads that means they are making money, they wouldn’t be spending money if they were not making money.
All this can be done without a business plan and funding from a bank or family.
All can be done with the smallest amount of money if you choose to run a digital business, resell other brands’ products, become an affiliate, author, or sell your own digital products or even physical products using the POD (print-on-demand) model.
What you need to remember is that a business plan is different from a business model.
A business model describes how your company creates, delivers and captures value.
It’s best understood as a diagram that shows all the flows between the different parts of your business.
This includes how the product gets distributed to your customers (direct/indirect method or channels).
And how money flows back into your company (monetization).
And it shows your company’s cost structures, and how each part of your business interacts with the others.
Where your company can work with other companies or partners to implement your business and so on.
To increase your success you need to focus on building and testing a business model.
And this is what Dan Noris did when he launched a WPCurve.
He achieved this through bootstrapping his business (that is starting a business with little capital and his own money). He tested his business model by offering a minimum viable product people would pay for.
And he kept testing his model and adjusting it till he found a market/product fit. And, he developed it into a profitable business that was later sold to an investor.
If you are going to bootstrap, you have a greater chance to build a business model which really works. The business model can produce positive cash flow and profits right away. And don’t we all want that?
So to recap 3 points we’ve covered:
1) Doing market research is tricky. So go after existing demand and after markets/customers that are already looking for similar products like yours. Identify your perfect customer who is already paying for similar solutions.
2) Spy on your competition to figure out your unique selling point and pricing, but don’t lower your prices to compete. Validation works best when you show the customer a product and ask them to pay for it. If you have enough interest, your idea is validated.
3) Business plans are not necessary for small businesses unless you are asking for a bank loan or VC capital. Bootstrap your product idea using the MVP concept (minimum viable product) and take it from there.