Let me be quite forward and ask you – have you ever had a brilliant idea you knew would be a game-changer? Something that we, nay, something that the world needs? If so, penny for your thoughts, please! We want to know all about your startup experiences and ideas!
It often happens that the best of the ideas come to us from the frustrating experiences we’ve encountered. In many cases, we opt for the product or the service judging by its functionality-economical point. Whether it is a service or a product, we expect that it anticipates and covers our needs. But when it fails to do so, our minds tend to point out the shortcomings and we get frustrated.
The greatest product and service ideas came to life by evaluating the problems we face, i.e. the shortcomings, and assessing whether our idea would help others and not just us.
Since we are firm believers in the power of a great idea, I have asked the Domain.ME’s CEO Predrag Lesic, to share his experience of using lean canvas models in helping develop startups from a mere idea into a successful business.
So, here are the necessary steps one needs to take in order to develop a startup.
Step One: Who is the Customer for Your Startup?
So many businesses fail due to a common misconception known as ‘everybody needs my product’. While we are sorry to burst your bubble, it is essential to set the record straight. Not everyone will like or need your product, and that’s ok. The important thing is to narrow down the customer segment as accurately as possible. By narrowing down your customer segment you’ll get a better understanding of who your customer is and focus on solving their pain points, challenges, and desires. In case your idea encompasses two diverse customer segments (for example your online learning platform is aimed at teachers and students), make sure to separate the two and define their needs, wants and challenges.
Once you’ve defined your customers, think about the group of people who’ll be the first to use your product and provide feedback. Something like a test group, if you will, that can consist of your family and friends, first customers, developers and you.
Remember: This step is crucial and should not be vaguely defined or skipped, as it can stop your startup in its tracks.
Step Two: Define the Problem Your Customers Face
It may be counterintuitive to some that defining the customers comes before fully fleshing out the problem they are facing. However, it is important to remember that without knowing your customers, you won’t be able to properly define their problems either. Especially, as it may happen that they don’t perceive the initial problem that has inspired your idea the same way you do.
So, how do you define the problems that your customers are facing? Depending on the number of customer segments you have defined, you’ll have a different problem to solve for each customer segment.
Let’s say you are developing an online marketplace. Every marketplace has sellers and buyers with different problems you need to solve. While buyers have problems finding what they need, sellers have problems finding customers in need of their products. First group is facing the problem of accessing information (who has the product I need), while the second group is having problems distributing information (how to reach the right buyer). Two different marketplace customers, two different problems.
Check out how the possible competitors are already solving the specific problems you have listed. Then answer these questions:
- What solutions are they presenting?
- How do they approach the problem?
- How can you differentiate your idea from the competition?
Step Three: What are the Possible Revenue Sources for Your Startup?
It goes without saying that your idea must gather revenue. So it is important to understand the basic costs your business will have, and the revenue it will generate. Here you have to answer a couple of questions.
- Why would people use your product?
- Would they pay for it?
Let’s take an example of Upwork, a freelance platform. Since the platform has two customer segments – freelancers and clients (people or companies who employ freelancers), they also have two revenue sources. Although the platform is free of charge to become a member for freelancers, they acquire a percentage of the freelancer’s pay once the job is completed. On the other hand, freelancers are willing to pay a fee for every work they are paid to. In addition to this, you can apply for paid membership to get additional help and visibility from UpWork.
Think about the ways in which you put yourself into customers shoes and ask yourself the simple question ‘should I pay for this’. Others streams of revenue could be from sponsors, ads, and so on. What is important to calculate is your average customer value. This helps you calculate your break even or how many clients you need to have in order to cover your basic expenses.
Step Four: What Solutions Do You Offer to Your Customers?
For each of the problems you’ve outlined above, now is time to offer solutions. Here, you need to detail the experience your customers will have by using your solution. To get a better idea, answer the following questions:
- How does your solution to the problem simplify your customers life?
- How does your solution accelerate your customer life?
Initially, you’ve partly answered these questions when you defined your target customer. However, now it is time to test your solution against the one your target audience needs. To seek out the best answers, it is advisable to cooperate with your target audience. They will outline their most pressing challenges, desires and needs, which will allow you to adjust your solution idea and tailor the perfect product/service.
Step Five: Unique Value Proposition For Your Customers
The unique value proposition is the selling point of your product/service. This sets your idea apart from the competition. As such, it is as important as defining the target customer. With your unique proposition, you’ll attract your customers by directing their attention to the uniqueness of the solution you offer.
But how do you do this? First answer the following questions:
- How does your solution solve the problem better than that of your competitors?
- Does your solution give an added value to your customers?
- And most importantly, can you explain your unique value in one sentence?
Once you’ve answered these questions, describe to your customers the uniqueness of your product/service and feature the key differences from the solutions already available on the market. It is important that you offer the unique value proposition to all of your customer segments and not just focus on one, thinking the other will follow in suit. Remember, unique value propositions can be different for different segments.
At last, comprise an elevator pitch. The elevator pitch should be short, easy to understand, statement about your product/service highlighting your unique value proposition.
Step Six: Distribution Channels
This step boils down to the following – your product/service will fail if no one knows about it. So how do you get others to take notice of your awesome product/service? Here are the basic questions you should ask yourself (and your target audience too!):
- What are the channels your target audience frequents?
- How can you reach them through these channels?
Upon determining the channels your customer segments use and the ways in which you can reach them through the same. Check out growth hacking practices. People are discovering new one every day, so keep an eye on the new practices and trends.
Step Seven: Key Metrics to Track Your Startup Progress
Key metrics will help you measure the progress you are making, so it is vital that you set them right from the beginning. While you’ll be prone to set big goals, it is important you break these down into measurable units that you can observe over time.
At the very beginning, you may have one or two key metrics, and that’s ok, as you can expand on them later on. Don’t get ahead of yourself at the start. Instead, determine the following:
- What is the overall goal?
- How can you break that goal into smaller measurable segments?
Over time as your business grows, the key metrics will change according to the goals you’ve established. Do not underestimate the power of KPI. 🙂
Step Eight: Cost Structure of Your Product/Service
What this initially means is defining your fixed and variable costs. This can include anything from the rent of the office space, hardware, salaries, marketing expenses and so on. Set a time window for cost structure. Depending on your goals, this can be either product/service release or achieving a certain number of customers. This ties in with the Revenu Sources as it tells you the amount of the resources needed to cover your costs, determine your break-even point and so on. Rewise cost structure regularly and try to fix outliers.
Step Nine: The Unfair Advantage You Have
The unfair advantage is something you have and no other competitor can obtain or copy. And this can be absolutely anything. From personal insight, access to specific data, a great reputation, and so on. Although this will not necessarily become obvious right at the beginning, you can try to evaluate your standing position against your competitors. Beware, your unfair advantage can and possibly will change over time and don’t forget it’s something others can’t be excellent as you are!
So there you go, we went through all the necessary steps one needs to evaluate in order to verify their idea before investing a lot of time and effort into shaping a business plan. Please note that this model needs to be continuously updated as you reach set milestones. But what are the next steps you need to take?
Upon evaluating your product/service idea using a lean canvas model, you’ll get a better understanding of the success you can reach and the problems you might encounter along the way. Once you are confident with your analysis, it is time to create a business plan. This includes a description of your startup, thorough marketing and competitive analysis, management and organization description, breakdown of your product/service, marketing plan, sales strategy and funding.
We can’t wait to see your brilliant idea develop into a startup!