The Keys to Startup Success: The Product18-4-2017 Formation Startups
This is the first of a series of articles in which I’m going to write about how to create a Startup.
Many entrepreneurs dream of creating the next Facebook or Google… but if it is the first time you try it online, these 12 points will help you define your product or service in order to maximize your business’ chances of success:
1. SELL SOMETHING
There are several ways of monetizing a website such as Google Adwords and affiliate links. These revenue streams are frequent in “niche” websites or blogs, but the difference with a Startup is that the latter doesn’t receive payments for advertising or commissions, they receive money from their customers by selling them products or services instead.
2. MAKE YOUR CLIENTS EARN MONEY
Create a product your clients can use to earn money (in a direct or an indirect way) or save time. Some examples of these things are a tool to manage emails in an efficient way, an online course or an e-book.
Online Courses are a quite successful product lately
3. CREATE SOMETHING NECESSARY, INDISPENSABLE
Do you know the difference between ibuprofen and vitamin supplements? The difference is that when you have a hangover and a headache, YOU NEED the first one while when you are lacking vitamins, supplements are something that will be good for you, but they aren’t indispensable.
The same happens to Apps, products or online services, there are some that when found, you can’t live without them while there are others that are just “nice to have” complements or entertainments.
4. YOU DON’T NEED AN APP FOR EVERYTHING
People want to spend less time in front of a screen, they are fed up with so many apps that adding one more thing to the list of daily tasks of your users isn’t something I’d bet on.
Too many Apps
5. MAKE IT SCALABLE
A freelance plumber isn’t a Startup. A day only has 24 hours.
Revenues of a Startup should increase independently from its staff, this is the great difference between Startups and conventional companies (such as a consultancy service company, a product manufacturer company, etc.)
It’s much easier to scale the growth of a Startup that sells products (and more if they are digital products) that of one that offers services. When it comes to a Startup that sells services, if we want to scale we need to outsource those services and become mere intermediaries or consultants.
6. DON’T SELL YOURSELF AS A FREELANCER
Well, the truth is that you can do it (in fact, I do it myself) but I’d recommend not to link your professional activity to your Startup. This is related to the previous point, the scalability: If your Startup depends on the amount of hours you work, the day you get ill or go on holidays your “company” will sink.
If you are very good at something in particular, create a product based on the services you offer (this is what they call Productized Service). This way, you give authority to the product making it clear that you are putting all your knowledge into it while getting yourself out of the equation.
7. AVOID SOCIAL PRODUCTS
I’m sorry it has to be me to tell you but… you aren’t going to create the next Facebook . I really wish you can prove me wrong, although most probably if you try it, you will fail. If it is the first time you create a Startup, I’d recommend you to avoid offering products or services that depend on a community in order to exist or grow.
The social component is a problem that doesn’t depend on you and it makes the product’s success lessen exponentially. Most likely you will need a lot of investment to create sufficient Marketing campaigns to attract your target audience and, even then, most probably you are only creating a bubble and not an economically feasible online business. Do you remember the “situation” created when Facebook entered the stock market after making their income statement accounts public?
The Social Network Bubble
8. SEARCH FOR YOUR BUSINESS’ NICHE
Create a specialized version of a generic product and targeted at a niche with which you are familiar with.
The good thing about creating a product for a specific niche instead of for the general public is that there is less competition: marketing for niche Startups isn’t as good and it’s easier to stand out, especially if you are a good copywriter.
9. DON’T AVOID COMPETITION
There are moments when you are talking about Startup Ideas with friends and someone says… “but that already exists!”. I think that the fact that there might be similar products to yours shouldn’t dissuade you from creating your Project because they are just a proof that there is a market out there for your idea (provided that the market isn’t overcrowded, of course…)
The best way to deal with the competition isn’t trying to create a better product (although it’s good to have one’s own value) but trying to reach that market segment that hasn’t been exploited by them yet. Another thing that helps with customer’s loyalty is offering a customer and support service better than your competition’s.
10. FAIR AND DECENT PRICE
Don’t compete in price. Trying to gain market just by lowering your prices is the best formula for a total failure. In the Internet’s world where we are used to “free” and “low cost” things, people who know how to appreciate the value of things and are willing to pay for it should be your aim and target.
The upper price limit of an online product or service will depend on the product itself and the country where it’s aimed at. In Europe for example, people aren’t very comfortable purchasing items over 100€ on the Internet. The more expensive a product is, the more you need to give a customized sales support service, requiring, in some cases, the offering of a non-binding trial period.
Subscription products or services normally have a price range between 9€ and 49€ per month.
People don’t spend their money easily
11. AVOID TRENDS
We get carried away by trends. It’s ok when it comes to designs, clothes, etc. But when we are talking about a digital product or online service we should think long-term. I know it’s difficult in an evolving world but the product we are about to create should be as useful now as in 5 years time.
Related to this, we should also prevent our product from depending fully on third-party services (such as Facebook’s or Twitter’s API) as they might close them at any moment.
12. DON’T RELY ON INVESTORS
Do not create a product with the simple intention of being bought by Google or a venture capital fund as you might step into the trap of generating a bubble instead of creating a feasible product. Focus on creating something that has value and that your clients are willing to buy, especially if it is the first time you create a Startup.
One way or another try to step out of the equation as soon as possible: the more you outsource, the more value your product will acquire.