This article is devoted to software engineers who wake up thinking, "I should build the next big thing." This intention eventually faces many difficulties.
Without a thorough approach, a good outcome would be a few months wasted, as it happened to me some time ago.
Engineering and even management/leadership skills are not enough if you want to set up a business or a startup. You should look at things from different angles and face reality.
To succeed in entrepreneurship, you first need to understand how business works under the hood, avoid wrong moves, and carefully spend time and money.
Sharpen the idea until it is a one-sentence pitch.
People often don't buy the best products. They buy the best products they understand.
Until you describe your idea in 3-5 words, you most likely barely understand what you are about to do.
Think of what real-life problem you want to solve. Spend some time rewording the pitch. It should be straightforward so that your friends and relatives will get it without explanations.
- Can You Explain Your Startup Idea in One Sentence?
- How to Describe Your Startup
- How to describe your startup idea
- One simple trick to make writing your startup description suddenly easy
Write down a story behind the idea.
What does motivate you? How did you come up with the idea?
Do you want to make money or fix someone's pain? Questions like that will bring clarity.
At the end of the day, if the answer is primarily to make some money - there is a high chance you will quickly lose motivation, and the initiative won't last long. You better find something that will drive you for years.
- Startuptelling: Startup Storytelling the SMART Way
- How to use storytelling in your startup
- Storytelling Your Way To Startup Success
- Three stories every startup needs to tell
Identify who your customer is.
Think of who are your potential customers? What intentions do they have? What about their desires and limits? Perhaps they have a specific role at work or anything else?
The better you understand your customers and their behavior, the more chance you will acquire first users. It will be hard to find a customer if the product is too generic, concentrate on a niche. Things may change as your product evolve but try to laser focus in the beginning.
- UX Project Checklist
- Putting Personas to Work in UX Design: What They Are and Why They're Important
- How to create Personas, a step-by-step guide.
Estimate market potential.
Any entrepreneur is an investor. You invest your time and money into building something.
And the legitimate expectation is to have a return on investments. Do not apply any efforts until you have a market size estimation and approximation of your pricing model.
There's no easy and precise way for those matters, but you should try your best and have some estimations.
- How To Effectively Determine Your Market Size
- How to estimate market size: Business and marketing planning for startups
- TAM SAM SOM - what it means and why it matters
- TAM, SAM, and SOM: fundamental market size metrics
Figure out what competencies are missing.
Building a business is hard. You should wear many hats, such as product, engineer, marketer, sales, accounting, support, and others.
Be honest with yourself. It's not possible to do all things at a good enough quality level. You will need to find a co-founder with relevant experience or outsource some activity.
- 9 Make-or-Break Startup Roles (and Why They Are Important)
- The 6 Essential Startup Roles That Every Team Should Hire
- Startup Team – How to Define Roles
- 5 Crucial Roles in Every Successful Tech Startup
- Where Do You Fit In? A Founder's Guide to Startup Roles
Conduct competitive research.
Someone has likely come up with a solution. Carefully create a list of competitors, write down all their strengths and weaknesses.
Think of what makes your solution unique and valuable for customers.
No competition might be a signal of the red flag. Perhaps a problem you're solving is not significant enough, or the market has unfavorable conditions?
As a last resort, a spreadsheet could be a competitor to any information system.
- How do I identify competitors?
- All Startup's have competition: Startup Survival Guide
- Who are your startup competitors?
Have an idea of the startup's business model.
By now, you have an answer to many questions. What product are you building, your customers. It now time to come up with a sustainable business model.
There should be a revenue stream that will bring users to the product. Do not disperse efforts creating many revenue streams. Focus on one, but make it work.
- The 10 Most Popular Startup Revenue Models
- 25 Proven Startup Business Models You Must Know
- How To Choose The Most Profitable Business Model For Your Startup
In the very beginning, focus on traction.
Being too ambitious at the early stage of the business might be harmful to its future. Do not focus on growth. Acquire first customers, gather feedback about your product. Make sure your assumptions are correct. Accelerate your business machine slowly but surely.
- Measuring Startup Traction
- Traction metrics for your startup?
- Traction & Growth: Turning Your Startup into a Business
- How To Get Early Startup Traction – The Complete Guide
Respect the rule of business survival.
Running a business may not something people do intuitively. There are basic rules that help you in navigation.
Customer lifetime value should be at least three times higher than acquisition cost(LTV/CAC >= 3).
This will ensure your business is not sinking and has the potential to grow. Simple, right?
The following essential thing is money flow. It could be negative if the customer acquisition cost is higher than lifetime value, or you spend money investing into growth. That's fine for short periods or other situations with calculated risk. Be conscious about this metric. In the long run, money flow must be positive. Otherwise, the business will run out of money.
- 7 KPI meanings small business owners need to know
- 16 Startup Metrics
- 5 Performance Metrics Your Small Business Should Track
- The Only Startup Financial Metrics That Matter
- 4 Key Financial Metrics That All Startups Should Measure
Learn from the mistakes and failures of other startups.
Before moving too far, learn how other startups failed. Your case will likely fall under one of the well-known risks. Make certain significant risks are covered in some way.
Based on research, top 3 common issues:
- No market need
- Ran out of cash
- Not the right team
There are more. Look over researches on the topic. It could be a beneficial and eye-opening experience.
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