I am a power user of Quora and Reddit. I follow so many subreddits on entrepreneurship and startups. I see these questions “I have a business idea. Now what shall I do next?” all the times. So, I think that I should write an 1100 words story on this that tell you what to do next.
You can divide the journey of a startup into 6 phases where getting the idea is the phase 1. If you’ve come up with an idea, good to know that you’ve completed the phase 1. There are 5 more to go out of which phase 2 is the most crucial. This is where most entrepreneurs make mistake.
Here are the phases:
I am going to explain each phase one by one.
1. Phase 1: Get the Idea
You already have the idea ready. So, you have completed this step.In a recent survey by Unversity of Phoenix, 55% of people in 20s want to start a business someday Click To Tweet
They surveyed 1600 people. But do you see that 55% of the population start working on their business? No. Majority of them stuck at phase 1. They find it difficult to find the idea.
It’s good that you have crossed the phase 1. Let’s get to the phase 2.
If you’re looking for more ideas, I have already created a list of 67 business ideas which costs less than $1000.
2. Phase 2: Validate the Idea
You need to make sure that whatever your idea is, people are going to buy the product out of it. People are not likely to buy a pen which can be used as a calculator because all of us have a phone nowadays.
There are two ways you can validate your idea.
2.1 Directly Ask the Potential Customers
When you came up with an idea, you must have a list of target customers in mind. Like, these are people who’re willing to buy your product. You can directly approach them and ask whether they would buy a product with that idea.
If they are not physically approachable then you can add them on LinkedIn and Twitter, and ask.
It’s a good idea to ask at least 30-40 people in this phase.
- If 50% of them say “yes”, go with the idea.
- If only 5-10% say “yes”, either drop the idea or tweak the idea.
- If 10%-50% say “yes”, this is a danger zone. Your product can either take off or not. You need to validate your idea with another approach. Read section 2.2.
While asking them whether they would buy the product or not, you should also ask the features they would like to have in that product. This will give you a list of things that you can consider adding in your product.
2.2 Do a Market Survey
It’s very likely that whatever you’re going to offer, already exists in the market. There may be some differences but more or less the product would be the same.
Gather the data of that company and check how is it performing. If the company is performing average or good, you can go with your idea. If it’s not performing good, head to the customer care section of the company and check what do its customers say. There you will get the idea of what’s wrong. If you see that people don’t need the product anymore then you get the zest that you need to look for a new idea.
3. Phase 3 – Create a Prototype
Many first time entrepreneurs think that once they have a valid idea, they can go for funding.VCs don't fund ideas. They fund the growth. Click To Tweet
You need to have something to show that your product is growing. But for that, you need to have a product.
You need to create a prototype. The worst part is that you need to put your own money to create the prototype. If you don’t have enough money, go to your friends and family.
I suggest you to read Lean Startup by Eric Ries before you start building your prototype. Many entrepreneurs put too much money in building the prototype so that they’re left with no money to operate it later. Lean Startup tells you what should you consider when you’re building your startup. Some of the highlights are:
- Just make the Most Viable Product which means that it just does the thing it is supposed to do.
- The question should not be what to add in the prototype, it should be what to remove from the prototype.
- If you think that building a prototype will take months, then you’re not building it correctly. Trim the features.
- It should not eat up all of your money.
4. Phase 4 – Get Customers
Launch the prototype and start working on getting customers. You can get the early adopters on Product Hunt. They are the people who are willing to use your product and test it.
Make sure that you offer a referral program so that your customers can bring in more customers. Dropbox did it amazingly. Whenever someone gets a referral, he gets extra 200MB.
If you’re facing lots of challenges in acquiring customers, you can use some out of the box ideas suggested by Traction by Gabriel and Justin. One of biggest reason behind AirBnB explosive growth was that they had approached almost all media companies to get featured. They did not spend much on any kind of paid advertising.
5. Phase 5 – Get Funding
Getting into this phase depends on you. If you think that getting fund will make you grow fast, you can go for it. If you think that getting fund will not make much difference, you can skip this phase.
Generally, service-based companies don’t get into this phase.
If you for a funding, the first question most of them will ask is your x-factor.
u(t) = u(0)e(xt)
u(t) = users at time t. “t” can be 1 month, 1 year or any time period
u(0) = user at the time from where you’re starting the calculation
x = x-factor
t = time
Let’s solve this math equation.
Let’s say that you have 200 customers on 21st Feb 2019. You had 160 customers on 21st Jan 2019. So, here u(0) would be 160 and u(t) would be 200. Here t can be 1 month.
Putting the values in the equation:
200 = 160*(e(x*1))
e(x) = 1.25
log(1.25) = x
x = 0.09
So, the x-factor for one month would be 0.09. The more it is, the better. This x-factor would get you the funding.
The company is losing the customers if x-factor is negative.Entrepreneurs should go for funding only when the x-factor is positive. Click To Tweet
VCs are not likely to fund if the x-factor is very small or negative. If it’s very low or negative, figure out what is the reason. Call the customers and ask why did they leave.
6. Phase 6 – Improve the Product
Now, that you know that you have all the data from your customers, improve your product/service. You know what do they want and what they don’t. You can remove what they don’t want and start working on what they want.
All of the successful startups keep on improving their products. A good example is Facebook. It updates its app biweekly with new features.
This is the phase where you have the money and you need to expand.
This is all guys. Make sure that making the most out of the below offer.
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