Where to get started on your product based tech startup?
August 7, 2019
August 7, 2019
So you want to work with technology to build out a product and a business around it to launch a new tech startup. Congrats on wanting to make the journey! Before you quit your day job however, you should take time to validate your product startup idea is really something that can translate into a business. The hard work of building a business around a product startup is done long before you write your first line of code and by doing it this way, you can ensure you have not wasted any time or money chasing something that may not give you the end result you hoped for.
If you are ready to try and go on your own with a tech startup, the first thing you need to really nail down is the pain point you want to solve and who the potential users are of your product solution for the pain point. Many product founders have an idea for a product and then start working on it because they think people will want it. There is no need to do it this way as your idea should and can easily be validated long in advance of writing the product first. Create a simple business case which lays down the backbone of what you are setting out to do. This business case can easily turn into your product vision or mission statement. Make sure you can answer the following questions when you are doing your product planning:
- Specifically what problem do you see?
- What are the pain points that the problem causes?
- Who is experiencing the pain points?
- What is your solution for the problem that solves all of the pain points?
- How are your potential users solving the problem today?
- Are there additional competitors solving this problem already?
- How would your solution be different than the current way the users solve the problem or how competitors already solve it?
- Would your potential users pay for your solution?
- Look down the road 5 years, and figure out how many developers you would need, marketing team members you would need, support, sales and operational resources. Take a swag at your monthly costs.
- How large is your potential customer base? What percent of that do you think you can capture?
- Now take your customer acquisition estimates and multiply that by the price you expect to charge for your product to get an idea of what your revenue will be in a few years.
- Now take your costs for running the business five years out and add them up to see expected expenses
- Compare your revenue and expenses, does your business look profitable? How much capital do you need to get from here to there and how easy will it be for you to raise that money?
The goal of product planning as an exercise is to ensure when you commit to doing a startup that you are building something that has a future and that all of your sweat and tears has the potential of a great future. Startup founders find quickly that their product becomes an extension of them and will spend many days and nights with their baby to ensure it is nurtured and grows. As a result, you will want to ensure that you pick a tech startup idea that has real potential and not guess at what could be. Product founders really need to dig in early on to validate their idea as a product has a real need in the space and even more important has the potential to generate revenue that will offset the costs to become a real viable business.
All product startups make mistakes and underestimate costs and overestimate the opportunity. This will always happen but the big key is to have a plan and work toward executing that plan and adjust it as you learn more about the metrics of your business. Keep tweaking your projections for cost and revenue as you go because you will need capital to make it happen and the closer your projections are the more you know how much to raise.
As a product founder if you are able to work through the list above about your startup and walk away feeling you have a vision to get profitability that is accomplishable, get to work right away! If you complete the exercise and are not happy with the outcome, this does not mean you should not do a tech startup, only that the idea as it is needs more work to ensure you are successful down the road.