Solving Real-World Problems
Why do so many startups fail in the first five years? Often it’s because they haven’t fully validated their business idea before they charge forward. It’s common for founders to be filled with passion and optimism, and make some mistakes when it comes to research.
The first step is to ensure that you’re solving a real-world problem. Start by identifying the problem you solve and carefully defining it. Then, look at the market to see what competitors already exist. If you don’t find any competitors, you probably aren’t solving a real problem.
Once you find your competitors, make sure that you have a differentiating factor. Why should someone buy your solution instead of the existing ones? If you don’t have an answer, you probably don’t want to pursue that particular business idea.
With your remaining business idea, review how much investment you need to start, how personally interested you are in the product or service, and the potential profit. This can help you evaluate business opportunities against each other.
The Business Model Canvas can help you visualize how your business will move forward. It allows you to look at your entire business foundation, from your ideal customers to your value proposition and the route to market. Once you fully understand each of these elements, you’ll be in a position to determine if you should move forward with your business idea.
Solving real-world problems is only the first step to validating your business idea. You’ll need to understand your customer base, scale, and gain traction — which we’ll look at next!
Know What Your Customers Demand
Do you know what your customers want? Unfortunately, for a lot of new business founders, the answer is no. The problem is many founders think they do, only to uncover almost no market need. A lack of product-market fit is the number one reason companies fail.
Getting completely clear on your ideal customer is essential, and it’s best to get information from real people rather than creating a marketing avatar that may or may not exist. Also, don’t rely solely on what people say they’ll pay for — find out what they’re actually willing to put money toward. You can do this by creating an online funding campaign, for example, or seeing where your market spends money with competitors.
Once you’re aware of your target market, learn everything you can about them. What are their core motivations? What goals do they have? What products and services do they use that are complementary to what you offer, and what are current competitors they buy? What would it take for them to switch to a new provider for their needs?
Finally, determine exactly how you’ll add value to the lives of your target customers. What will you bring to the table that they aren’t currently experiencing? How can you share that message in a way that gets their attention and moves them toward a purchase?
Knowing what your customers truly want and how you’ll meet that need in a unique way is essential if you want to have a successful business.
Start Small and Scale Efficiently
Most business founders know that they need to start small, but sometimes they scale too quickly or not efficiently. This can lead to burning through startup funding too quickly and crashing into failure. So what does it mean to start small, and how do you know when to scale?
Starting small usually entails moving to market quickly with a minimum viable product (MVP). This allows you to test demand and make sure you’re meeting your customers’ needs before you invest significantly in product development and production. However, an MVP is not a one-and-done process. In fact, it’s something you do over and over — and that’s how you scale responsibly.
Your first MVP will prove your primary concept. Then, as you add features, you need to go back to your customers, again and again, to ensure that’s what they’re looking for. You don’t jump straight from an MVP to a full-featured product or service. Instead, you iterate, getting feedback and improving as you go.
Once you’ve gone through the process of multiple iterations of your product or service, you’re ready to create your full, mature offer. You’ll be able to put it into the marketplace knowing there’s demand for every element. This is when you focus on scaling up.
To start small and scale your business identify your assumptions and test each one. As you do, you’ll create an in-demand product or service and build your brand at the same time. It’s a win-win that allows you to scale responsibly and minimize the risk of an expensive flop.
Get Traction to Attract Investors
One of the key things that make your new business idea attractive to investors is traction. They want to see positive forward momentum, not just great ideas on paper. How can you create traction and attract investors?
First, make sure you’ve gone through the process we’ve been discussing in previous posts. Prove that you’re solving a real-world problem, and get to know your ideal target market. Then, create a minimum viable product (MVP) and get initial sales. If you can show strategic partnerships, interest from major brands, and customer testimonials, you’ll be well on your way.
The focus for investors is to ensure that the market opportunity is large enough to provide a strong return on investment and that your business is viable and unlikely to fail. They want evidence that your idea isn’t just a dream and that you have sustainable growth and a valid business model.
From there, consider talking about how you can take advantage of your early traction and continue moving forward, and even scale your growth. That will help you stand out from other startup founders.
When you have traction, investors will still have some questions. Why do you need funds? What are you going to use them for, and how will you generate strong returns?
When you have great traction, it will be much easier to pitch investors and get them to follow through with financial commitments. Then you’ll be able to scale your growth and be well on your way to business success!