Startups can take a lesson from a single mother on a budget.
Problem: She has a hungry family and limited resources to provide food for them.
Solution process:
“What will they eat which is good for them?”
“What ingredients are already in the house?”
“How to combine those into a healthy meal they will eat?”
Startup Analysis: Part One
“What product or service would be helpful but is not currently available?
Is it a desire or a need?
Who would pay to have that problem solved?
How large is the market currently?
What is the duration of the market?
What is the potential for expanding the market?
What is the street value of the solution?
Startup Analysis: Part Two
What is the total cost to bring the product or service from idea to revenue received?
What is the customer acquisition cost?
What is the cost and availability of the talent necessary to complete all phases?
What is the profit potential?
What is the time frame to complete the process?
Start with the Need in the Marketplace
Instead of thinking from a point of “This is a cool idea which will be fun to do,” think like Rob Walling, “The biggest challenge is building something that people really need/want. Not only discovering that pain point, but then actually building something that solves it.”
Why do startups fail? Peter Shankman, founder of Haro stated that the entrepreneurs listen too much to their friends. Bootstraptoday.com proposes that it is financial, management, marketing and technology. Joanna Krotz of Microsoft suggests that startup failures relate to passion, selling too cheap, starting a business for the wrong reason, poor marketing and poor capital management.
Though all of these elements are true, they all overlook the core issue which Rob addressed. What problem does the marketplace need to have solved? Far too many entrepreneurs subscribe to the Field of Dreams scenario; they believe if they build it, the market will appear. Instead, build what the market needs and wants.
Three and in or out
Step one is “what does the marketplace want and need? The second step is determining how to fill that need with a solution for which the marketplace will eagerly pay. Step three hinges on the size and duration of the market as well as the perceived value of the solution. If the cost of delivering the solution does not permit a sufficient profit, the idea must either be scrapped or tweaked.
Until steps one, two and three are affirmed, go back to the drawing board. Rob spoke of a “pain point.” People will pay for a need to fix in any economy. In a tight economy, they may not pay for a nice to fix.
Think in terms of the dentist. If you have a severe toothache, that is a need to fix. Requesting an expensive tooth whitening treatment could easily be postponed; that is a nice to fix. The need exists to solve the toothache; the customer will pay for the solution. An endless supply of people with teeth exists. One, two, and three are satisfied.
Back to the Kitchen
Steps one, two and three are fundamental.
One – “What will they eat which is good for them?” In terms of a startup, ”What does the market need enough to be willing to pay for the solution?”
Two – “What ingredients are already in the house?” relates to “What similar services are already available in the marketplace?” What additional value can be provided?
When Mountain Castles launched in Steamboat in 1986, there was an absolute need for vacation lodging, tourists were willing to pay and the market would return every ski season. The differentiation was that the other property management companies offered condominiums; Mountain Castles offered the privacy and luxury of single family homes.
Three – “Combine the ingredients into a healthy meal they will eat.” Mountain Castles had to package the benefits of a home rental into a cost-to-value proposition which was much more appealing than condominium lodging.
Startup Solutions
The primary consideration in starting a new business, purchasing an existing business or re-analyzing a current business is determining the extent of the “pain factor” in the marketplace. Without sufficient pain, the slightest blip in the economy may devastate the business. What solution can be provided in a cost-to-value relationship which will appeal to the customer and provide a profit for the entrepreneur?
Determine the “pain point”
Conduct a survey of your followers on Google+, LinkedIn, Facebook, and online mastermind groups. Meet prominent business leaders for coffee or lunch at the club, talk to fellow leaders at Rotary, or form a “think tank.” Attend executive conferences and Economic Development meetings. Conduct a postcard campaign driving people to your website. Incentivize everyone to provide the winning idea.
When the pain is clear, the solution will appear.
Elaine Love writes for PrintPlace.com, Small Business Examiner, Motley Fool, and Elaine4Success.com. Her expertise is in small business, marketing, mindset for business and speaking coaching. Her credentials include Masters Degrees in Communication, 35 years of entrepreneurial awards including “International Innovator of the Year,” World Class Speaking Coach, and author of 3 books.
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