Building a startup is usually expensive. Even if your business doesn’t require much capital to get started, you’ll spend a lot of time and effort to build it. You want to know the expense will pay off. Part of that is understanding if you can sell it to someone for a price that justifies the investment. To do this, you’ll want to find if your startup idea has a market. Answer these 4 questions to understand if you can actually make money before you build.
What is the problem my startup solves?
Without understanding this, you don’t have a startup. Your business must bring a solution to a problem that either costs people money or reduces their capacity to make money. You can define this as loosely as you want. If you’re fixing a process that currently costs businesses a boatload of money to execute and you can sell it for less than that, it’s an easy sell.
If you’re building an entertainment product, you have to stretch a little to make it fit and you have a lot more competitors to deal with. Here’s an example:
If you’re building a revolutionary new videogame, that fits into our definition if we say people have to have ways to entertain themselves and relax. If they don’t do this, they burn out and diminish their ability to be productive. This will ultimately impact their ability to make money. We’re stretching a little, but it does still fit inside our definition. Here are the problems:
- If money gets tight, entertainment expenses are the first to go. If the country goes into a recession, these companies will suffer much earlier than healthcare companies and grocers because what they’re selling isn’t absolutely necessary and there are lots of cheap alternatives.
- Your competitors are broad and varied. Your videogame gives your audience joy. Other products that fill the same niche: TV, music, Netflix, sports, museums, national parks, the symphony, plays, movies, books, comics, travel… the list goes on and on. That doesn’t mean there isn’t room for your product, just that your customers will have tons of alternatives.
You can certainly make loads of money by entertaining, but you’ll have an easier time and probably less competition by solving a concrete problem with a dollar value attached to it.
How much does that problem cost your target audience?
Once you have a product to sell, this will help you price it. Even before you are ready to price a product, you can use this to answer the next question.
Can you deliver your solution for less than the current cost of your customer’s workaround?
If you can’t do this, you won’t make a profit. Remember that the cost of the problem to your customer might be incurred in different ways. They may have to augment the staff with contractors to power through the problem. It might mean they can serve fewer of their own customers (an opportunity cost). It might mean they aren’t able to offer an additional feature that would allow them to sell their product for significantly more (again, opportunity cost). A cost doesn’t always mean your customer wrote a check to fix a problem, so keep your eyes open for other kinds of costs.
Can you reach the audience to tell them about your solution?
If you know how much the problem costs your audience, you can price your product less than their problem, and you can reach them, you should be able to make sales. Here are a few ways you might reach them:
- Target them with Facebook ads
- Find people who already have an open channel with your audience and offer them a commission to sell your product
- Offer to write guest blog posts on blogs your audience frequents
- Set up booths at industry conferences focused on your audience
- Talk to decision makers directly about your solution
Once you’re delivering a valuable product, this answer should be just a matter of finding the right channel. Some audiences may be more difficult to reach than others.
Tick these boxes, and your product is marketable
If you can reach your audience, deliver your solution, and make a profit for less than what the problem is costing your customer, congratulations! You are ready to start building your product.
Time to take the next step and build a cheap MVP to test your solution!
The fear of having a startup idea stolen can inhibit new founders from doing what they must. If you don’t talk with people about your idea, it will fail. Fear will have a far greater negative impact on your startup than copycats. Let’s try to put things in perspective.
Who are you talking to?
When you’re building your startup, there are a few different kinds of people you may want to talk to. We’ll focus on three common types:
- customers who may buy your product or service
- investors who may give you money to build your thing
- developers you may want to hire to work on your project
Your customers very likely don’t have the skills to execute on your idea. Unless you’re serving developers or entrepreneurs, you generally don’t need to worry here. Even when you are serving developers or entrepreneurs, they likely have their own projects. For those who follow through and ship products, figuring out what to build isn’t the biggest challenge.
Investors make their living trading money for part ownership of startups. They have the money to build their own but often don’t want to be that closely involved which is why they invest instead. Otherwise, they would be off building their thing instead of talking to you about building yours.
Developers could run off and build your idea, but they usually won’t because, even though building an app or a web site is hard, there are still many other hard challenges remaining like sales, marketing, and fundraising that fall outside the skillset of the developer. Some founders have developers sign an NDA (a non-disclosure agreement) to bind them to keep quiet about your startup, but many highly skilled developers will turn away at this suggestion. (Many developers have written about why they do this.) You can use the NDA as a tool to protect you from your developers if you’re comfortable with that trade-off, but it must be very narrow and will require a high standard of proof to enforce.
What about companies who might acquire my startup?
Perhaps you’re worried about approaching companies who might acquire you. If you’re building a product or service that would be a natural fit for a larger company to acquire, how can you keep them from stealing your idea? Truth is, you can’t without patents, and, even then, they can often work around them to achieve the same result. If you’re worried about this, though, you’re probably missing the whole point of an acquisition.
Large companies used to have giant internal R&D departments that brought new ideas to life. This has largely gone away and been replaced by acquisitions. Now, rather than trying lots of things internally only to have a few succeed, companies can spend less money to buy up the experiments of others that have already succeeded. That means, if you’re thinking about approaching someone about an acquisition before you’ve built anything, you’re most likely too early.
How will the copycats find you?
I’ve talked with founders who are reluctant to even put a prototype or a lead generation page online because their idea might be stolen. Here’s the question I ask them: How would someone discover your page? If I search for “startup ideas,” it’s going to bring back pages with the words “startup ideas” on them or in the title. Unless you write an introduction on your site that says, “Welcome to my startup idea,” they’re not going to stumble upon you by searching.
The events that would have to transpire for your idea to be discovered and copied are extremely unlikely. Just to put this in concrete terms, let’s think about an imaginary on-demand lawn tool rental app. Users select a lawn tool which is delivered to their home for a small rental fee. They return it after a week. (Hey, I never said the example would be a good startup idea. 😉)
The people who are likely to come across you are those looking to rent lawn tools. So, before you can be copied, one of your users needs to also be a web developer or an entrepreneur with money to invest. (Aside: Is an entrepreneur with lots of cash likely to want to rent lawn tools?) Most of your visitors will not be one of these two kinds of people. A few of them will. Let’s focus on those.
What about visitors who could execute?
Not only does one of your visitors need to be able to execute your plan, but they need to want to do so. They should also have the free time to put this plan into action. If you divide a startup into two bits — the idea and the execution of that idea — which do you think is more difficult? If the idea is the most difficult, stop worrying and just execute since that’s the easy part! You’ll have no need to talk to anyone. (Don’t actually do this. I’m making a point here.)
On the other hand, if the execution is the difficult part, don’t you think all these people who are capable of doing the hard part — the execution — already have the easy part — the idea(s) — under control?
Let’s review. The person who will hit your web site to steal your startup idea will be: 1) an entrepreneur or web developer 2) wanting to rent tools 3) with no good ideas about which startup to build next. The likelihood of this person finding your site amongst the entire world wide web is extremely low. If they do find it, congratulations! You win at SEO! 💰
I don’t care how unlikely it is. How do I prevent people from stealing my idea?
(Note: I am not a lawyer and this is not meant as legal advice.) If you want to protect your idea at all costs, get out your checkbook. You’re going to need a lawyer to help you write up an NDA. You’re also going to want any intellectual property patented so it can’t be copied by others.
Once you have these protections in place, you’ll have a court case should anyone decide to steal your idea. Now, you’ll just need the money to take the infringing party to court to enforce your NDA and/or to protect your patent. It won’t always come to this as, for many, knowing you have the defense in place will be enough to deter them, but you’ll want to be sure you’re prepared to defend your property in the event someone calls your bluff. If you’re not prepared to enforce NDAs and patents, you’re wasting everyone’s time and money by bothering with them at all.
No One-Size-Fits-All Solution
I’m being a bit flippant here about protecting your startup idea because many people focus on this instead of executing. Protecting your idea will be more or less important depending on what you’re building. Keep your eyes and ears open. As with any advice you read, listen to your trusted advisors first and think about the particular needs of your business. Just don’t let fear of having your idea stolen keep you from realizing your startup dream. A launched startup that was beaten to market by a copycat is still far more likely to achieve your goals than the one that never shipped.
In order to generate startup ideas, you need to tweak the way you see the world. You can do this by priming yourself to see problems. Most people go through their days encountering hundreds of problems. They work around them without even noticing. If you instead come up with a way to solve a problem that people find valuable, you have a startup idea. Here’s how you can get started.
Look for Problems
Throughout your day, keep your eyes open to the problems you and others encounter. These are the seeds of your startup ideas. Almost everything you do throughout the day will bring a new set of problems. Most of these problems are either very small or extremely difficult to solve. The small problems have less potential as startup ideas because they aren’t painful enough to solve. Most people aren’t going to pay to solve these. The difficult problems are typically expensive to solve. The cost of the solution may outweigh the potential.
Here are a couple of examples from my own life, first of a problem that is difficult (for me) to solve. In my neighborhood, I have trees lining the streets that leave sticky sap everywhere. This is a problem when I walk because the sap gets on my feet and picks up leaves. These leaves then come into my house and make a big sticky mess.
There are a number of ways I could approach thinking about this problem. What if the soles of my shoes were made of a material that would still provide enough grip to walk but that the sap wouldn’t stick to? I would probably need to be a materials scientist to develop that solution. What if there’s a way to treat the trees so that they don’t produce the sap? Again, this would require more expertise than I have. (I don’t even know. Maybe a botanist or a chemist?) Even if this solution were viable, I’d worry about the environmental implications. Maybe there’s a chemical or some type of floor mat that would make cleaning the sap from my shoes really easy. Again, requires expertise I don’t have. Disposable shoes that I throw away after each walk? That could work for some people, but it doesn’t give me the warm fuzzies.
Now, let’s look at a problem that is small and easy to work around. When I move through my house, I have to to either turn lights on and off as I go (which is annoying) or I have to leave all the lights on (which is inefficient). It would be really cool if the lights were aware of my location and activated when I was near and likely to need them. That’s something I might be able to build. Problem is, it would probably be fairly expensive for people to buy relative to the pain of this problem. Am I likely to pay $200 or so to avoid having to flip light switches when I enter or leave a room? Not likely.
Although these two problems might not bear fruit, noticing them and others like them will eventually lead you to a problem that could become your startup.
You shouldn’t limit yourself to your own problems though. Mine other people’s problems too! If you have opportunities to talk to people who own businesses or make buying decisions for them, ask one question:
Most people will happily (unhappily?) tell you all about the one thing that’s most difficult for them. The logical next question is, “What do you do to work around that?” This will give you some great insight into what solution might be viable for them.
Solving problems that cost businesses money is your fast-track to earning your share of that money. 💰
Record Your Startup Ideas
Use whatever system works for you to record the problems you find. For me, that’s a note-taking app on my smart phone. (Bear is a really nice one if you live in the Apple ecosystem.) Some people are more comfortable with a notepad and a pen. Find a system that provides the least friction for you.
In Bear, I like to make a new note for each problem. If you find a problem you want to research, you can record what you learn on that problem’s note as well. Tag each note by adding a hashtag (like this:
MARKDOWN_HASH0fb61889242ddc12a066af9c64543246MARKDOWN_HASH) somewhere in your note. If you’re going to use Bear to make any other notes, make sure you are disciplined about tagging all your problems with the same hashtag. Otherwise, you’ll never be able to find them when you want to review them.
Be very careful about proposing solutions to your problem. If the problem relates to something you’re intimately familiar with like your own business, you can jot down an idea or two. Don’t get attached to anything though. This will only inhibit you from finding the best solution. This solution will come from conversations with your customers. Even suggesting your own solution can make finding the customer-centric solution more difficult.
Explore the Possibilities!
It’s the last step in your idea generation system! Don’t overthink this part. It’s more art than science. You don’t need to find the problem that will make you rich. You just need a problem that seems like it’s worth exploring. Use whatever criteria you want. Maybe take what seems like the low-hanging fruit. Try on the one that’s most exciting to you or seems most challenging. This will be the first problem you’ll focus on when you start talking to your customers.
As you talk to customers, you may very well learn the problem you’ve chosen is not viable. You may find the solution your customers will pay for isn’t one you can build. It may just be that the solution doesn’t sound like something you’d want to work on. That’s why we start here, with the cheap stuff. Instead of filing for bankruptcy protection, you can simply move on to the next problem.
Lacking experience in business doesn’t mean you can’t start a startup. If you’re starting a business without experience, you can take one of two paths:
- Find someone with experience or
- Learn everything you can yourself
The first path sounds easy, but you must have a clear idea of what your contribution is to the partnership. Although it sounds easy at first, it’s actually a very tough road in a startup world where mere ideas aren’t worth much.
Let’s instead focus on the second option to mitigate your lack of business experience: learning as much as you can. This is the critical path I took when starting my first business. It paid off for me even though I knew absolutely nothing about business. I still have a ton to learn, but I now have a much better understanding of how the pieces fit together. This post will serve as a minimal curriculum to get you up and going as quickly as possible.
I know books take a long time, so I’m keeping this list short. Read Josh Kaufman’s The Personal MBA followed by The Lean Startup by Eric Ries. The Personal MBA gives you a good foundation of business concepts. The Lean Startup builds on that foundation a framework for running a successful startup with minimal waste.
Read each of these in its entirety in order. If you have trouble finding time to read them, get the audiobooks and listen to them on your commute, while you’re showering, and any other time you’re able.
Don’t let this stop you from getting to work though. As soon as you know enough to get started, do it. You’re never ready. Don’t let that fact paralyze you and keep you from building your startup.
That should actually be “Course” because I’m giving you only one. Take Steve Blank’s How to Build a Startup course on Udacity. The course is free and will guide you through the process of defining your startup. This includes the bits about your startup that will make it marketable to investors should you choose to go that route.
You need someone who can teach you through their experience. It doesn’t mean you always have to do what they suggest, but having that veteran watching your back can be a lifesaver.
You may already know someone who can be a mentor, but most of you reading this probably don’t. You’ll find mentors in many different places. One of my favorite sources is startup incubators. They may not be as difficult to get into as you think. Incubators are all about mentorship — pairing you with people who have been there until you can stand on your own two feet. I learned more from my time participating in a startup incubator than I have from all the books I’ve read and courses I’ve taken combined. In an incubator, you’ll learn from mentors in the context of real-world startups (yours and the others in your cohort) what works and what doesn’t. Local startup and entrepreneurship meetups are also great options.
For more detail on finding mentors and getting them on-board, I highly recommend Jaime Masters’ post How to Find A Small Business Mentor over at Eventual Millionaire. She does a great job of outlining her own favored options for finding mentors. She then goes into some depth no how to create a healthy mentor/mentee relationship. Really good stuff.
Never Stop Learning
Don’t wait on learning to end before the startup begins. “Business experience” isn’t something you either have or you don’t. If you’re doing it right, the learning never ends. Besides that, much of your learning is specific to your startup and your situation. You’ll never learn it unless you put yourself out there and start making your startup idea a real business.
If you’re learning to write code to bring your startup idea to life, check out these excellent coding practice sites to help you stay on top of your game.
Every week, you’ll get one easy, medium, and hard coding practice challenge. You can post your solution and compare notes with other users on the subreddit. At 122,000 subscribers, you won’t ever be solving the problems alone.
From the site:
Project Euler is a series of challenging mathematical/computer programming problems that will require more than just mathematical insights to solve. Although mathematics will help you arrive at elegant and efficient methods, the use of a computer and programming skills will be required to solve most problems.
These get hard really quick, so don’t get discouraged if you hit a wall. You probably don’t need this level of math proficiency to build most apps. If you can solve these coding practice problems, you can work through just about any problems you come upon developing your app.
Coderbyte and the subsequent sites on the list are of a different breed which allow you to code your solutions and have them automatically evaluated on the site. Where dailyprogrammer and Project Euler have you submit solutions to be evaluated by other users, Coderbyte lets you write your solution in one of a number of languages and test them immediately.
View suggested solutions and read explanations of them. You can still discuss your solutions with others on the site just like you can on dailyprogrammer and Project Euler, but the addition of immediate feedback makes coding practice more gratifying.
HackerRank gives instant feedback just like Coderbyte. The editor has some neat features (like Vim and emacs modes), but those will only become interesting as you become a more accomplished developer.
It has a competitive layer in which you try to attain the highest “rank” among all the users of the site. They optionally use this rank to show you to potential employers. Not useful to founders but an interesting feature nonetheless.
CodeFights has a healthy slathering of gamification. As with the others, you do practice exercises and receive feedback immediately. Each completion earns you points that contributes to an overall score. You’ll get game-like achievement popups as you move through your challenges which will track your progression.
It offers several “modes” (again, like a game) including races against other users, daily and weekly coding challenges, and tournaments.
It’s probably the best looking of the six profiled here too!
It puts other users’ solutions to the problems front-and-center, displaying them after you complete an exercise. It groups similar solutions together and orders them by how many people submitted the same solution. This makes it really easy to pick up language features you weren’t aware of. Usually, good solutions will rise to the top. You can compare these to yours to find out how you can improve your solution.
Which Site Is Best for Coding Practice?
Codewars combination of instant feedback with a focus on comparing solutions puts it on top. The instant feedback allows you to keep momentum up where you might have to wait for feedback with dailyprogrammer or Project Euler. However, showing others’ solutions highlights the opportunity to learn from other users like the aforementioned sites.
It’s not the prettiest. It doesn’t have the coolest game-like scorekeeping and achievement systems. Despite that, the value of focusing on other solutions cannot be understated when you’re learning to build your startup.