You are probably already aware that to create a high-quality business project you need to take into account many things and work hard. Our task today is to help your startup not just survive and not just make enough to cover its expenses.
Let's talk about what can and should be done for your new technological business project to bring money.
According to Small Business Trends, only two out of five startups are profitable, the rest either break even or continue to lose money. We understand that every startup founder wants not just to “stay afloat”, but to start a successful business that makes a profit.
Steps that are crucial for startup success
But there is good news too: you don’t need to reinvent the wheel! There are certain working must-haves which lead to the tech startup success, and we are happy to share them with you. These practical tips are simply necessary to be used in the initial stages of startup development, so we recommend using our checklist to start a successful technology startup. All this will help you to set the right direction for your new business project from the very beginning of its life cycle.
1. Analyze the idea of your business project
For this purpose, use The Value Proposition Canvas by Peter Thomson - a simple but useful tool that will clarify the essence of a startup, analyze the future product, and understand the logic of the consumer who buys it and how they feel while using the startup product. In addition, do not forget to check the uniqueness of your startup business idea.
2. Check the feasibility of your startup idea
PoC (Proof of Concept) to help you! With it, you will test the feasibility and practical potential of your startup product.
3. Explore the target audience
Get to know the target audience better, find out its needs - this is a platitude, which few people do in a quality manner. You will be able not theoretically, but practically come to the solution of customers problems through your startup product. Therefore, we recommend you to create an ICP and keep it in focus.
4. Analyze market, competitors & alternative products
Have the Five forces analysis by Michael Porter: the threat of new entrants, the threat of substitutes, bargaining power of customers, bargaining power of suppliers, and competitive rivalry. As a result, your startup will gain a competitive advantage in the market.
5. Choose a catchy name for your company brand
Tough name is important but it’s just half the battle. The good example is the Titanic, it had a tough name but it’s still on the bottom of the ocean. Nevertheless, the company name is critical, so make sure it is short, catchy, simple and easy to remember. Good examples of this are the well-known brands Amazon, Apple, Google, Facebook, Slack, Tesla, Canon, Uber, Windows. No ideas for startup title? Use the name generator.
6. Create a reliable marketing plan
Write in detail about your goals, the target audience, and check the startup business model using the Business Model Canvas. Filling out its nine blocks, you can analyze all the main aspects of the business: key partners, key activities, main resources, value propositions, as well as customer segments, relationships with customers, channels, cost structure and revenue streams.
7. Build an MVP and test it
The best solution for this goal would be to use experimental target audience and focus groups. Create a user experience collection system and analyze it. Explore how user-friendly your startup software product is. Based on the results - add extremely useful and relevant features for consumers.
8. Take care of the right financing
Try to get funding with the most attractive conditions. You may seek assistance from business angels, venture capitalists, business incubators, or take a loan from a bank. But most importantly, choosing investors, remember that at the initial stages the best ratio of financing is: 30% to 70%. This means that 70% of the business project belongs to the founder, and not more than 30% to investors.
9. Use strategic and tactical IT consulting
IT consulting is carried out throughout the startup project, but most of the effort is applied at the PreSeed and Seed stages. Using this service allows you to carefully study a startup, get expertise and useful tips in implementing your business model, plan the quality of a project, and ultimately develop a software product that will satisfy your expectations. The topic is very broad, read in more detail in the article “How it works: IT Consulting”.
10. Create your dream team
Every startup founder needs support. Find like-minded people and entrust certain tasks to professionals. Over time, your tech startup team will definitely need a technical director, or STO, CFO, Marketer, Product Manager, and a development team. This is necessary, because it's impossible to have expertise in all areas at once. If you are not a multi-robot, of course.
11. Choose a trusted technical team
You need a team that has experience, good reviews, gives guarantees through a contract, offers IT consulting, is involved in the project as possible and tries to give you even more than you expect. And do not forget to choose the right engagement model.
12. Plan your budget and control expenses
Choose the right pricing model, carefully plan your budget. To reduce costs in software development, use outsourcing. We also recommend you turn to the Lean startup methodology and clearly follow the goals of your business strategy, which always need to be assigned monetary values. This will help to avoid extra expenses.
13. Take care of legal details
To prevent future misunderstandings, make sure to document the ownership of your startup business. Secondly, register your startup product, including programming code. Thirdly, complete a shareholder agreement and sign up for intellectual property rights.
Now let's ask those who succeeded
Our practical tips are definitely delicious. But why don't we turn to those who once started a business project and were able to achieve success.
Amazon CEO Jeff Bezos: “If you have found your calling... you've hit the jackpot.”
“When we started, I delivered the packages to the post office by myself. I knew the UPS guy so well that he would let me in even like 5 minutes after closing... In early days, when there were just ten of us, I did not have packing tables. We were packing on the floor, on our hands and knees”.
It’s hard to believe that these are the words of one of the richest people in the world.
“When I raised the initial funding for Amazon I had to talk to sixty prospective investors to raise a million dollars. I raised a million dollars from 22 different investors, 50 thousand dollars at a time. And they got 20 % of a company for a million dollars. That was in 1995.”
According to Jeff, support is one of the fundamental things that helps you to be able to take risks: “You have to have some mentors, you have to have somebody who loves you. These are the kind of things that build up and allow you to jump off into uncharted train and do something new, because you know you have a support system of one kind or another.”
Amazon is committed to several core values throughout its work.
- The first and most important thing is customer obsession. A competitor obsession can also work, but in the long run it is not as good as customer focused. “If your whole culture is competitor obsessed it's hard to stay energized and motivated. Whether customers are always unsatisfied, they are always discontent, they always want more. So no matter how far you get out there in front of your competitors you are still behind your customers”.
- The eagerness to invent, to pioneer. Constantly create something unique that customers are going to like.
- Long term thinking. In Amazon they are in no hurry and patient with business initiatives. The time frames of many of their competitors are 2-3 years, Amazon - 5-7 years.
- Operational excellence and professionalism, high standards for identifying defects and fixing them at the root.
Other secrets to Amazon’s success include:
- The philosophy about “a Day one”. It means that the company must act and think like a startup. “Day two is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day one” - a phrase that being used in Amazon all the time. Your business may have the scale of the Amazon, may have financial resources, lots of brilliant people, accomplish goals, have global scope, operations all over the world. But the downside of that is that you may lose your nimbleness, your entrepreneurial spirit, you may lose that kind of heart which small companies have.
- Being a large company, Amazon is committed to maintaining its inventiveness, its heart and spirit of small companies.
- Two pizzas team rule - company creates teams that are no larger that can be fed with two pizzas.
- No Powerpoints are used inside of Amazon. “This is the weirdest meeting culture you'll ever encountering” - says Mr. Bezos. According to him much more efficiently works method, when all participants at the beginning of the meeting silently read the memo (not just bullet points), and then discuss it together. Thus, they will definitely read it, since special time is allocated for this.
Another tip for startup founders from Amazon CEO: “If you are going to do anything new or innovative you have to be willing to be misunderstood. And if you can't tolerate that, for God's sake don't do anything new or innovative”.
OakNorth - from Startup to Profitable Unicorn
Joel Perlman, the OakNorth Co-founder and Chief Strategy Officer, Bank of entrepreneurs for entrepreneurs, also speaks of the passion of entrepreneurship, which encourages to continuous growth: “In building a business you can never stop and you can never sort of get satisfied. As soon as we figured out we had a recipe to do something and do it profitably, we said - ok, how can we get this to the next level?”
The Joe Perlman’s team once realized the problem of a certain target audience, mid-level entrepreneurs, and suggested its solution. The team created a fintech startup, an organization that provides medium-sized loans to entrepreneurs (several million pounds worth).
Among their clients are owners of cafes, stores, hotels, restaurants - those who have really good cash flow businesses but have a need in growth and scaling. The company found a way to make money on its loans, while at the same time making them economical, flexible and profitable.
Joe Perlman mentioned the main features of The OakNorth:
- Focus on customers.
- Bespoke loans.
- The client pays more, but in return receives benefits. Only a week to get the answer, and two to three weeks to get cash. Instead of 4-6 months that other banks offer. “Time means money for entrepreneurs. They found a sight, and they need to move” - emphasizes co-founder of OakNorth explaining the company's speed in providing loans.
- Combination of manual and automatic in work: high tech and personal conversations with borrowers.
- Using the early warning signal tool which helps identify when problems are coming.
- The principle of "zero basing": it’s about understanding what is really needed here and what is the fastest way to achieve it.
- It took 20 years for the company to reach this level: “Because great value takes time,” says Joe Perlman.
Of course, we are not Jeff Bezos and Joe Perlman, but we believe that to start a new business project that brings money, you need to find the right people at the right time. And that's what we wish you :)