Plan on Launching a Startup in 2020? Here Are 7 Critical Questions to Ask Yourself First
You should focus first on these key areas.
1. Who is the customer?
Always be your own customer. Being your own customer has historically had a strategic advantage. As an example, Uber and PayPal were created by founders solving their own problems.
In the beginning of a company, only innovators and early adopters will be interested in a new offering. To be successful, you need lots of access to customers because you’ll typically collaborate with your customers to make the best solution. So always serve a segment that you belong to.
2. What’s the problem?
Now that you have a customer segment to target, you need to explore the big problems that group is struggling to solve. What is the most inelastic problem facing those customers? What would they gratefully pay to have solved?
I recommend solving needs, not wants. Create aspirin, not vitamins. You want to find a problem bad enough that early adopters will pay even when the solution is not perfect.
3. What’s wrong with the status quo?
You’ll need to explore the current solutions to understand why incumbents are not sufficiently addressing the market. Look at solutions the incumbents are avoiding because it will cannibalize their empire.
Understand the flaws in existing solutions, and understand what factors a new solution must address to overcome the sunk costs already incurred. Sticking with the status quo kills more startups than almost anything else.
4. Can you produce an additional solution?
That said, a new solution doesn’t always require new technology. Netflix, Tinder, Airbnb, and Uber all rose to success based on their models, not just their technology.
5. Will anyone buy it?
Because the cost to launch a prototype solution has dropped so low, most investors expect founders to have traction (revenue, user growth) before funding. It is more important to get early user commitments than it is to perfect your solution.
If you can’t find buyers for your beta version, I worry that the problem you’re solving isn’t big enough for a portion of the user base to adopt early. So make sure you sell now, perfect later.
6. Can you generate a profit?
If you can’t eventually generate more revenue than costs, your venture is dead. It really is that simple.
Try to find the lowest-cost way to attract new customers. Is that Facebook ads? Twitter contests? Trade shows? You want to find and convert users quickly and at a low cost. Then, once you have that, focus on making the most of these new customers. Try to find ways to increase revenue by extending value.
7. Can it scale?
2020 is a year of new beginning. If this is the year you finally become an entrepreneur, ask yourself these question first, and good luck.
Dr. Sean Wise, BA LLB MBA PhD is a best-selling author, venture capitalist and founder of more than half a dozen new ventures. He has spent two decades in the venture capital industry, specializing in supporting high growth ventures at the seed stage. Dr. Wise was named national startup Mentor of the Year in 2014. Dr. Wise has written five books and hundreds of articles on entrepreneurship with work appearing on or in: Forbes, CNBC, CNN Financial, The New York Times, Fox News and the Globe and Mail. Recently Dr. Wise published an online roadmap to startup success at www.100Steps2startup.comFollow on:
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