Does your startup idea actually fit YOU?
So, you found 'Product/Market Fit' for your startup idea. You feel all fine and dandy. On top of the world even.
“Product/market fit means being in a good market with a product that can satisfy that market.” — Marc Andreessen
You start working on your business. (Probably some Saas. — How would you be able to 100x within a year in any other way?😱)
But what you don’t know is that within a year, you’re stuck in your business. Hate working on it and struggling with it at the same time!
You are struggling because you sell to consumers for $1 a month while they load you with support questions.
You hate the work because you have to ‘follow orders’ from venture capitalists that invested in you.
Then you pull the plug, cut your losses, and write a postmortem on hacker news.
“I’m glad I wasted this year building a failing business, but at least I learned something, would do it again 100%!” — Said no one ever
Yes, you learned something. Could you have found that out before starting? Yes, probably. At least answers to some of these factors.*
*(in this example: B2C vs. B2B, VC investment vs. Bootstrapping).
That way, you could have set up your business with those factors in mind. And still, have kept product/market fit.
A business that is in line with you (and the lifestyle you want) is infinitely more robust. It enables you to keep up the grind. The ‘perseverance’ successful entrepreneurs talk about is because of that alignment.
Continuing, these are just two examples of factors that influence the success of your business. There are more like it — some important to you, others not so much.
All the factors I will talk about have two things in common:
- They look at more than the product/market fit.
- They are specifically about YOU. (What kind of business you want to run).
How do you go about finding out what business factors apply to you?
Well, we’ll ask some questions, you silly! 😉 The right questions, in any case.
Let us look at some questions we can ask. — (B.t.w., if you stick around till the end, I will have a useful, practical surprise for you 👌.)
(Also, underneath each factor, you can score your business idea based on your answer. Write down the points and at the end, calculate the score.)
B2B vs. B2C
Do you want to sell to businesses or consumers? They each come with their pros and cons.
e.g., consumers don’t like paying much. Building an app for consumers will force you to need much volume for profitability.
Businesses expect high service, but you can provide that with a higher price point.
You can reach consumers pretty good with SEO strategies. But by selling to businesses, you need more direct sales. What do you prefer?
Pointing: B2B +1 | B2C -1
Bootstrap or VC
Being able to bootstrap has the upside of sole control over the direction of your business. But for some startups that need a lot of capital upfront, it’s not an option.
It would help if you thought about what you find most important.
- Success of a specific business idea, including VC investment?
- Or doing something else/different with that idea that is bootstrap-able.
Pointing: Bootstrap +1 | Venture Capital -1
Fun to work on
To be able to persevere with your business, you need to have fun. Not necessarily 100% of the time. But most of the time.
It means liking your clients and liking the day-to-day work, or gaining fulfillment from the change your business brings in the world.
Pointing: Fun +1 | Not fun -1
Solve a problem you have/had
If you can relate to your clients personally, it makes it so much easier to stay in business. I can’t stress enough how much of an impact this can have.
When you know the pain of your clients, you can empathize with them. You will be able to choose the right course for your products and services. You understand customer questions and struggles.
It’s no coincidence that many successful businesses started with a pain the founder(s) had.
Pointing: Own problem +1 | Not own problem -1
High price point possible
An impactful but straightforward factor.
Can you sell a product or service at a high price point? (e.g. $100+)
If so, you don’t have to sell to as many people. Which enables you to spend more time per customer. And less (support) overhead.
Also, margins are usually higher percentages (than low price point offerings). This gives you the option to experiment with products while having less risk.
Pointing: High price point +1 | Low price point -1
While ‘niching down’ is essential when starting a business. You do want to have a broader market surrounding it.
It enables you to grow into a broader product/service offering if you like to do so.
When the broader market is small, your business will be constrained.
It does depend a lot on what products and services you offer (and their price point).
Pointing: Large market +1 | Small market -1
I have yet to speak to a founder who specifically started a business ‘because of’ the legal complexity.
But some businesses have regulations and legal complexity. If you can help it, avoid it. But if you must, do get advice from a professional.
Some industries where there is much regulation: finances/money, health/hospitals, services for children/schools.
These are industries where, not a coincidence, there is still much left to innovate!
Pointing: Low legal complexity +1 | High legal complexity -1
It may look you are a ‘first mover’ when you can’t find competitors for your business idea. But it’s more likely that for some reason, your business can’t work out in a practical sense.
It’s no often you have such an innovative idea that no one thought about it AND is not able to make it work.
If for some reason, you do have an idea like that, you can’t validate it by looking at competitors. So this should at least give you a big red flag!
If, you do find competitors, it gives you some idea of what may work. But also gives you an edge to start a similar thing but better (because you don’t have the ‘legacy’ they have).
Pointing: Found competitors +1 | No competitor -1
Impact on the world
Does your business leave the world a better place then when it wouldn’t be there?
Being able to show my kids the impact my businesses had over the decades, I want it to be positive. So for me, this is an important one. For many, it’s not, however.
But if this is important to you, and you don’t think about it, believe me, you won’t persevere.
Pointing: Positive impact +1 | Neutral impact 0 | Negative impact -1
The way you monetize is important. Do you want recurring revenue, pay-per-use, or something else?
There is a multitude of options here. And while an important factor, it’s one of the easier ones to change (read: easier, NOT easy).
Also, you can have more next to each other, or have it differ on each product/service.
Pointing: ANY way to monetize +1 | No monetization option (kill the idea… >_>)
Can you do it all by yourself?
Not a necessity at all. But maybe you don’t like managing other people. Or you are unwilling to work with someone else.
Then this is a factor that determines if the business will be successful or not.
Here again, there are pros and cons. e.g., Working alone makes you agile, which makes you able to pivot quickly. On the other hand, it may keep you in a bubble (too long) when working on something.
Pointing: Solopreneur option +1 | MUST need co-founder/others -1
Free marketing, anyone?
Building out a product that people like and even love makes them share it. Your customers sharing your product is the best kind of marketing you can have. And it’s free!
So, is your business idea delivering something that customers can share? Share without friction? Do they like it so much that they are willing to share it by themselves?
An example of an industry that does this nicely are fitness apps. Another specific big one is Instagram.
Pointing: Likeable +1 | Indifference 0 | Not liked -1
Do you have to manually do (a lot of) work for each customer? Can you provide service for one customer almost as easy as for a thousand?
At the beginning of your business, this is not a necessity most of the time. But if you want scale, better make your offering scalable.
If the scale is not of much importance to you (which is a good option by the way!), then this factor is less of an impact to you.
Where the scale is less important is in a business doing custom jewelry work, for example.
Something to keep in mind while thinking about your business idea is: “What parts of my business could I automate?”
Pointing: Fully scalable +1 | Fully scalable except customer support 0 | Only scalable with increase of work -1
Multi-sided business model
Creating a multi-sided business has been successful for some companies. But it’s a prime example of the chicken-egg problem. You need both sides of the model/marketplace to work.
“Let’s build a marketplace for X!”
You need to create TWO separate value propositions for different types of customers.
Essentially this means you are starting two businesses at the same time. As if starting one company is not hard enough already!
If you can start off providing value for one part of the marketplace already, then it’s not much of a problem. Then it may even be an excellent way to grow your business later.
Pointing: Not multi-sided +1 | Multi-sided -1
Data management (storage and retrieval)
Every business has some data (on their customers). Even just an email address.
But some products and services require an insane amount of information or computation. e.g., products where you provide recommendation services, cloud hosting, or use time-series data.
It doesn’t have to be an issue. And data being “the new oil” can give you side benefits that you can leverage in your business. Selling that data (I recommend anonymized or aggregated insights only b.t.w.) is one option. Another option is building new products on the ideas you get from that data.
But storage en retrieval of a large amount of data does complicate your business. Your infrastructure, maintenance, and processes need to be efficient.
Pointing: Low data storage/retrieval +1 | High amount of data storage/retrieval -1
Dependent on one other business
I’ve seen some businesses that build on top of one other business. Be it on top of Google, Facebook, or some API.
Often these are risky endeavors. The company you build on top of can shut down their service without notice. And this has happened often enough to be a risk to you.
Secondly, you have to maintain a connection with that business up to date. Update and upgrade your software or supply line to handle changes.
In the end, you’re at the mercy of the company or service on which you built your service.
In the beginning, it may be fine (to validate your business). But do check if it’s even possible to have more than one ‘dependent-upon-party.’
Pointing: NOT dependent on one other business +1 | Dependent on one other company -1
These are the factors I look at when valuing a business idea. Even before I validate the product/market fit.
If the business wouldn’t fit my lifestyle, it’s a waste to spend time and energy validating it.
So, while some of the factors are must-haves for me (like a ‘Positive impact on the world’), they’re different for everyone.
If you take away anything from this, it’s that you need to look at more than the product/market fit.
i.e., How do you see yourself running your business in a year, in 3 years, with kids? Etc.
Surprise gift! — Business Idea score calculator
As promised, a surprise! I made a small tool that you can use to score your business for yourself.
Evaluate your startup idea:
If you rather calculate by hand, check your points beneath each factor. Then sum those and divide by 16. For example:
- TOTAL: 1 + 1 + 1 + 1 + 1 + 1 + 1 + 1 + 1 + 1 + 1 + 1 + 1 + 1–1–1 = 12
- CALCULATION: 12 / 16 = 0.75
- SCORE: 0.75 x 100 = 75%
Now I’d like you to reply with one of two things:
- a business factor of your own that I forgot to cover. (So I can update the tool for everyone.)
- the score your business idea received (in the tool or calculated by yourself).
Thanks for sticking with me here. I love to help other entrepreneurs with their businesses. And hopefully, I provided some value for you in this post!
If you like what I write about, feel free to subscribe to my newsletter.
Or if you want to look around a bit more, check out some other posts.
*This article may contain affiliate links - these are URLs to services I use and recommend, but with the added extension to let the service provider know I referred the person who clicked it.
Some service providers offer me extra usage of their product or give me a small payout when someone I referred signs up to their service.
Referrals are always at no cost to you. (Sometimes you even get discounts through my URL's!😁)
On top of that, I only refer to products or services which I use and pay for myself.
Thank you very much for your understanding.😊