How to avoid starting a business idea that could fail from the beginning
The Business Idea Funnel: a simple 5 step approach to filter business ideas
I experienced on my skin that an idea and the capacity to build it is not enough for a product to succeed.
We just rush in the momentum, from a spark in our minds and then spending time until the MVP is conceptualized, built and released to the market. And here it is, the Market. No one will know if our product will succeed or fail until faced with it.
That’s why recently, in the startup or indie hackers world, it is all about going to the market as fast as possible.
But is that enough?
No, I don’t think so. We need to go back to the basics and don’t start from the beginning but from the end, which is our dear market.
Is there a market for my next idea?
If so, it will like it or not?
Are people, in this specific market, willing to pay for it? How often?
How can I reach my potential customers?
Some of these questions can sound obvious to you, as they do with me.
But if they are so obvious, why are we always discover too late about missing product-market fit?
Of course, because it is your idea: it has to be successful. Right?
Well, it is also your time. A lot of your time, that you’re taking out from family, friends and new opportunities. That’s why you need to maximize your chances to succeed. Here’s how you can do this.
💡 How to evaluate your next business idea
In marketing, the steps that a user takes from being aware that a product exists until buying it is called a sales funnel.
We can use the same concept for a business idea: let’s call it the business idea funnel.
What’s a business idea funnel?
Everything starts from an idea: from a small spark in our minds to something that grows and we keep thinking on for weeks or more.
What should happen next? Here’s some different path that I followed in the past:
- build, ship it and advertise it.
- do some basic market analysis and ask the potential customers, build an audience, build and ship the product and use the audience to make a base for growth.
The first one is a complete shot in the dark. I did and I will continue to do it for something that just sounds fun to me but I don’t care about building a business on.
The second one is a typical approach widely used, I also used it for a current startup I’m running and I didn’t saw any major issue with it. Not until now 😅.
What happened?
I tried to make a sustainable business around it via a recurring model. It did not work out. Why? I slipped on one of the steps I’m going to talk about right now, and this article is a way for you to avoid the same mistake.
Let’s do this! 💪
📈 Step 1: are you in a big or niche market?
It is pretty easy to reason about the average size of your business idea.
You are in a big market if you are willing to create something that solves a problem for most people. The same also counts if a particular market is already huge by itself, like the web hosting market for example, where big players are already in.
Instead, if you are willing to create something that solves a specific problem for a relatively small amount of people, then you are in a niche market. For example, a community where people can swap second-hand clothes in a particular city could be one.
One important side note that I want to highlight here: niche market could not stay niche forever. The search engine market was a relatively small niche before…what about now?
Takeaway: make sure that there is a market for your business idea and, if so, identify if it is a big or niche market.
🍽 Step 2: is your product a main or a side dish?
Based on the market you want to be in, the type of product you have in mind can make a huge difference.
The market is big, well known and funded players are already in and they are growing fast. You could do two things:
- create a main dish, something that can compete against them
- or a side dish, something that can use the big players’ growth in your favor.
Let’s make it more concrete with an example in the social media space:
- building another social media would be a main dish
- building a game that runs on social media (never heard of candy crush saga?) would be a side dish.
Why is this connected to the market you are in?
Think about it. Does a niche market need a side dish? No, it is just waiting for the next game-changer product. On the other hand, does a big market need another main thing? Maybe yes, who knows, but probably your chances of succeeding would improve by creating a side dish first then grow from there.
Takeaway: proceed with your idea if you want to build a side dish in a big market or a main dish in a niche market.
💰 Step 3: profile your potential customer pockets
Talking about a business idea, there is no business at all if there is interest in a possible product but no-one willing to pay for it. That’s the hard truth.
I noticed a lot of ideas, brilliant ones sometimes, but not sustainable in the long run. The problem was not the idea itself, simply no-one was willing or with the availability to pay for it.
There is a reason why a B2B is, most of the time, a safer choice than B2C. If a business has a problem, which probably causes a money loss, paying for a solution that solves it is a no-brainer choice. On the other hand, that’s not true if a specific person has a problem (like planning a trip) and your product could solve it.
Here’s the main question: is your target customer (business or consumer) willing to pay for your product? If so, how frequently is it willing to spend?
The frequency part is vital for a sustainable business. If a customer does not pay more than once, then it means that you need to find new customers to keep your business running long-term.
Takeaway: make sure that your potential customer is willing to pay, frequency is a high plus. Depending on the level of interest, make the validation stronger by asking customers to pay in advance.
🤝 Step 4: build a business for customers you would like to have
While the other steps were more subjective, this one is really about you and who you like.
Growing a business is hard and customer focus is essential in doing it.
To make your business succeed, you will need to spend a lot of time talking and understanding your customers. And, especially if you’re not doing this full-time, you want to make the journey enjoyable.
Solving a problem that is also yours is a common pattern that partly reflects this step: you will be able to understand and communicate with potential customers, while also being more determined to build the product.
Takeaway: make sure that you enjoy the market (and then the customers) you are in, it will make things much easier.
📣 Step 5: identify your marketing channels
After making sure that:
- there is a market for your product
- your type of product is in the right market
- customers are willing to pay with a variable frequency
- you would enjoy making business with your potential customers
Then is time for the last step, where you need to understand if you can reach your potential market or not.
Doing a blind online marketing campaign on the most popular channel could be a waste of money and time.
First, understand where does your customer physically and virtually spend time. After identifying these channels, specify how you can use them and when.
Never underestimate physical channels, especially at the beginning when you need customer validation and feedback. Everyone always uses virtual channels from the start not because is better in every aspect, but because it is easier. If you can, build more quality physical channels first, get feedback and act on it, then grow by using virtual channels.
Takeaway: create a list of your marketing channels, how you will use them and when.
Before I mentioned that I slipped on one of the steps. Of course, it is the most common one where people with a software engineering background fall.
With my team, we had the idea of a platform to help volleyball players to find a team and vice-versa. I can say, the market is quite big and the idea is a main dish, combination that I would not generally advise but which can make sense in the case of lack of strong competitors (first red flag 🚨).
We liked our potentials costumers and we also had good channels, especially physical, to reach them out. So we build ClubUp! and shipped it in the Italian market with an MVP and then did some pivoting based on feedbacks.
In the past year, we tried to create ways to make the business sustainable. This is where we understood that the market was interested in our product but not willing to pay an amount with a frequency to make a sustainable business around it. What a pity, but that’s simply how life goes sometimes 😣.
Of course, we are proud of what we made so far and also the experience we gained with it. I wish this article will be a source of inspiration for you to make your next business idea succeed, so all the best with it! 🚀
That’s all for this article, I hope you found it useful!
If you liked it, show me some of your support by pressing and holding the clap icon 👏 and share it, it could be useful to someone else as I hope it was for you.
Feel free to give any feedback or comment below👇🏻, I’m eager to know what you think!
Credits
I first heard of the interesting concept of main/side dish on the Indie hackers podcast, specifically in this episode with Tyler Tringas and Justin Jackson. Give it a try if you want to know more about it!
