Summer has taken its toll on our writing efforts. It doesn’t help that we’ve been busy working on some rather time-consuming projects. For one, the main contributor, Mikk Maal published an e-book about security tokens (can be found here), and secondly, we’ve been developing the prospectusapp.com, a web application for SMEs looking to raise capital.
In this blog post, we’re going to talk about a case study of our business advisory client. The lessons here probably do not apply to all businesses, but the struggle of going from zero to one is familiar to almost any business. Due to confidentiality reasons, I won’t be using the real name of the client, instead, I will call it Company X. Company X is a one-man company, with John as its sole shareholder and manager.
Company X is doing cybersecurity consulting, or at least that’s the main activity of the company. While the cybersecurity side of the business is working well and bringing in the money, John has more plans and ambitions. He has developed a software solution which can be applied in multiple industries. The solution is not the end product, but rather an engine, and on top of that engine, you can build the products for end-consumers. Or you can license the engine to other companies who can use it to build their products or improve their existing products for the end-users. I don’t want to go into more details about the product itself, but I hope you get the picture.
The problem the Company X had is that the engine enables to build many products — too many. There are tens of different products you can build in several industries — we counted about 15 different industries together with John. This sort of situation can create the decision paralysis, where you don’t know in which direction to go. This kind of decision paralysis can happen to starting entrepreneurs as well — there are so many possibilities to do different things, but how to decide? Here are some of the things we did and the approach we took with John to get some clarity on how to proceed.
- We listed out all the potential industries where the solution could be applied. Bear in mind that there’s no end-product at this stage.
- We analysed the industries from the perspective of a) potential products that can be built in the industry using the solution b) market characteristics per product/service category c) does the entrepreneur behind the Company X wants to be in that industry and does he have any passion for it.
It makes sense to break down what we analysed under the market characteristics. It’s not a comprehensive list, but some of the main things we looked at, in no particular order:
a) Existing products and competition in the market.
b) What would be the added value our solution can bring to this market or product/service category.
c) Potential untapped niches in that industry, or at least niche that could be targeted as a first step.
d) Does any competitor have a dominant position in the market? Is there a star-business with a clear competitive advantage?
e) How lucrative is the market?
f) Is the industry growing or dying?
g) Do we understand what drives the demand in the market?
h) Can we collaborate with existing players in the market to improve their existing offering?
And so forth until we were getting some clarity. We realised quickly that as we don’t have a final product, but the engine enables to build products on top of it, it makes sense to approach companies and see if they’re interested using the software engine to improve their existing product (it enables to build superior features and performance to what they have). The main reason for approaching companies and not consumers was the cost. Our approach was to test the market quickly, cost-effectively, get some feedback and try to generate income streams via licensing at this first stage. To approach consumers or end-users, it means you have to have a final product. The final product would need a lot more time, expenses on development and marketing, and knowing what the final product will be.
After doing the above analysis, we ended up with two industries at first — pharmacy (R&D) and search advertising. Once we had the industries, we mapped out the biggest players in the industry and analysed their existing offerings. With this, we knew where we could improve what they already had, or what functionalities their current offering was missing. As a result, we had a clear list of companies to approach. Hence, we were now in a situation where we could talk to potential clients and collect feedback.
We helped to craft the messages to these potential clients (though Company X did not need much help with it and our part was minimal). After the initial calls it was clear that the solution was very interesting for these clients, but in a bit different way than we had imagined. This sort of feedback is invaluable. At the time of the writing, Company X has several negotiations opened and agreements waiting to be signed. We’ve taken a step back as consultants at this stage, but it’s always good to see a company in the process of going from 0 to 1.
Mikk from Comistar
Comistar provides business, legal and tax support for e-residency companies. Our core focus is on Fintech licensing, e-commerce companies, blockchain industry and affiliate marketers. We’ve been operating for over 5 years and have helped more than 300 companies to get started in Estonia.