Have the ideas, found the niche...what to do first?


16

I have found two completely seaprate niches, and identified the target markets for them both. I have comprehensive ideas and details on how the applications should work. I have a developer that I trust and work well with (I am the entrepreneur, not the developer). One of the applications in a SaaS, and the other one will be in the EMR realm. What is my first step?

Do I first incorporate as a software development company? Do I first write a business plan? Do I first try to create an Executive Summary for the applications? What is the first step? I want to approach this in a structured way since I am the business person and would need some preliminary documentation in order to obtain investment for paying my developer to actually create the software.

Software Saas Business Plan Business

asked May 19 '10 at 08:00
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Kerry
113 points
Top agency to build award-winning mobile apps: Utility NYC
  • Make the software first. – Jpartogi 9 years ago
  • Why not partner with the developer? It saves capital and provides more incentive for the developer to do a good job. – Tim J 9 years ago

6 Answers


22

12 Steps To Starting Your Company
and
3 Unit Tests to to measure your progress
Or the art of Changing Hats, Calendar Time and not waiting by the phone.

Below are step by step instructions based on my experience running a successful small software company for the last 14 years. Below that are some milestones for measuring your success along the way. These are principles that I just followed intuitively. My partner works in the industry our software serves and so a lot of this ("stay close to the customer" sort of stuff) was built in naturally. I violated the rules about finding customers first one time and that was the only one of my products that wasn't a success (it was, in fact, a miserable failure commercially. ).

How to make Calendar Time work for (instead of against) you I've found there's a certain amount of "Calendar Time" for things to develop. For example, it takes time for the customer to convert from a "prospect" to a paying customer, and it takes time for the effects of marketing (ads, Adwords, etc.) to take measurable effect. You can't speed up these Calendar Time events so tt's helpful to have something else to work on instead of "waiting by the phone". The steps below interlace marketing/sales and product development productively while also giving you something to do while waiting on something else.

Good cautionary reading: Common Startup Mistakes by the esteemed Paul Graham.

  1. Feel their pain Become intimately familiar with the domain you're working in and the pain you're trying to solve. Hopefully, you've chosen one you already know. You might also find your "anchor customer(s)" who already understand your market. They needn't be actual partners. The relationship could be that they tell you about the market and they get the product, built largely to their specifications, free. Beware the single datapoint. Ideal First Customers have an understanding of the computer and what's easy and hard and understand how the typical customer in this market would use the software.
  2. Be the customer.Play customer. Try to find an existing solution to the pain. This will show you who your competitors are and how your customers might find you. Be exhaustive. Try forums, google groups, whatever. How do people currently solve the pain? (Perhaps your software is replacing someone, or it might just help them do the job faster). This will be important when estimating the value of your product. Because the price of your product should be based on its value to the customer, not its cost. (The customer will never pay more than how much it's worth to them and they couldn't care less how much it cost you to create it.)
  3. Find a few representative customers. As in, people who would pay if you solved their pain. They needn't actually paybut they have to be willing to. Payment is a litmus test at this point, not an income model. Tip: your Aunt Irma who thinks you have the cutest blue eyes and will buy whatever lemonade your stand is selling is not a customer unless she'd pay for the product even if she didn't know you from Adam. Get referrals from #1 or find them while you're searching forums. These will also be your beta customers. I can't tell you how many people I've seen spend months or years working on a product and then ask "how do I get beta testers". How do you know if you're on track if you haven't been at least talking to potential users.
  4. Evaluate the market. 4.1 . Get a domain name & Build a simple website. Submit to google. This starts the clock (see calendar time above) for getting your site into Google. Let folks sign up to get an email when the product is available. They'll be source of enthusiastic Beta testers and first sales. Be clear with them that the product isn't available yet.
    4.2 Read this excellent article by the author of Lean Startups. The basic premise is that bugs in your idea (whether you can make money selling it) are more deadly than bugs in your software. Your product's #1 goal is to test your business idea. (I.e., version 1.0 should be the minimal product to test whether there is a market there for your product).
  5. Paper prototype and get feedback from beta testers. Test your vocabulary. Having a clear vocabulary about the product is good indicator that your mental model is well constructed and clearly defined. If ya' don't know what to call it then ya' don't know what it really is.
  6. MVP: Minimum Viable Product. The simplest thing that will be of net positive benefit to the customer. It doesn't need to be professional. It might be ugly. It might crash a bit. As long as it's better than what the customer uses now,it's good enough. Someone asked Seth Godin what advice he'd have for his own child on how to start a business of their own.

    His response? One word:

    Start.

  7. Get feedback from Alpha testers. Interactive demos, etc. Look for common feedback themes.
  8. Find keywords that your customers use If you can find the lingo your customers use when describing their pain then you can use that vocabulary in your site text and even get a domain name with that text. And you can even find keywords that your customers ("Marketing Segment") use even when not discussing the pain. E.g., if you find that the "pain" you solve is the pain of using paper records in a hospital (your solution: Electronic Medical records). Obvious keyword are the solution ("electronic medical records") the problem (" best way to store paper medical record") and also just words your marketing segment uses: Find Doctors (or Hospital Sys Admins) who are techies.

    Start an Adwords campaign to start finding out the right keywords. Make "beta trial sign up" one of your conversion metrics. A willingness to give out their email address is the closest (and dearest) thing you can ask of the visitors at this point. All visitors are not equally interested (or equally likely to buy your product). Ones that sign up to be a beta tester are much more likely to be worth your time selling to. The goal of the Adwords Campaign is to find which keywords are likely to attract customers, not simply attract visitors. If all you wanted were eyeballs on your site, you'd just advertise "free sex". But out of the nearly billion people on the internet, you want the folks who are likely to be your customers.

  9. Beta version. Get Beta feedback. Does everyone have trouble starting the program? Do they all ask the same questions "What does XYZ mean?". Remember: add features that help a large % of your users and harm a small % of them. Stay focused on your goal. If you're creating a Contact Manager and someone is using it for some other task they'll start asking for weird features to get their non-standard task done. On the other hand, if a lot of your users all "misuse" it the same way maybe you've discovered an unmet need. That's how Flickr started: it was originally a gaming site with the option to share photos. Turns out the photo sharing was the "killer feature". They sold it for around $20 Million. So... look for trends and make sure that the customers who are giving feedback are representative of your market.
    UserVoice is a great way to gather this info. Users get to suggest features (or you can suggest them) and vote on each others ideas. They have a free "starter" edition that works find for small companies.
  10. Let visitors to site sign up to get a trial when it's ready.
  11. Let some of them try the trial if you think it's ready.
  12. Work on Beta 2.
SUCCESS MILESTONES A software company could be considered a Software Factory pattern. And what's a pattern without a Unit Test? Here are three to get you started.
  1. Finding beta customers for whom your Pain Story resonates. They understand they have a problem and see how your product could mitigate their pain.
  2. First dollar - First sale (ideally to someone who doesn't already know you, but hey take what you can get) - validates the value of the product
  3. Stranger Money - Next 10 sales - validates your marketing. (If you can get 10 sales from strangers for $x in marketing then that's probably repeatable and there is a future for revenue from this product. Whether there is profit is another question. But if you can't get to this point, then you'll never reach profitability)

Resources

Startup Flow Chart
(I looked at several and far too many have "develop concept" before talking to actual users. Some just suggest you "have passion" or "talk to your friends", both of which aren't helpful and potentially harmful.

answered May 28 '10 at 11:02
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Clay Nichols
737 points
  • This is great! Thanks for posting. I need clear steps and this puts me on a good track. – Kerry 9 years ago
  • This post is more useful than most entire business books. – Kizzx2 7 years ago

12

Does incorporation yield profits? No.

Does a business plan itself generate revenue? No.

Do things that lead consequently to making your business profitable.

For example:

  1. Design your business model graphically and check that you have solved all the structural problems (To justify that your business can be profitable at least in theory).
  2. Ask your developer to design a landing page and collect some emails from prospective customers (To justify that a demand for your product actually exists).

After completing these two steps you'll be able to answer the following questions:

(A). Where can I find customers, how can I direct them to my application, what would they pay for and what marginal costs and profits would I have?

(B). Who are my real prospective customers and what do they actually want?

If you can answer those questions, you can start to develop your software. (Note that step 2 implies continuous work. It lasts simultaneously with software development).

answered May 20 '10 at 01:06
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Kirill Blazhko
393 points

2

As Susan stated, you should develop the big picture and concentrate on your strategy.
At the same time, you should empower the developer to write the requirements, you'll need it for the product strategy road map.

Then you should cross both documents in order to see if they are strategically aligned.
Here's an example of why this is important: if you plan to sell it in US, UK, Portugal and Germany, you will have market acquisition costs per country. If your strategy is to go for US and UK at the same time, the language localization software requirement will only be needed when you go for other markets, so your expansion plan must be aligned with the software version releases and feature prioritization.

All this should not take much time, as you've already made most of the hard work and your business plan probably does not require much detail.

Best of luck for your business ;)

answered May 19 '10 at 20:49
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Fernando Martins
798 points

1

It sounds like you need to do an opportunity evaluation to really explore the opportunities you have identified and develop a plan to execute them strategically. I have posted about this before in detail here. It's really important to develop the big picture first so you can concentrate on the strategic things that will drive your business forward. This process will also help you identify what the milestones are that prove to you that you have a profitable opportunity.

If it was me, I wouldn't incorporate etc yet. I would evaluate the opportunity and then test it at low cost in the market before spending a lot of time or money on development or building a business infrastructure.

Hope this helps

answered May 19 '10 at 12:50
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Susan Jones
4,128 points
  • I am holding off on the LLC for now, as there are many other things I need to secure first. But won't I need to form an LLC before I can sell the service? – Kerry 9 years ago
  • Personally, I would use a company structure when selling stuff (unless it was commodity items on eBay or something when it is probably ok to act as a sole trader.) But my point is that you need to establish that you have spotted a genuine opportunity, and that you have a workable business model and demand for your product/service before you spend lots of time and money doing stuff - even developing your product. Hope this helps. – Susan Jones 9 years ago
  • You can sell the service as an individual aka sole proprietorship. It's a good idea to workout the marketability and functional aspect of your product before worrying about the legal aspect. Logistic stuffs like incorporating, writing a business plan, and etc are easy once you know what your product is and how it can be profitable. – Nick 8 years ago
  • Very true! That's precisely my point – Susan Jones 8 years ago

1

well the first thing you should do with your EMR is get extensive clinical experience. I am a nurse (who has a CS degree) and will be making an EMR soon-ish with some nurses (with CS degrees) because we have to use all these crappy EMRs made by people with little to no clinical experience. I can also tell you that the EMR field is heavily dominated by a few major players who have pretty much sewn up all the lucrative products, so you will basically need a side entrance - I have MANY side entrances as well as many contacts within health care organizations, you'll need that too to succeed. Get clinical people on your team, preferable RNs as they use these things far more than anyone else!

There are a massive amount of regulations that tie into EMRs, including a wide variety of certifications that need to be attained to sell to certain markets. Furthermore, the vast majority of hospitals use poor quality computers running Windows XP and IE 6.5 - you have to tailor your software to that market!

answered Mar 16 '12 at 15:10
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Nathan
11 points

0

Great advices so far.

One thing you should consider, during this initial phase, is to secure a good domain name.
Domain names are hard to find and run out fast.

If you have all the ideas for the product, you probably have a name for it right?

Get a domain with that name while you still can, and then get the developer to create the landing page that Kirill talked about.

Once you have your plan defined, you should build Prof of Concept or demo version of your product. You'll need that to validate your ideas and get feedback on the features you're offering (and eventually even get some funding).

Hope this helps
Michel

answered May 25 '10 at 09:07
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Mike
825 points

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