How To Build a Start-Up: Ideation

Everyone has ideas, but not every great idea can be built into a successful startup. Entrepreneurs need to be passionate, have a tough mentality and a willingness to take risks. They must present an achievable and realistic business plan that demonstrates a measured growth scheme based on a solid business model, detailed market research, and produce products, tools and services of appropriate quality.

Entrepreneurs typically consist of two main types: the Inventors and the Copycats. An inventor radically challenges and changes the status quo, often encouraging us to change the way we think and act. Intense passion and obsession usually drive motivation and succession. Some of the world’s most recognisable brands were created by Inventors, think Dyson and AirBnB. Copycats, however, look to improve and perfect business ideas or products already available. Part-innovators, part-hustlers, Copycats don’t like to stick to terms set by others and often possess great self-confidence. They intend to enhance and better the customer experience – at a better price. Think of challenger banks such as; Starling Bank, Revolut and N26.

Step 1: You’ve got the idea, but are you ready?

Building a startup is exciting, exhausting, all-consuming, onerous, and when done right, extremely rewarding. Filled with exhilarating highs and desperate lows, rejections, challenges and wins that leave you smiling for days, it’s no wonder the startup process is so addictive – and it all starts with one, often simple, idea. A eureka moment. But alone, one idea is not enough.

First, some background checks are in order: what problem does your solution solve, and do enough people care? Where does it fit the market, and is it unique? If there’s a similar offering already available – how is your version better?

There are 305 million startups annually, and every year, 100 million new startups emerge. Out of those, 1,35 million are tech startups. Competing in a world of 472 million entrepreneurs, it’s no wonder the process can be relentless. Intense commitment is obliged, alongside an understanding of the challenges that lie ahead. Knowing that 90% of startups fail and 10% don’t make it past their first year, there’s an argument that suggests mindset is everything. There will never be a right time, so don’t wait for the stars to align. Focus on being mentally prepared. Building a startup requires significant time, resources, and energy. If you’re not psychologically ready, any failure or rejection could devastate you. So we ask, are you in the frame of mind to win? If so, read on.

Step 2: Do you have the right people around you?

Are you looking to embark on this adventure solo, or do you have a co-founder in mind? Perhaps there’s even a team of you working together. Harvard Business Review says that experience alone does not make for a successful team. Soft skills, such as entrepreneurial passion and a shared strategic vision, are also required.

Whoever you decide to collaborate with – either on a founding or employee level – ensure that the personnel appointed have skills that complement, a similar work ethic, shared values and an aligned vision for the company’s success. No one person is an expert in everything. Often weaknesses need to be filled by experts, professional advisors or external parties. Choose wisely, as every person who deals with your company is an advocate for the brand.

A mentor will also prove invaluable. Whether it’s your first or one-hundredth startup, it’s impossible to know everything or have all the skills and insights needed. Your mentor will help guide you throughout your journey and act as a safe sounding board for ideas and decision-making. It’s imperative to find somebody you trust, respect and value. Often mentors can be found in your inner circle, fellow acquaintances, through accelerator schemes and networking events, or provided through the VC – which is why being connected to the right investor can prove crucial.

Step 3: Research the market

Do your homework. Establish the demographics of your customer base so you can connect with and communicate effectively with your audience and build a product they will use and love. Build user personas to understand their habits, needs, desires and most of all, how you can change their lives for the better. Semi-fictional character personas are created from your ideal customer idea and then further developed by talking to users and segmenting them by various demographic and psychographic data. The information gathered will help determine your brand image, messaging, tone of voice, product marketing and even the design of your website, online presence and product.

Compare yourself to competitors and realistically evaluate how you measure up against them. Read what their customers are saying about them and what yours are saying about you. This helps determine your price point, how your brand and product is perceived, and if you’re standing out from the crowd.

Step 4: What’s your business plan and structure?

Essential to starting any company, your business plan helps define the roadmap ahead, including how you want to run the business, how you will monetise your idea, accounting for budgets and most of all: gain investment capital or a loan. Statistics show that startups who have a solid business plan are twice as likely to generate funding. Plan’s most commonly span a 3-5 year timeframe. Your strategy should contain:

A solid value proposition,
Market analysis and where the brand fits,
A detailed description of the product or service,
Descriptions of the management and organisational structure,
Competitive advantage,
The sales and marketing strategies and tactical plans,
A forecast of sales and cash flow,
Cost structure, including expected expenses and how you will generate a profit,
Revenue stream(s),
And predicted profit margin.

However, amidst all the planning, don’t forget to make room for flexibility and remain organic. If an opportunity presents itself that falls outside of your plan but would reap benefits and possibly provide a better solution, don’t dismiss it for the sake of preparation. Remember, the business plan acts as a guideline, not a gospel.

There are 12 common types of business models:

1. Subscription
2. Bundling
3. Freemium
4. Razor Blades
5. Product to Service (PaaS)
6. Leasing
7. Crowdsourcing
8. One-for-One
9. Franchise
10. Distribution
11. Manufacturer
12. Retailer

Finding the correct model for your business depends on the scope of your operation and the costs you will likely incur. It’s also wise to seek professional legal advice to set up the appropriate structures and whether you will operate as a sole proprietor, partnership, limited liability company, or corporation, whilst adhering to the countries tax regulations. Although it can prove expensive to bring in professionals, it will cost more to rectify mistakes.

Step 5: Decide your Route to Market

Deciding how you intend to sell to your customers through your route-to-market strategy deciphers success. Different avenues will suit different kinds of products and services, so choose your channel wisely. If you decide to employ more than one route, consider the risks of channel conflict.

Step 6: Building and selling your product

Entrepreneurs often fall in love with their own product, leading to over-engineering. The concept of an MVP allows creators to get into the market and fail fast. This is beneficial because early set-backs help discover what the market really wants. Getting in the feedback loop is imperative for any startup. Entrepreneurs can reach 70, or even 80 percent perceived perfection, but the last 30 percent is entirely subjective. Therefore, if the product is not yet in the market, how can you learn how it’s being recognised, understood, used, perceived – and most importantly, which direction to go next? In the famous words of Ray Dalio, “Perfectionists spend too much time on little differences at the margins at the expense of the important things. Be an imperfectionist.” Produce an MVP and let the market reaction guide development.

Conclusion

So, you’ve got a stellar idea. You’ve set yourself up for the potentially very challenging journey ahead. You’re in the right headspace and have prepared for the intense highs and lows that await. You’ve selected your team, trusted advisors and respected mentor. You’ve researched the market, you understand the space, and the need for your solution. You’ve made a solid business plan – with room for compromise and decided on your route-to-market. By now, your MVP is up and running, and you’re gaining invaluable insights and data. Now, it’s time to build traction and funding. But how do you get investor ready?

Read step two of our three-part series on The Start Up Journey here!

How To Build a Start-Up: Ideation

How To Build a Start-Up: Ideation

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