Maybe not, then there are a few simple steps to assess the market. This is the very first step to your own business. By Tom Blondies from www.makerof.club
There might be the rare occasion when you can feel that you have the killer idea but even then it does not hurt to check out whether there is a market.
For the rest of us this article provides the right tools to set up a successful business for yourself and not for the glory. See also Jon Westenberg ‘s great article The Sandwich Shop Startup.
So a brief note on your business idea — You do not have to change the world!
Not required!
A lot of people get hooked on the idea that they have to start the next UBER, google or any other game changing startup. That is great if your idea has that potential but there is a lot of fun to be had and money to be made in other markets. You will still make a dent as you have to be better than the competition so your service or product will be superior in some way.
And you will improve something a little bit.
Read this article from Jon Westenberg (seems I reference him a lot) about “5 Reasons Why You Should Build A Small Business — Not A Start-up”. Small can be beautiful and more fun. You start small and you can always grow it into something big.
So if you would like to try out to sell some gadget or promote your own book. Go on. The key is to start something.
Some thoughts before your start
Without going into much detail. Starting something on the side, as most of us do, takes a lot of time. So make sure you have your partner, loved ones aligned that you will be spending more time on these things. It will at least prepare them a little bit for things to come. My girl-friend always rolls her eyes.
Then it also helps to find a partner in crime. Teams are usually stronger and they produce more, have more ideas and create more success.
Simple example: you both tried the whole day to sign new customers. At the end of the day your cofounder signs a new customer. You did not. You still feel great because there is one new customer. If you had been on your own, no customer…
Last but not least. It helps a lot to have a mentor. I know easier said than done. Just start, be active in your local startup community or online. If you are active and show that you get things done, help others, someone will show up sooner or later.
To make progress, make it a habit to work on your venture regularly. Best is to book some time every day. If you cannot find a bigger chunk make it 20 minutes, you will see how often it will become more because you think oh just that one little more thing and that one little more thing and so on. If that does not work for you then maybe it is the wrong idea, wrong time in your life or the whole thing is not for you. Businesses take a lot of time and effort.
And last but not least: just start! And we will help you to start the right way.
Chicken and egg question: Product first or audience first
There are two schools of thinking out there. The traditional method involves first creating a product and then selling it to customers.
The newer approach is to build an audience and then sell to them. This has only come up in the last years and is promoted by some of the most successful online marketers and sellers out there, e.g. Neil Patel and Derek Halpern.
The big advantage of the second approach is that you first build a potential customer base and then adjust the product to their needs. You are not confined to your product and you can quicker adapt as you will find out about your customers’ preferences while building the community.
With the first model, you will start to bring in revenue faster. However, you are more likely to have a bad product-market fit and create something that does not interest many people.
With the audience-first model, you will need to build the audience. The best way to do this is in most cases with content marketing.
You build a readership in a particular niche and then find out what their biggest problems are. Finally you will offer solutions to these problems with a great product, which can lead to an incredible conversion rates. Because you know exactly the solution for their biggest pain.
The downside is that it will take several months before you start to see any revenue. And building a community takes time.
Both models have been used successfully to build successful companies, so what works best for your business depends on your preferences, skills and capital.
Passion or not Passion: Should you do what you love?
This is a tricky topic. Keep in mind the thoughts from Ben Horowitz. Who likes to work on somethings that no one wants…
On the other hand who likes to work on something that you have absolutely no connection with. So the truth is somewhere in the middle. Look at areas that you like or you are interested in. It is always good to have a some background in them or a massive interest.
If you are a complete newbie there is a certain risk that you might be quite off. On the other hand the second approach by building the audience first will help to mitigate this.
In either case. You will be building an audience and create content for them over a long period of time. Even if you go product first, you better like the subject as it will be very boring writing and communicating with others about something that you are actually not interested in.
Imagine writing about cats but you actually love to program…
So make a list of potential topics and audiences that you care about and could see yourself helping for months on end with no return.
This is the old topic of picking your niche. Before looking into the first round of market validation also think about whether your niche actually has the tendency to spend money. If they like to buy stuff then great if not then you might have to review this.
So write down the niches you can see yourself developing. Then the next big question is.
Is there a potential market in your niche?
We want to understand whether people are already buying in this niche. Competition is actually good as it proves that there is an interesting market!
If there’s no competition then usually there is not market because no one is buying. In this case, find a different niche.
No need to be concerned about your future product. There is always a good chance to significantly improve an existing product or to market better than the competition.
Take the following example, which one do you know better UBER or Lyft. Probably the service is the same but UBER usually comes to mind when thinking about ridesharing services.
Make sure you like the product type in your niche
We do not want to worry too much about the actual product. But there are only a few main categories and before you start working on your niche you should make sure you actually like to sell these types of products.
We differentiate between:
- physical products
- services
- information products
- software (SaaS or other)
You want to see how big a market there is to push yourself in. If you have a product use the next steps to validate whether you are on the right track.
If you are just building an audience then you can understand now what sort of products people buy in your niche.
Make sure it is the type of product you want to offer and sell. Maybe you are not a lot into software but that is the only product really sought by your audience. In that case you might want to reconsider whether this is the right niche for you.
I am personally not a big fan of information products. In most cases people do not use them or are not able to apply what they are being taught. If these products were so good then we would have no obesity and entrepreneurs everywhere. If I want to help people I would need to think of something that really works for them.
Physical Products
Physical products are experiencing a return. See all the makerbot movement and the internet of things. You can notice that a lot of people after being long online are quite keen to be involved with something physical again.
So it will not go out of fashion and it is a good market to be in unless you are selling something that no one needs, e.g. a thermometer for boiling water…
To check out your market go to amazon and search for the respective category, e.g. nutrition supplements or google it and once you identify interesting potential products check them using some price comparison engines.
Amazon has the advantage of showing you the number of reviews and the quality of the reviews. And you can find out what people think about a product.
The more reviews a product has the more demand it has. Lots of reviews means lots of business.
More than a hundred reviews are pretty good and if you have more than 500 you will be always on top of the list of people buying this product.
Make sure your market has a good size which is determined by quantity and price. If you sell penny items you have to sell a lot until you make money and the whole processing can become a lot of work.
Repeat the process above on google and go through price comparison engines to other selling sites. Most of them are not as good as Amazon but they will give you an idea how sales work on other sites. A lot of times there are no comments but if there are you potentially are looking at a good market to be in. And it is easier to get a piece of that market.
Services
Another item of high interest. You might be offering consulting services or cleaning services. you cannot verify the demand for these on Amazon but there are other options.
Check the number of professional groups on linkedin. Or google competitors. you can simply call them and show interest in their services and ask about current customer numbers to understand the size of the market.
Most will give you this information simply to show that they are an established player. They might exaggerate a bit so whatever number they give you take it with a pinch of salt.
This is true for professional services and services that you buy online. And always also google “comments on xyz” or “complaints about xyz”.
Information Products
A big hit with entrepreneurs these days. It is all about self-improvement and learning new skills. So demand is high but a lot of products are not great.
Plus no one provides any numbers about how many buyers achieved their goals.
But there is a market — from reinventing yourself to eating healthier, from exercising more to learning something new.
Check out the kindle or apple book store and you will see demand for these areas.
Typically, Kindle books don’t get as many reviews as physical products do, so even 15+ reviews is a decent indicator of a sales volume (although not great).
You’re looking for at least a few high selling books.
You can also click on an individual book and scroll down to the product details to see its ranking in the Kindle store.
Anything under 100,000 means they’re selling at least one book a day. Under 50,000 means they’re selling at least five per day.
The Kindle marketplace doesn’t represent your whole audience, so all you’re looking for here is some demand. Find at least three books made for your audience with a ranking of under 100,000.
You can get there by clicking on the link below for the writing categories and find similar books that might fit your search.
If you can’t, your audience isn’t really interested in digital products.
In our writing example, the demand is ok. There’s a decent demand but it is also not overwhelming. Losing weight and startups tend to be more exciting.
Software Products
Anything programmed falls into this category from web app to iPhone app to your old Microsoft office installation on your PC.
There are plenty of audiences, e.g. from above writers, designers, people looking to lose weight or to learn something new like a language. Or cooking and related shopping are very popular at the moment.
Most people have their computer with them these days, i.e. the mobile phone. Also people love anything that makes their life easier, so it’s logical that they’ll buy apps that help them achieve their goals.
To verify the market go to Google, and search for your audience (e.g., workout), followed by “apps” or something similar.
There are thousands of entries indicating a good market. It is a crowded market but key is that there is a market with high commercial intent. Finding a good niche we will cover in another article.
Try searching for a few different areas of interest that your audience may have to evaluate the demand.
So what do your customers love and what do you love
If you went through all types of products and found no significant demand then your audience isn’t a good one. Try a different one or some variations.
If you found one that was good, you have a decision to make. Are you potentially interested in creating that type of product for your audience in the future?
Most people are drawn to one type of product. Some people love the idea of selling a web app, while others hate it and would love to sell a physical product.
The best case scenario is that there’s a demand from your audience in all three areas. If there is, you know that you’ll have your pick of options in the future.
Once you’ve gone through the process of validation for all your potential audiences, cross out those that won’t work, and then pick one that you’re happy to go after.
You also see the boundaries are often not so clear among these products. You can find an online programming course with personalized mentoring. so you get a service, information product and SaaS software offering when you practice web development or any other programming skill in their online interface.
What is next
Run through these steps. It takes some time and might require a few iterations until you are happy. Make sure you do not get stuck in analysis paralysis.
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We will continue this series. In the next step we will detail how to understand your customer better and how to find the right niche to focus on with your audience.
One step at a time.