Monthly Archives: October 2015

The 5 steps to planning a software startup

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There are a lot of people out there with “BIG” ideas.  These ideas range from the practical to the absurd, with some of the practical and some of the absurd turning into successful businesses.  A problem I had early on in my plans to build a business was that I would approach is as great idea leads to a product and a great product will automatically get customers and success.  This assumption was all wrong.

I’ve been a part of several startup companies, a lot of which I started on the ground floor and helped build the concepts.  Through these experiences I’ve come to a couple of conclusions as to what we did correctly and what we could have done better.  The biggest realization for me though came when I realized that my tendencies lead me to a result which limited their ability to succeed and increased the amount of effort I was putting in.

Below I list the 5 steps I currently use for planning a software startup.

Step 1: Construct a thought of a product and put together a team

This step is designed for you to come up with a concept.  This level of idea is typically high level, visionary and might have a wide range of interpretations. With this vague notion you have enough information to start finding your founding team, with a variety of relevant expertise.  You and this team will be responsible for flushing out the concept into a fully formed idea, so make sure its creative and business savvy people.

I personally recommend that you have at least one technical expert and at least one sales/marketing expert.  Consider what other roles will be needed if your product was already created today and make sure to get a representative with those skill sets.

Step 2: Come up with your idea

Now that you have your high level concept, and a team with some of the pieces needed, it’s time to flush out your idea.  Your newly formed team will start identifying areas they think will or will not work from the perspectives of their skill sets.  The goal here isn’t to come up with what your product will look like, or its detailed functionality, but rather build a story to tell which either hasn’t been told before or is a problem that can be solved more efficiently.  Try role playing your product idea with your team.

The typical story should include answers to the following questions as well.

“How does my business change my consumer’s worlds?”

and

“What new behaviors am I asking my consumers to make, and does it make sense?”

Step 3: How much capital can I realistically afford

The next step to starting your own business needs to be a realistic assessment of how much you and family members are willing to put into your idea.  Starting off this is going to be your budget, and expect this to last until you’ve built a proof of concept or even launched your product.  In the case of iPhone apps the current trends are that your app will launch before you get seed round funding, so make sure you take this phase very seriously.

When approaching getting the actual dollar amount it is important not to treat this step as a hypothetical problem where you assume people will invest.  This step should be money you have access to immediately and money you’ve had people pledge to you after discussing your idea with others.  Get a piece of paper, or have people email you amounts which they are willing to put in.  The reason for this is that it’s easy to say “Sure I’ll invest”, but not really think through what they can afford.  By making a document, or an email, with the specific amount of money they could be willing to invest they also have to go through the process of thinking out what they’d be willing to put in.

Step 4: Plan out how you’re going to sell your product

This step is critical to think through, and to figure out how to prove your approach.  The sooner you can prove that your ideas resonate the way you expect the better.  This is where a concept called “Lean Startup” comes into play.  To sum this method up, your user acquisition strategy isn’t fact, but rather a theory which can be either proved or disproved with the scientific method.

Use your full team to discuss the sales strategy, and pare down your product to what’s minimally needed to be functional, be useful and something that can be sold to customers.  While it might be nice to have every feature, the sooner you can get your core concept out the more you’ll learn, but what’s initially shipped must also be able to be sold.  This is why this step comes before building the product.

Be very cautious of sales ideas that you think will work or false positives of success. Likes on a Facebook pages and followers on Twitter should all be disregarded.  These are all activities which require little investment by others, and cannot be relied on as indicators of a functional strategy.  Alternatively, pre-registration, crowd funding and pre-orders are better indicators of a successful strategy.

After doing an initial draft of your sales strategy make sure that the costs of what would need with the capital you have access to.  If your sales plan exceeds 25% of that budget to get your first round of results, then you need to rethink your sales approach.

Once you’re finished with this step, don’t expect the plan to be written in stone.  The sales strategy will evolve as the product evolves, but what you’ve created in this step will help define what needs to be done when building the product.

Step 5: Make your product

Now that you have a sales strategy, or user acquisition strategy, it’s time to start making your product.  The product road map needs to be designed to fulfill onlyStep 4, without adding extra “nice to have” features.  This criteria will lead you to what will be called your MVP or Minimum Viable Product.  Expect that your project will run longer than you expect, and cost anywhere between 150% – 300% what you expect it to cost initially. The reason for this is that it’s near impossible to think through all the details and low level decisions of your product.  A lot of ideas might sound good on paper, but you’ll really find out if you’re on track when you use the product. You also won’t really know if the product is simple enough to use and understand until you have some time using it.  Complex products tend to lead to less interest from consumers.

Ideally your product team would be funded with equity or be on a fixed bid for the work.  The value of a fixed bid is that the cost doesn’t go up for bug fixes and missed deadlines.  The negative of a fixed bid is that the team doing the work will build to the letter of what was specified, and if you forget a necessary feature or scenario it will cost more money.  Fixed bid also tends to limit iterative product development, where feedback is taken, prioritized and build continually.

Epilogue

Making a business is hard, and every ounce of effort not leading towards your initial sales, or which doesn’t contribute to getting your initial rounds of funding, is wasted.  I put these steps together in order to best focus my own efforts for startups which I am a part of.  These steps are not intended to cover some of the finer aspects of building your specific business as all businesses vary case by case.


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