Welcome Back! I hope week one went well and you’re excited to learn the next steps to take in order to build your startup. To recap last week, We’ve validated the market, ensured we are okay with the existing competitors and created a prototype! Congratulations! Those are big steps you should be proud of yourself!
What are we focusing on this week? This week you should, if you haven’t already, answer the most important question that investors care about: How is this product going to generate a profit? Secondly, we will identify what does my market space look like. Finally, start working on a Business Requirement Document.
Revenue Generating Products:
The last thing you want to be is the next Twitter, (before Q4 of 2017) they burned through money and had no way of creating revenue. Even though everyone uses the product, Twitter had no way to make money from it. Investors will not invest in a product that does not create a profit. Here is a free fact, in-app advertisements do not generate a lot of revenue. You might be looking at $35,000+ in revenue from advertisements with 500,000 Weekly Active Users. You really need a true revenue stream, or your product will not be able to sustain itself and investors will not invest in your product.
You should research competitors in the market space to see how they make money. This will allow you to see what price people are willing to pay and what price point similar companies are putting on their product. By gathering this information, you are able to identify your price point.
Identify Market Potential:
You’ve already confirmed that the market wants your product! That’s a big first step, now you need to put a price on the market! Say you’re developing a SAAS focusing on database analytics, you’ll be able to identify how large the market is, that is your Total Accessible Market.
Now You’ll need to identify your Serviceable Accessible Market. Who of the Total Accessible Market is your exact client? How do you find that? Well, that’s for you to determine, but, leveraging the data you collected to see if the market wants the product can help you to identify who is your exact client.
Last but not least, is finding the Serviceable Obtainable Market (SOM). Your SOM is who do you believe through traditional marketing mediums you will able to get as a client. How many people do you reasonably expect to pay for your product?
Once you’ve identified these numbers, it will allow you to continue creating more financial projections!
Business Requirement Document:
What is a BRD? A BRD is exactly as it sounds, it is the requirements for the application as set by the business needs. This is where you write out the entire application in the form of longhand. You need to list how exactly how every button works, what happens at every step of the application, and what must be done in order to keep moving forward. Write the user story of every single account type, how they interact with the application and what features they do or do not have access to.
Writing out a BRD helps move the business forward tenfold. This is the manifesto that you need to move forward in development. It allows for any new employee to understand the exact needs of the software and what the product exactly does.
If you want more information on a BRD and the purpose of one this will help explain why in a bit more detail: Why Should I Do Discovery?
These are three big tasks they will take a lot of hours to complete and a lot of focus. I wish I could tell you after working on these your head won’t hurt but in all likelihood, it will. But that is a good thing! Just like working out and your muscles get sore, your brain gets tired because of your thinking and working hard continually improving. By writing out the plans for development, identifying how you will make money and how large your market space is, will help you to continue moving forward on the path to success!