I believe that turning an idea into a business, or becoming any sort of entrepreneur, is all about the little logical baby-steps. Each step should be obvious, without the need for any massive risks or blind jumps.
The key is to keep getting validation at each step you take. Only take the next step when it is really logical to do so.
Start spending money and time slowly and increase it gradually as your product gets more and more validation. I think the best way to demonstrate this is with an example. The following is for a smartphone app I have been thinking of building. Let’s work through all the steps to turn that idea into a business.
IDEA: To create an instant micro-jobs smartphone app
The idea is to create an app that lets you outsource jobs instantly. Similar to Fiverr or People-Per-Hour but where you need the job done immediately.
For instance: you’re at a restaurant, no-one can speak English and the menu is in a foreign language. You need the menu translated into English before the waiter asks for your order. You load up the app, photograph the menu and put it in the translation section, the first person to accept the job gets it.
Step 1 – Validate the idea
Ask as many people as possible what they think of the idea, ideally in an anonymous setting.
We need to be creative: for instance we could look for outsourcing websites with forums and do a poll. Or even walk the street and ask people what they think. We need feedback both from the buyers and from the freelancers.
We’re looking for:
- How many people liked the idea/was the reaction lukewarm.
- What the buyers would use it for – maybe no-one has any interest in translation, but everyone really wants a transcription service.
- What services the freelancers would like to provide.
- The amount they’d be willing to pay/be paid for the micro-jobs.
- Optional contact details to send them the app when it’s complete
Once we’ve asked a few hundred people it should be pretty obvious whether the idea has potential or not.
If the responses are positive, we move on to the next step.
Step 2 – Validate the per-job financials
This is simply comparing how much the buyers are willing to pay vs how much the freelancers are willing to be paid.
We are comparing like-for-like. For instance, how much a person will pay/be paid to transcribe a 10-minute piece of audio.
If the numbers work out, we move on to the next step.
Step 3 – Price up the cost of building the app
Now it’s time to look at actually building the app, starting with writing a specification and getting quotes.
The specification needs to be as clear and obvious as possible, with plenty of diagrams and visuals. It should be for the simplest app that we can possibly release. The minimum viable product. It’s worth spending a good amount of time on getting this spec perfect.
Once it’s ready we can put it on a few freelancing sites, such as Freelancer. We aren’t necessarily looking for the best firm, we are looking for the cheapest one that we are confident will get the prototype built.
The point of this prototype is to get more validation through real users. Chances are we’ll rebuild the whole thing with an in-house team if everything goes to plan.
Once we get the quotes back, let’s see if it’s still worth doing. We need to add in a big margin for errors/contingencies and work out how many users we will need to cover the initial expenditure.
If we need 100 users each doing 5 jobs, that is very doable. If we need 10,000 users each doing 5 jobs, then we need to really think about whether it’s worth continuing.
If it’s definitely worth spending the money, we move on to the next step.
Step 4 – Build the minimum viable product
Commission the product! Again this step is worth taking time on. We need to be in regular communication with the developers to make sure that they completely understand what we want.
Then at each deliverable we need to make sure they have created exactly what we want before paying them.
The more input we have during the development phase, the better the final product will be.
Once there is a working prototype that we are happy with, we move on to the next step.
Step 5 – Get validation of the live app.
We send out the prototype to all the people who registered interest during step 1.
The trick here is to monitor the supply and demand balance carefully. If there are too many freelancers, we will post dummy jobs to give them something to do. Likewise, if there are too many buyers we will make sure we have people ready to jump on and take on the jobs. This could mean hiring freelancers by the hour to sit on the app waiting, or by relying on a group of friends who are willing to help out.
As it grows we are prepared to adjust pricing when needed in favour of either the buyer or freelancer.
We now ask all the users for anonymous feedback: what they liked about the app, what we could do to improve it, and most importantly whether they will continue using it.
Provided people are using the app, the usership is growing and all the financials are still working out, we move on to the next step.
Step 6 – Take it to the next level
Brilliant, we’re now in a great place! We have a product people are using and we have clear financial viability (we’re making money on each job). Time to go and raise some money to push the app over that critical mass where we no longer need to prop up either the supply or demand.
This should be pretty easy, especially as we know exactly what we’ll be spending the investment on (improving the product, salaries, marketing).
Now we’ve got ourselves a salary, we can quit our jobs safely and work on our business full-time.
And that’s it. We have built a start-up that’s well on its way to global dominance without ever needing to take a significant risk.
I followed these basic steps to build a to start a table tennis brand (now the #1 best-selling table tennis bat in the UK), a coffee shop and a comparison website for ETFs (which we sold in 2012).
