We’ve all been there before: turning an idea over in our minds, asking our friends hypothetical questions, observing trends, and, ultimately, trying to determine if our business concept will fill a need and be welcomed in the market. Businesses succeed or fail on their value proposition. It’s not enough to be able to do, make, or provide something: It must be worth something to potential customers. The amount of time and money wasted from buying into the “if you build it they will come,” fallacy is staggering. So before you go ahead and take the plunge, how can you evaluate your startup’s value proposition to ensure that your launch will not be met with a shrug?
Related: Know Your Unique Value Proposition.
While there are no guarantees, of course, I’ve found that the following questions are incredibly helpful when choosing your startup’s lane:
Where is the white space?
It’s obvious, but it needs to be said: Is there a real and unmet market need that your startup can address? First, start with a classic comparison list and go down the line to determine if you can fill the white space that exists. If the answer is yes, that’s a great first step — but the more likely answer is no. Even so, that doesn’t mean you’re completely out of luck. Try viewing the market from a different perspective and consider unique positioning for your startup.
For example, Uber as another high-end car service is less compelling than Uber as a replacement for a personal vehicle or taxi — or even Uber as a logistics company offering lightning-fast delivery. Challenge yourself and your team to envision the market years down the road and use that as inspiration.
Is my product vastly superior to my competitor’s?
If someone else is already doing what you intend to do, or something substantially similar, fear not — there are still ways to show that you have an edge, and they all have to do with quality. In short, anything you create must be 10 times better than your competitor’s product.
For instance, look at Chipotle. Yes, there are other quick-serve Mexican restaurants, but why does Chipotle have lines out the door? It wins in every category: quality of ingredients, ease of customizing orders, value (amount of food for the money), overall experience, the list goes on. You can make the same argument for your startup, too, by showing investors that quality is what sets you apart.
What do my (potential) customers want?
The best advice I can give you is this: Do the market research yourself and take the time to interact with your potential customers. You’ll receive the best feedback from those who would pay for your product (or are already paying you, if you’re in beta.) Venture capitalists don’t always have the same read on buyer needs as the buyers themselves, so it’s worth your time to explore every angle.
For those of you who are launching a consumer product, the easiest way to test the market is via Kickstarter, Indiegogo or another crowdfunding platform. It’s a fantastic way to see what people are willing to pay, and there’s very little downside if the idea flops. Another simple way to test the market is via Google’s Keyword Planner, which can help you learn what potential customers are searching for as well as predict how certain keywords will perform.
Could it benefit me to launch after a competitor?
Have you ever heard the phrase, “The early bird gets the worm, but the second mouse gets the cheese?” Launch strategy is just as important as any other business decision that you will make. Many times being first-to-market has significant advantages but not always. Remember when Apple’s iPod crushed every other MP3 player on the market? While MP3 players had been around for years, Apple created a superior user interface and intuitive end-to-end user experience, making it far and away the best option.
If you can “fast follow” by letting someone else do all of the R&D and absorb the initial blowback, you can then introduce a superior product and leapfrog ahead. At the end of the day, investors want to know why it is safer to invest with you, and traction in the market will speak much louder than launching prematurely.
It’s incredibly important to vet your value proposition early, as it’s difficult to change your core DNA down the road.
Launching your startup with a well-defined focus will set your team down the path to success. What they produce, especially while the company is young, will be guided by how well your team knows what, why, and for whom they are creating. A sharp value proposition provides focus and answers many questions before they are ever asked.