I listened to a fascinating talk on YouTube called “How are you going to make money?”. It is from Harvard University’s Innovation Lab which is focused on providing support to business start-ups.
The essence of the talk, presented by a venture capitalist, is simple: entrepreneurs are so focused on getting the product developed; finding partners and getting funds, that they forget to think about how they are going to make money! The fancy word for this is “monetisation” – how to convert what you do into a commercial success? The talk provides a few interesting pointers.
First, you must ask some important questions and have clear answers to them, namely:
- What is the problem you are solving with your offering?
- For whom are you hoping to solve this problem?
Clarity on these form the backbone to business success.
Another idea that stood out is the importance of gathering data points, or proof points. These are facts that serve as evidence that you are in fact onto something.
One important data point is other companies that have done something similar to your idea, possibly in a different market. Such parallel examples serve as evidence that what you are trying to do can in fact work.
More such data points should be gathered by developing an initial concept of your idea and testing it with a sample of potential customers. The idea is not to go and sell the concept for money, but rather to get actual customers to use it and provide feedback. Enough positive feedback serves as an early indicator of potential success.
Finally the question is: “how large is your potential market?”. This is an interesting one since many entrepreneurs have no idea. The point is not to have accurate figures, but rather some “back of the envelope” calculations on what the potential is for your business. Ambitions must be tied back to reality!
Ultimately one should be methodical about starting a new business. It is about starting small, carefully testing a concept and scaling it to success.