When Entrepreneurs begin developing a business, they face many uncertainties. They don’t know what’s ahead of them and any number of things could go wrong.
However, no matter your business, your goal is to create a competitive advantage. Your “special sauce” that sets you apart from other players in the market and kind of gives you a disproportionate advantage.
Identifying core advantage
Your core advantage could be a brilliant marketing strategy, a new product or a variant of existing product. It’s vital to identify what your core advantage is.
Once you’ve figured it out, the next step is proving it exists. This would require building something with a little bit of added scope beyond the core advantage so that you can try it out. However, you have to be careful at this stage to not increase the scope to the point that it becomes a full blown product. It takes too much time to develop that. Every extra minute you spend building a product before proving your idea is a huge waste of time if your idea ends up not working.
For example, one of my friends realized that while there are many people who want to find activities like group dancing, hiking, music lessons – there isn’t a good place where they can find them together. Some were available on on a county website, while others were available on sites like Groupon and Yelp. So he decided to build a one stop shop where people could find all the activities and deals in their area.
He planned to spend 3 months building the product. I recommended that he first prove where he can get some people to like the product enough that they excitedly recommend it to their friends. So, he decided to build a database for just one city manually and implement it as a static website. Then, I recommended he go to parks and showcase his product to people. It only took him 2 weeks to do this exercise. Through the process, he learned a lot about his product and his market, so he was able to tweak his product to a successful outcome. If he had not chosen this strategy he might have waited 3 months before he got authentic user feedback.
Another example is a company I was an advisor to. They wanted to offer basic maintenance of your car at your home or office. The CEO was able to identify the core value proposition. He did a few market trials where he was able to coordinate the task. The users were delighted with the product.
Once he worked through the trials, however, he realized that his Customer Acquisition Cost was really high. He was spending hundreds of dollars to acquire customers for this product and his revenue per customer was less than 20 dollars. Even though his customers loved the product, he couldn’t find a way to build a sustainable business.
Because of this he decided to stop this product around 4 weeks into starting building it, saving him time and money and freeing him up to move on to the next product.
This is why it’s extremely important to prove an idea before it becomes a product and a company. You may have to manually sell it through craigslist, go door to door, or even meet people in parks. The effort will be worth it as you will learn a lot and the next stage of your development will be a lot easier.