Jobs then all of 24, had a privileged invitation to visit Xerox park …{Jobs} “and they showed my really threes things but…I was so blinded by the first thing they showed me the graphical user interface i didn’t see the other two. Within ten minutes it was obvious to me that all computers would work like this”.
Comment: Apple “stole” the very thing that made the Apple Macintosh so revolutionary, its easy to use interface. Microsoft in turn, “stole” it from Apple and created the classical Windows user interface. In the word’s of Jobs “we have always been shameless about stealing great ideas”.
If you want to own your own dot *you*, like .car, .pepsi or .phil (instead of having to use.com) your chance is around the corner. Icann, the important people who control domains, are extending the suffixes used for web addresses beyond the current .com, .edu, .net etc. Here’s how it will work:
Submit your application to Icann by between Jan-12 2012 and Apr-12 20212 (you’ll have to wait to 2015 if you miss this one).
Keep your fingers crossed that you make it through the approval obstacle course e.g. In the “initial evaluation” they want to know you have enough cash to run the suffix each year – around $180k/yr, you are not a security risk and there are no ligit objections filed by others (no you cant apply to own .facebook).
“Applying will set you back $185,000, and it doesn’t stop there, says Melbourne IT DBS’s Tim Callan: “Your corner mom-and-pop shop, this is not right for them.”A good estimate is it will cost between $150,000 – $200,000 a year to run [a gTLD]. So costly yes, compared to your and my wallets, but for the companies we’re talking about – trivial.” – BBC website
You can really get your teeth sunk into the application process by visiting Icann’s website – here you go
Basically, this is a real life case study on how i’m testing my business idea.
The first part in working out how to start a business is to find out from customers what they need (not what *you*, what they need). Here’s some of my assumptions – aka a hypothesis – for the iGoIQ business idea (i.e. publishing video ebooks to help business people get quick explanations on how business works). The best way of doing this is to find out how to put my product in front of them at the very moment they need it – be present at the *point of need* is all important. Since i’m evaluating an online business idea this shouldn’t be overly difficult.
Hypothesis #1:
Entrepreneurs use Google to find answers when they are stuck with their business e.g. they maybe be asking “How do i raise money”, “What is pre money valuation”, so if i can put myself in the middle of this buying process i should learn something. This will also help me to see how i can keep against “free”.
Actions:
Create a Google keyword word list and run targeted ad campaign and funnel people to the website.
Experiment with targeting mobile only devices (Google lets you do this). If i’m selling mobile content and i can get in front of people as they are searching on their phone, my hypothesis would be that i will be able to isolate a good point of need.
Here’s some example words:
Hypothesis #2:
People who buy business books – especially ebooks – would be a good market because they are already in the market for the type of content and packaging i have.
Action – Ideally work with one of the new online publishers who would be willing to market the books (this may take some time but i’m already talking to one publisher).
Hypothesis #3
Packaging ebook content (video and written) for specific professionals – like real estate agents or accountants – will provide them a valuable way to attract and keep clients. i.e. they have their own custom resource library where content can be branded with their company name
Action – Pick a vertical and work up some dummy content. Approach some sample clients and organizations for customer discovery
Hypothesis #4:
If my content is tailored for specific types of entrepreneur in specific market niches – like people starting home baking businesses – it will sell better then generic business content
Action – I created a website called baking-business.com a few months ago as an SEO experiment. It now gets about 1,000 visitors per month who are looking to start a baking business. This should be a good market with sufficient traffic to test around.
Hypothesis #5
My content will need better design than i can create inorder to sell. I dont want to massively over produce what i have but i think taking it one notch up by using some design resource will provide a good way forward. I’m not going to let this delay me; i can start testing my hypothesis with the self generated content i already have. I’ll measure this and then add some design flare to the content, test and compare the two.
Action: Find a story board designer to clean up the visuals in my videos. I’ll then need to re-record the voice over (this will be quick to do).
Start a business metrics i want to capture (not in priority):
Are people willing to pay for my ebooks
Would they use them even if they were free
What is the most desired format – online desktop viewing (web or pdf ??), mobile (iphone etc) or ipad.
What subjects / topics are of most interest
Is the ROI good for advertising (can i make money if i advertise)
I’ll end up adding to this as i go along but it’s a good start for testing my business assumptions and various hypothesis.
First thing the exec will ask is “hey, what is this so called *problem* i have?”. If you can’t define it simply and concisely, you’re out the door before you even put your latte on the table.
Step 2:
Now the big cheese is listening, offer up your solutions to the problem (3 is always a good rule of thumb) AND suggest what one you would go with.
Step 3:
Make sure it is technically possible – if it cant be implemented, you’re out the door.
Ok, you’re still in the game. Make sure it’s financially sound. If it costs $1m to fix a $100k problem, you know where you’re going…
Nearly there: After all your bluster and rational thought, will this answer to the problem really work. You’ve built up some credibility if you’re got this far, so work your magic (now you can become a bit more subjective). Give it a 75% chance of success and you’re off to the races; less than 25% chance of success and you lose, find the door.
I was reading Apple’s earning report today (impressive yawn!) and the end of their press release prompted me to start thinking about elevator pitches again. So, what is an elevator pitch firstly? And secondly how do you create one?
An elevator pitch is:
“A short summary used to quickly and simply define a product, service, or organization and its value proposition. The name “elevator pitch” reflects the idea that it should be possible to deliver the summary in the time span of an elevator ride, or approximately thirty seconds to two minutes.”
We’ve all watched those cheesy but strangely addictive infomercials (i’ll speak for you here). Well, these guys are incredible “elevator pitch” guys. Take the Shamwow master “elevator” pitch (enjoy the video if you like). He gets over the usefulness, price and what his product does in a quick compelling way – we end up believing we NEED an-ultra-absorbant-micro-fiber-cloth-made-in-Germany-that-dries-the-countertops-and-the-dog-in-under-2-seconds whether we actually do or not (i bought a set after all).
Your elevator pitch should do the same thing for your business or product without the cheesy obnoxious delivery.
Here’s how apple explain their business in a few words – the spoken elevator pitch would be more suited to verbal delivery but the content would be similar:
“Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and has recently introduced iPad 2 which is defining the future of mobile media and computing devices”.
(it’s just missing a closing statement … “and we make a crap load of money doing it”.)
Now we’ve answered “what is an elevator pitch?”, here’s a couple good tools for helping you to craft your pitch.
This video walks you through the basics of creating an elevator and works well at focusing you on what to say:
The second tool, from the Harvard Business Review, takes a more formal approach but is useful as well (click the image and it will run on their website):
To set the scene: I’m in the throws of evaluating a new business concept around publishing video ebooks. My goal was to find a way to run a quick (down and dirty) focus group to work out customer needs – with zero budget.
My business idea is to is to provide quick visual explanations to common business questions in the form of a mobile video ebook (think a “talking picture book”. Go See igoIQ to get a better idea). Given this, i want to get in front of as many entrepreneurs building a business as i can to see what they are thinking and where they are getting stuck with their business – aka the Customer Discovery process (see “4 Step guide to testing a new product before you even think about creating it”).
Here’s one way i’m using to get feedback from a big group of people in one go – it’s not strictly a focus group but it is close: I attend business presentations on one of my target subjects (e.g. How to Raise Money From Angel Investors) and record what questions the audience is asking. The audience attending the presentation is basically the same target customer i want to get to, so being a “voyeur” in these sessions is very useful.
I attended a seminar on Raising Money today. Here’s what the 38 entrepreneurs asked the panel:
Explain why debt is cheaper than equity
Please go over the formula for determining a company’s valuation
How do i determine what earnings multiple to use in my valuation?
Can legal fees for setting up my corporate entity be funded from the money i raise?
How involved do Angels get when investing (on the board, in day-to-day etc.)?
How likely is it for Angels to call-in convertible debt?
How important is it for founders to be strong technically?
Have you invested in a company with a string management team that has no board in place?
How important is it for me to build IP in my company?
What should a pre revenue company be valued at?
What level of detail should i present when talking about my financial model when pitching investors?
All of these questions are gold dust to me when looking at what entrepreneurs want help with regard to content in my books. My benefits:
I got a large sample of potential customers in one go i.e. FAST
It cost me zero $$$. The seminar didn’t have an entry fee i.e. FREE
It cost me zero time to set up and run (my investment was sitting in the audience for an hour) i.e. SAVED TIME & HASSLE
It’s easy to replicate i.e. FAST
From the list of questions i recorded, the first 3 questions (in italics) could be exact chapter titles for me and the rest can be crafted into something useful. My goal is to repeat this process with other seminars focused on different topic areas. It should be noted that this is not the only way of researching and gauging what questions entrepreneurs are asking but it’s one of them (other examples would be – Google keyword analysis to see what people are searching on, one-on-one interviews, researching the Q&A websites to see what questions are being asked).
Here’s a checklist to run a down and dirty focus group for free:
Clearly state your research hypothesis (e.g. i want to know what questions entrepreneurs need help with)
State the audience you want to target (e.g. early stage entrepreneurs who want to raise money)
List the topics areas that are relevant to #2 (e.g. Fund raising, seed investment, angel investment etc.)
Find local – or online – events (seminar, webinars, presentations, workshops) that meet the above criteria (free or not, it’s up to you)
Registar and attend the event and record the questions asked.
The Rule of 78 can be used with subscription business models to estimate revenues extremely quickly. The R78 is often used in the mortgage business but it is also very useful in the context of recurring revenue-based businesses, where a customer pays you a monthly recurring fee.
Who is the Rule of 78 useful to?
People running the following types of businesses:
SaaS (Cloud) software services – e.g. book keeping online
Publishing – e.g. paid monthly news letter
Consulting services – e.g. a monthly retainer charged by marketing consultant
Product rental – e.g. video rentals
What is the purpose of the Rule of 78?
To quickly calculate, back of the napkin style, my Total Annual Revenue from subscriptions. It’s very useful for comparing annual revenues when prices change, looking at revenues quickly over a number of years, without needing a spreadsheet or exploring the power of recurring revenue models.
Example scenario:
“ I run a business that hosts people’s websites; I charge them $100 per month for hosting, email and storage; I add 50 customers per month to my business. What will my Revenues be over a 12-month period? (Assuming we lose zero customers during the year. I.e. Churn = 0)
Basis of Rule of 78
If I added one dollar of recurring each month the accumulated revenue over 12 months would be $78
New RevenueTotal Revenue
January $1 $1
February $1 $2 ($1+$1)
March $1 $3 ($2+$1)
April $1 $4 (etc.)
May $1 $5
June $1 $6
July $1 $7
August $1 $8
September $1 $9
October $1 $10
November $1 $11
December $1 $12
TOTAL ==============> $78
Now, applying this to our website hosting business example:
Assumption #1: Monthly Subscription = $100
Assumption #2: New Customers / month = 50
Therefore,
Total Annual Revenues = ($100 x 50) = $5,000 x 78 = $390,000
Using the Rule of 78 we have just calculated our annual revenues based on our 2 two business assumptions about subscription amount and customer acquisition. We could take this step further and ask, what if we tweak our assumptions? Assume we know, that if we drop our price to $75, we gain customers at a rate of 90 per month. What happens to revenues?
Total Annual Revenues = ($75 x 90) = $6,750 x 78 = $526,500
We’re better off by $136,500 per year if we drop our price by $25.
A few weeks ago I boldly stated that I was going to test a number of business ideas quickly with a budget of $2,500 (see post). So, how has testing a new product gone? The premise was to avoid spending a big wedge of cash (and time) on building / launching something that nobody really wants – or more importantly, nobody wants to pay for. Side note – having something that people want but don’t want to pay for is more dangerous than having something that they don’t want at all; the former you should call a ‘hobby’. When ‘I want’ meets ‘I’ll pay’ you have permission to call it a business.
First thing to report back is that this stuff is harder than I thought. It’s become a frustrating sinkhole of time working out whether the idea is a good or not. On the positive side I’ve only spent $169 in cash and I have avoided any emotional attachment to an idea, which has been a killer in the past. To get things back on track my first task is to get in front of customers and discover want they want.
In this post I want to focus on testing a new product by qualifying my hypothesis (I’ve set up a list of hypothesis it doesn’t matter what mine are you should have your own). The goal behind this part of discovering what my customers want to validate my assumptions.
I’m currently testing a new product around mobile publishing. Some of my key assumptions are:
Entrepreneurs struggle to find good ways to have basic business concepts explained to them quickly and simply e.g. how does raising money for a business work?, what is a balance sheet?, why are early adopters important?
A good way to explain these would be using short-form video and voice i.e. replicate how a buddy would explain something to me drawing on a back of a napkin while I’m having a beer at the bar.
A good time to learn about these things is when I’m on the go and have a spare 5 or 10 minutes. i.e. people would want these packages up as mini video pocket guides they could watch on their phone or tablet.
Step 1: Friendly 1st Contacts
Your goal to TALK to customers face-to-face
List 50 prospective customers that loosely fit your profile
It doesn’t matter where in the food chain they live or whether they are the big buyer, this is just a starting point
You probably know or someone you know knows them
Direct customers and indirect influencers are both good
Make 50 calls and you’ll get 10 people to meet with. Don’t hide behind email, pick up the phone as old fashioned as it might be.
THIS IS NOT SALES you are in research mode. People are very open to helping.
Let me say it again, do not get drawn into selling your product, no matter how tempting. Your ego may get fluffed that you have a killer idea but you’ll miss gems of information.
Step 2: Problem Presentation
Get something ready to show people when you visit them
Draw up a sheet like the one below and use it in your visits
Goal is NOT to convince them of your idea, it’s to illicit information
Avoid any product features.
Focus on understanding problems
Get in “detective” mode (do not sell your product)
Step 3: Customer Understanding
Have the customer state their problems in their words
YOU CAN NOW TELL THEM SOMETHING OF YOUR PRODUCT IDEA (STILL AVOID FEATURES)
Understand how the customer day flows by answering the following 10 questions:
If they are in a company how do they interface with other departments
What other products to they use?
Is their problem limited to them or do others share it?
Can the problem be quantified (dollars, time, costs etc.)?
Will they use the product themselves?
Does it depend on other workers / friends using the product before they would?
What percentage of their time could they save by using your product?
How mission critical is this problem
Would the product solve the problem they mention
What barriers would there be to adopting a product like this?
Step 4: Market Knowledge
Go broader with your discovery
Interview / research
Analysts
Competitors
Key influencers
Press / bloggers
Friendly customers (again, this time about broad market)
Do it face-to-face, online / reading and at trade shows
Once this is complete you can now go back to your broader team and overlay the findings onto your product hypothesis. Remember your goal is to come up with the broadest and least features in a product that will allow you to test your hypothesis. NOW YOU HAVE PERMISSION TO TAKE A PRODUCT PROTOTYPE OR DEMO TO YOUR CUSTOMERS (BUT STILL STAY OUT OF SALES MODE).
The big challenge with this when you’re all fired up and excited about your idea is to try and sell it or convince people of it’s merits. This is not the time. If you do this you’ve already rang the death knell for your product. Avoid it like the plague. I try and put myself in the mindset of trying to find reasons why people WOULD hate my product. It’s like when I used to do cold calling in my first sales job; the only way I could deal with the rejection was to set myself a goal of being rejected 20 times a day. I would celebrate when somebody said no to an appointment and act indifferently to myself when they said yes. I knew however that by celebrating 20 rejections I would guarantee 5 appointments. I’m not trying to get all Tony Robbins on you but the it shaped my mindset and the same thing applies as a tactic to avoid destructive emotional attachment to ideas. What you want is unimportant: what a customer wants is important.
Here’s a slightly messy mimdmap I drew when summarizes the concepts around all this (click to enlarge):
And finally…Credit Crisis Explained in South Park
Authors note: I give much credit to these ideas to Steve Blank and his book, The Four Steps to the Epiphany. Here’s a related post and link to his book.
Step 1:
A few weeks ago I boldly stated that I was going to test a number of business ideas quickly with a budget of $2,500 (
