Market research is a crucial step in starting your business. By understanding your target customers, your competitors, and the current market landscape, you can ensure better market adoption and higher value.
Here are a few specific ways you can conduct market research:
Surveys: Surveys are an easy way to gather information from a large number of people quickly and inexpensively. You can use a tool like Google Forms or SurveyMonkey to create and distribute a survey to gather insights about your target audience, their needs, and their preferences. Be careful, though, how you write questions to avoid leading your respondents to give you the answers you like rather than solid data.
Focus groups: A focus group is a small, representative group of people who are brought together to discuss and provide feedback on a particular topic or product. You can use a focus group to gather in-depth insights and opinions about your business or product. Small Business Trends offers some more in-depth advice on How to Conduct a Focus Group.
Industry data analysis: There are many sources of industry data that can help you understand trends and patterns in your market. This can include data from trade associations, government agencies, or market research firms. The SBA provides links to some great databases and other tools for market research and competitive analysis.
Customer interviews: Conducting in-depth interviews with current or potential customers can provide valuable insights into their needs, motivations, and decision-making processes. You can use these interviews to gather specific feedback and ideas for improving your products or marketing efforts. More detailed advice can be found in the article Customer Discovery Interviews: A Secret of Successful Startups.
Competitor analysis: Analyzing your competitors can help you understand their strengths and weaknesses, and identify areas where you can differentiate your business. This can include things like reviewing their website and social media accounts, analyzing their product offerings, and gathering customer feedback about their products or services. Here are 5 Outstanding Competitor Analysis Tools for Startups.
Your regional Small Business Development Center will probably be able to help you conduct market research free of charge, and many local libraries provide access to demographic databases that can be used to gauge market size or build potential customer lists, like the Gale Business Demographics Now database and ReferenceGuru's AtoZ Databases.
Posted by Thomas Hopper on Permanent link for Doing Market Research on December 1, 2023.
No entrepreneurs have the experience, know-how, and time to build a concept into a full-fledged business that pays its own way. Most entrepreneurs have expertise either in business management or in the technical aspects of their business concept, but not both.
Most entrepreneurs are trying something new, so it's completely normal and expected that they won't know everything. Still, every entrepreneur should be actively working to close these gaps and improving their chances of success by acquiring a team of the right cofounders, advisors, and mentors.
Cofounders bring complementary skills, with enough overlap in knowledge and working style that you can effectively solve problems together.
Advisors are professionals with enough subject matter expertise or business experience to guide you to the right decisions for your business. They might be experienced at raising funds, or at sales, or have deep technical knowledge needed to develop a product or service. They are definitely there to advise you in an area of your business that they know better than you do. They might work for free, but compensation is fairly common, and may be in the form of cash or stock.
Mentors have "been there and done that." Though they may have worked on a different product or even in a slightly different industry, they already know the path you're walking and are familiar with the potential pitfalls. You will typically have only one mentor at a time, and the relationship should be fairly long-term. Mentors should have more experience and knowledge than you do in your industry, or at least in your stage of growth as an entrepreneur. More importantly, they should be someone you like enough for them to function as a role model.
The importance of cofounders, mentors, and advisors really cannot be overstated; they frequently make the difference between success and failure.
Posted by Thomas Hopper on Permanent link for It Takes A Village on November 17, 2023.
Entrepreneurs and innovators exist in rapidly changing environments with high degrees of uncertainty and a need to move fast. Success often hinges on strategic thinking, resilience, and adaptability. There are other professions and organizations that face similar pressures, and which have been dealing with them for much longer. We can learn from them.
The Navy SEALs is one such organization, where the stakes are much higher than those entrepreneurs face. The SEALs are renowned for their mental toughness and ability to thrive in challenging environments. "Get comfortable being uncomfortable" is a mantra that resonates with the challenges of starting a business or launching a new product. Entrepreneurs can embrace adversity as an opportunity for growth.
Another principle that I am frequently reminded of is "slow is smooth; smooth is fast." When applied to manual operations like drawing a weapon or playing an instrument, it's an admonition to take the time to get muscle memory right and then let training make you fast. For entrepreneurs, it underscores the importance of careful planning and execution for sustained success. Get the process right; let process improvement make you fast.
Brent Gleeson, writing at Forbes, offers nine such sayings.
Posted by Thomas Hopper on Permanent link for Slow is Smooth; Smooth is Fast on November 10, 2023.
Crowdfunding has emerged as a game-changer in the world of entrepreneurship, offering a unique opportunity for founders to raise capital, validate their ideas, and build a community of loyal supporters. Crowdfunding offers three significant advantages over other sources of funding for new ventures.
First and foremost, crowdfunding allows entrepreneurs to access a diverse pool of investors, including individuals who believe in their projects. This inclusive approach democratizes access to capital, reducing the need to rely solely on traditional sources like banks or venture capitalists.
Secondly, crowdfunding serves as an effective tool for market validation. When a crowdfunding campaign attracts backers and meets its funding goal, it's a clear sign that there's a genuine demand for the product or idea. Moreover, crowdfunding platforms encourage direct engagement with backers, creating a sense of community and loyalty. This engagement can lead to valuable customer feedback and the building of long-term relationships.
Lastly, crowdfunding, particularly in its rewards-based form, typically doesn't involve giving up equity in the company or taking on debt. Backers receive rewards or products in return for their support, allowing founders to retain control over their ventures and avoid the financial obligations that come with loans or shared ownership. This offers a level of financial flexibility and creative freedom that may not be as readily available through other funding sources.
Crowdfunding is actually four different types of funding:
- Rewards crowdfunding: Indiegogo and Kickstarter are the best-known platforms in this space, where entrepreneurs and creatives offer rewards in exchange for funding to launch their product, service, or production. Rewards might include anything from branded swag to discounted and early access to the new product.
- Equity crowdfunding: with equity crowdfunding, the business owner gives up a share of financial control of their company in exchange for funds to grow. Like Angel funding, equity crowdfunding is appropriate to early-stage startups. StartEngine and WeFunder are two of the platforms that are well-known in this segment.
- Debt crowdfunding: similar to obtaining a bank loan, individual backers loan money, which must be repaid with interest. LendingClub and Kiva, among others, support this type of crowdfunding, and it can be a good option for business owners who are willing to commit to repaying a loan, but unwilling or unable to work through traditional lending institutions.
- Donation crowdfunding: backers donate funds to a campaign, typically because they believe in the cause. GoFundMe is well known for these types of crowdfunding campaigns, where backers are donating to help or support individuals and communities through hard times. Entrepreneurs launching new products or services are unlikely to receive backing from donation-based crowdfunding.
Stripe offers some more guidance on choosing between the different types.
Kickstarter released eleven years worth of data on campaigns hosted on their site, and we can analyze that data to identify characteristics of successful rewards-based crowdfunding campaigns. UCLA's DataRes offers a good analysis of the data.
The key lessons from the data are:
- Success rates vary strongly by category. Tech-centered campaigns tend to be much less successful while setting the highest goals, with only about a 1-in-5 success rate. Arts-centric campaigns do better, running closer to 1 success out of every 2 campaigns. If you're developing a tech product, consider equity crowdfunding or Angel investment instead of rewards crowdfunding.
- While Kickstarter recommends running campaigns for 30 days, a campaign's duration has no relation to its chances of success. That said, most successful projects finish within 35 days, though this varies somewhat with the category and subcategory of a campaign. Unsuccessful campaigns tend to run longer.
- In all categories, successful campaigns ask for less. From the 2009 to 2020 dataset, half of successful technology-oriented campaigns asked for $10,000 (USD) or less, and a maximum of $1,000,000, while half of unsuccessful technology campaigns asked for twice as much, $20,000 and a maximum of over $110,000,000. The categories with the highest success rates are dance, comics, and theater, where successful projects usually set goals of less than $5,500. Crowdfunding usually does not net you Venture Capital, or even Angel, levels of funding.
- Expect your backers to pledge between $10 and $100. To get to your $5,000 goal, you need to plan on attracting about a hundred backers. A successful campaign, therefore, has a mass appeal and a good crowdfunding marketing plan.
- Successful campaigns often receive much more than their goal. Don't think of your goal as a ceiling; set your goal to the minimum you can for your MVP or first production run, but add aggressive stretch goals and communicate frequently and openly with backers about how your campaign is doing relative to those stretch goals. The sky's the limit!
Posted by Thomas Hopper on Permanent link for Funding a Startup: Crowdfunding on November 3, 2023.
There are lots of reasons why businesses fail, but some reasons are more common than others, and many entrepreneurs bump up against at least one of these three:
- No market
- Team is missing key experience or expertise
- New product category, requiring extensive customer education
Few customers will adopt a new product or service if they aren't experiencing a pain with existing solutions. Without a thorough understanding of your target audience's pain points, preferences, and behavior, you risk creating something that people simply don't want or need. This disconnect can lead to wasted resources, low adoption rates, and ultimately, business failure. Successful innovation starts with robust market research, customer feedback, and a deep understanding of the problem you're solving. Only by aligning your product or service with a clear market demand can you increase your chances of success, ensuring that your innovation meets real customer needs and creates value in the market.
Another incarnation of this failure occurs when the pain customers experience is so ubiquitous—so ingrained into everyday experience—that they don't recognize it as a pain. In such cases, the innovator needs to educate potential customers to get them to see the problem, recognize it as a pain, and perceive the new product or service as a solution.
Missing team expertise
A lack of diverse expertise within a startup team can significantly contribute to venture failure. Critical skill gaps often include financial expertise, marketing and sales expertise, and technical skills. Without these essential competencies, ventures may make costly mistakes, miss growth opportunities, or struggle to adapt in a rapidly changing market. Building a well-rounded team with expertise in these areas is crucial to navigating the challenges of entrepreneurship and increasing the odds of success.
New product category
Much like lacking a market, customers will often struggle with making sense of a new product that carves out a new product category. They will need to be convinced of the need for a product.
The Segway provides a classic example of the product category failure. Even on the company's website, the product has been variously identified as "personal, green transportation" and "small electric vehicle." Does the Segway compete with bicycles? Walking? The inventor said that the Segway would "do for walking what the calculator did for pad and pencil." In the end, despite abundant hype, the Segway just hasn't quite connected with consumers, and the evidence points to a failure of consumers to "get" the product.
How to avoid
- Try to intentionally test your business model against these failure modes
- Conduct thorough market research
- Work on being clear about the value proposition you're providing…from your customer's perspective
- Look for market, financial, and social trends that would make your idea inevitable, and get to market just ahead of the competition
- Be prepared to pivot
Posted by Thomas Hopper on Permanent link for Why new products and services fail on October 27, 2023.
While many entrepreneurs dream of securing hefty investments from venture capitalists or angel investors, many more prefer bootstrapping. While bootstrapping rarely leads to the high growth path that outside investment enables, it does allow you to maintain control and build a sustainable business from the ground up. Bootstrapping, or self-funding your business, can be a challenging yet rewarding way to turn your entrepreneurial vision into reality.
Bootstrap-friendly business models have a few common characteristics. They tend to have
- low capital requirements for startup,
- self-sustaining revenue streams (e.g. you sell everything you buy),
- can scale without large investments, and
- they generate cash flow rapidly.
Like any business, you need to have a clear plan to generate profit, and you you need to have.
So how do you bootstrap fund a startup?
1. Start Lean: Before diving into bootstrapping, it's essential to create a lean and efficient business model. This means focusing on your core product or service and avoiding unnecessary expenses. Keep your initial costs as low as possible, and be frugal in your spending. Consider working from home, using open-source software, and hiring freelancers or part-time employees instead of full-time staff.
2. Personal Savings: One of the most common sources of bootstrap funding is your own savings. Before seeking external investments, tap into your personal savings to cover initial expenses. This demonstrates your commitment to your business and reduces the risk for potential investors or lenders down the road.
3. Side Hustles: If you have a full-time job, consider starting your business as a side hustle. Use the revenue from your full-time job to fund your business without the need for external capital. Alternatively, if you need to go full-time on your new business, first start a side-hustle to provide some stable income, then start your business while keeping your side-hustle. This approach can provide a financial safety net while you build your business.
4. Family and Friends: While it can be a sensitive subject, don't dismiss the possibility of borrowing from family or friends who believe in your business idea. If you decide to take this route, be transparent about your business plan, repayment terms, and potential risks to maintain healthy relationships.
8. Barter and Trade: Explore opportunities for bartering or trading services with other businesses. You may find that you can acquire necessary resources or services without spending money upfront. Networking and building relationships in your industry can open doors to such collaborations.
9. Reinvest Profits: Once your business starts generating revenue, resist the temptation to take out hefty salaries or dividends. Instead, reinvest a significant portion of your profits back into the business. This approach allows you to fuel growth without relying on external funding.
Bootstrapping Mindset: Lastly, developing a bootstrapping mindset is crucial. Embrace challenges as opportunities to innovate, learn, and grow. Stay laser-focused on your goals and be prepared to make sacrifices in the short term for long-term success.
Bootstrapping a business as a first-time entrepreneur is not without its challenges, but it can be an incredibly rewarding experience. By starting lean, utilizing personal resources, exploring creative funding options, and maintaining a frugal mindset, you can successfully fund your business while maintaining control and ownership. Remember that bootstrapping is not just about cutting costs; it's about resourcefulness, resilience, and the belief in your ability to build something great from the ground up. So, roll up your sleeves, embrace the journey, and bootstrap your way to entrepreneurial success.
Posted by Thomas Hopper on Permanent link for Funding a Startup: Bootstrapping on October 20, 2023.
Publicly discussing or using the invention before filing
Once a patent has been publicly disclosed, inventors have twelve months to file a patent. Beyond that, and you not only lose the right to patent your invention, but open up the possibility that someone else can file for a patent on it. With the U.S. now using a first-to-file system, it's especially important that the inventor be the first to file.
There are two relatively easy solutions to this: file a provisional patent, and use of non-disclosure agreements (NDA), also known as confidentiality agreements. To maintain the priority date, a non-provisional patent cannot make any claims that were not in the preceding provisional patent, so think through writing the provisional with care to ensure that you don't leave any possible claims out. For NDAs, you should be sure to specify the parties involved, the type of information that is covered, the duration of time during which confidentiality must be maintained, the period of time during which the parties will work together under the NDA, and how confidential information will be marked. You then need to make sure that any confidential information shared is appropriately marked.
Missing the filing deadline
It's easy, when you're busy and focused on developing your invention, to miss those important filing deadlines. The USPTO is closely regulated under federal code of regulations, and sympathy is not part of those regulations. Be prepared to file early, and remember that it typically takes several months for lawyers to prepare a patent for filing.
Skipping the prior art search
Many inventors make the mistake of thinking that because an invention is new ("novel," in patent language) to them, it's new to the USPTO. This is rarely the case. A detailed search of the prior art is necessary to figure out just what aspects of the invention qualify as both novel and non-obvious. This requires searching for past and existing products, searching the technical literature, and searching prior patents. A good patent search by a law firm will typically cost $600 to $1,000, and be worth every penny in both reducing the time and cost of filing a patent, and ensuring that you have the strongest possible patent.
However, you can get 80% of the way there with other services. Google is a good place to start. The USPTO has a searchable database of patents, and many other countries offer similar online services. The Small Business Development Center (SBDC), a service offered in partnership with the Small Business Administration, can also perform a patent search and landscape analysis; if you're in Michigan, request their free business services here; other states have similar offices.
Penny-wise but pound-foolish
Patents seem like they should be simple, but the regulations and best practices needed to successfully defend a patent make them complex legal documents. Even the filing requirements, spelled out in 37 CFR, are arcane. To make it through the USPTO approval process, and have a chance at standing up to challenge, patents have to be in the right format, with properly formatted drawings, correct signatures, and legally defensible claims and backgrounds. Filing a patent yourself will be the cheapest solution, and might even seem like a financially sound move, but if your invention is really worth patenting, then it's worth hiring a qualified patent attorney to get the patent right.
Posted by Thomas Hopper on Permanent link for Patent Mistakes Inventors Make on October 6, 2023.
Are you eager to start your own business but concerned about the financial hurdles? You're in luck! There are grant programs designed to assist entrepreneurs like you in turning your aspirations into reality. In this article, we'll introduce you to available grant programs specifically tailored for lifestyle businesses and include information about grants for minority and veteran entrepreneurs, making your entrepreneurial journey smoother.
1. Small Business Administration (SBA) Grants
The Small Business Administration offers various grant programs to support small businesses, including lifestyle businesses. The SBA's Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs provide grants to encourage research and development, and are available to small businesses with innovative ideas. The US Department of Agriculture offers offers grants to rural regions to develop a range of businesses.
2. Local and State Grants
Many local and state governments offer grants to stimulate economic development and job creation within their regions, such as Michigan's Business Accelerator Fund (additional info at the Michigan Economic Development Corporation's website for BAF). These grants can vary widely in terms of eligibility and funding amounts, so be sure to check with your local government and economic development agencies for opportunities in your area.
3. Grants for Women, Minority, and Veteran Entrepreneurs
If you identify as a woman, minority, or veteran entrepreneur, specific grant programs exist to support your journey. Organizations like the Minority Business Development Agency (MBDA) and the U.S. Department of Veterans Affairs offer resources and grants tailored to empower entrepreneurs from these backgrounds.
4. Nonprofit and Private Grants
Numerous nonprofits and private organizations are dedicated to supporting small businesses and entrepreneurs. Some of these organizations offer grants for specific industries or business types. Research and reach out to these entities that align with your lifestyle business goals. Many of these grants are available only to nonprofits, but the right grant from these sources can be worth the effort. Start your search by using search engines and dedicated grant databases. Websites like GrantWatch, Foundation Center (now known as Candid), GrantStation, and Philanthropy News Digest are valuable resources for finding nonprofit and private grants. If you have trouble accessing these, your local library may be able to help. Also check with your local government and chamber of commerce to see if they know of any local grant programs.
5. Industry-Specific Grants
Depending on your business niche, there might be industry-specific grants available. For instance, if your lifestyle business is in the sustainable fashion industry, explore grants offered by organizations focused on environmental conservation.
6. Research and Development (R&D) Grants
If your lifestyle business involves creating innovative products or services, look into federal R&D grants. These grants are often provided by government agencies and organizations interested in promoting technological advancements.
How to Apply for Grants
Applying for grants can be competitive, but with the right approach, you can increase your chances of success. Follow these steps to get started:
Research: Identify grant programs that align with your lifestyle business idea and meet the eligibility criteria.
Prepare a Business Plan: Craft a clear and compelling business plan that outlines your business goals, target market, financial projections, and how the grant will be utilized.
Complete the Application: Follow the application instructions carefully, providing all required documents and information. Be concise and professional in your responses.
Seek Assistance: If you're unsure about the application process, consider seeking assistance from a Small Business Development Center (SBDC) or a business mentor who can guide you.
Submit on Time: Be sure to submit your application before the deadline. Late applications are usually not accepted.
Follow Up: After applying, stay informed about the status of your application and be prepared for possible interviews or additional documentation requests.
Starting a lifestyle business is an exhilarating journey, and grant funding can make it more accessible than you might think. By exploring the various grant options available, tailoring your approach to your specific business, and following the application process diligently, you can increase your chances of securing the funding needed to turn your lifestyle business dream into a reality. Best of luck on your entrepreneurial adventure!
Posted by Thomas Hopper on Permanent link for Funding a Startup: Grants on September 29, 2023.
You'll find volumes of advice on what business strategy to follow. Almost all of it is either based on anecdote or very tactical, and should be taken it with a healthy dose of skepticism. Sure, some business owners succeed, for a time, by trusting their guts. And yes, you should definitely keep abreast of your competition.
Michael Raynor took it a step further. He and his team studied twenty-five thousand businesses and found three simple rules that the successful companies followed:
- Better before cheaper—in other words, compete on differentiators other than price.
- Revenue before cost—that is, prioritize increasing revenue over reducing costs.
- There are no other rules—so change anything you must to follow Rules 1 and 2.
There's a proviso here, though, and unsurprisingly rule 0 is: do what the data says. Prioritize making data-driven decisions.
I'll let Raynor himself explain these rules in the video below.
Posted by Thomas Hopper on Permanent link for The 3 Simple Rules for Successful Businesses on September 21, 2023.
Much of my career has been spent developing new technologies and new products. One of the smartest people I ever worked for, a brilliant scientist, introduced me to the concept of "fail fast."
Up to that point, my approach had been mainly about trying different inventive ideas and seeing what worked. As a team, we would try to figure out what we did right, replicate that, and introduce the next Good Idea.
We had some good ideas. We also had lots of failures. Some of those failures were avoidable and many of them overshadowed the successes. Failure can be expensive.
The flexibility to make changes to a product or service decreases as we get closer to launching in the market. Decisions made earlier in the process become harder and more expensive to change. At the same time, as we approach commercial launch, we're spending more money on development and to acquire goods needed for launch. Potential failure points in our product or service design therefore become more expensive to fix as we get closer to launch. Figuring out why the good parts of an idea work doesn't make for more success, but finding failure points does.
The failing fast mindset accepts that while no idea is perfect, most ideas have merit with some weaknesses. In failing fast, we seek to exploit those weaknesses early in order to identify and either eliminate or mitigate them as early and as cheaply as possible. Instead of testing to verify possible success, test to find potential failure points.
Put another way: we want to learn as fast as possible. Fail fast means to deliberately test for failure points so that we can learn about and eliminate defects in our product, our service, and our business model.
To set up testing, identify the specific hypothesis you want to test. Then, create a test plan that outlines the steps you will take to test the hypothesis. For example, if you want to test whether a new website design will increase conversion rates, you might create two versions of the website with different designs and send half of the traffic to each version. Use A/B testing to measure the conversion rate for each version and use the results to identify which version performed better.
By adopting a fail-fast approach, entrepreneurs can quickly identify mistakes, learn from them, and make improvements. Remember, failure is not something to be afraid of. Instead, it should be embraced as an opportunity to learn and grow.
When developing new products or services, the costs spent on development increases, while the flexibility in making changes to the design of the product or service decreases. Image from NPD Solutions.