So, you found “Product-Market Fit” for your startup idea...
16 factors you have to check to see if your business fits YOU.
So, you found “Product-Market Fit” for your startup idea. You feel all fine and dandy. On top of the world even.1
So you start working on your business. (Probably some Saas—how else would you be able to 100x within a year? 😱)
But what you don’t know is that within a year, you’re stuck in your business. Hate working on it, and you’re struggling with it simultaneously!
Maybe you’re struggling because you sell to consumers for $1 a month while they load you with support questions. (But you’re not that into a big volume of customer support…)
Or you hate the work because you have to “follow orders” from venture capitalists that invested in you. (But your whole reason for starting a business was being independent…)
Then you pull the plug, cut your losses, and write a postmortem on hacker news…
(That goes viral, and you make a book about it, and now you’re a content creator—read: marketer in disguise—selling others how to make money online…)
Then you pull the plug, cut your losses, and write a postmortem on hacker news…
Probably not the route you wanted to go initially. Right?
You “wasted” a year of your life building a business that doesn’t fit you. (And if you get stuck in it, it’s even worse.)
So is there a better way of looking at starting a business? To build a business that is both robust and fits you?
Yes.
In this post, I share some “factors” you could look at to then map onto the type of business you could start. Let’s go!
Business factors important to you
#1 - B2B vs. B2C
Do you want to sell to businesses or consumers? They each come with their pros and cons. e.g., consumers don’t like paying much. Building an app for consumers will force you to need much volume for profitability.
Businesses expect high service, but you can provide that with a higher price point.
You can reach consumers pretty well with SEO strategies. But by selling to businesses, you need more direct sales. What do you prefer?
#2 - Bootstrap or VC
Being able to bootstrap has the upside of sole control over the direction of your business. But for some startups that need a lot of capital upfront, it’s not an option.
It would help if you thought about what you find most important.
The success of a specific business idea, including VC investment?
Or doing something else/different with that idea that is bootstrap-able.
#3 - Fun to work on
To be able to persevere with your business, you need to have fun. Not necessarily 100% of the time. But most of the time.
It means liking your clients and liking the day-to-day work, or gaining fulfillment from the change your business brings to the world.
#4 - Solve a problem you have/had
If you can relate to your clients personally, it makes it so much easier to stay in business.
I can’t stress enough how much of an impact this can have.
When you know the pain of your clients, you can empathize with them. You can choose the right course for your products and services. You understand customer questions and struggles.
It’s no coincidence that many successful businesses started with a pain the founder(s) had.
#5 - Is a high price point possible
An impactful but straightforward factor.
Can you sell a product or service at a high price point? (e.g. $100+)
If so, you don’t have to sell to as many people. Which enables you to spend more time per customer. And less (support) overhead.
Also, margins are usually higher percentages (than low price point offerings). This gives you the option to experiment with products while having less risk.
#6 - Market size
While ‘niching down’ is essential in starting most (non-artistic) businesses. You do want to have a broader market surrounding it. It enables you to grow into a broader product/service offering if you like to do so.
But when the broader market is small, your business growth will be constrained.
(It does depend a lot on what products and services you offer and their price point.)
#7 - Legal complexity
I have yet to speak to a founder who specifically started a business ‘because of’ the legal complexity. But some businesses have regulations and legal complexity. If you can help it, avoid it. But if you must, do get advice from a professional.
Some industries where there is much regulation: are finances/money, health/hospitals, and services for children/schools.
(These are industries where, not coincidental, there is still much left to innovate!)
Pointing: Low legal complexity +1 | High legal complexity -1
#8 - Competitors
It may look like you are a ‘first mover’ when you can’t find competitors for your business idea. But it’s more likely that, for some reason, your business can’t work out in a practical sense.
It’s not often you have such an innovative idea that no one thinks about it and cannot make it work.
If, for some reason, you do have an idea like that, you can’t validate it by looking at competitors. So this should at least give you a big red flag!
If you do find competitors, it gives you some idea of what may work. But also gives you an edge to start a similar thing but better (because you don’t have the ‘legacy’ they have).
#9 - Impact on the world
Does your business leave the world a better place than when it wouldn’t be there?
Being able to show my kids the impact my work had over the decades, I want it to be positive. So for me, this is an important one. However, sadly for many, it comes as an afterthought.
But if this is important to you, and you don’t think about it, believe me, you won’t persevere.
#10 - Revenue model
The way you monetize is important. Do you want recurring revenue, pay-per-use, or something else?
There is a multitude of options here. And while an important factor, it’s one of the easier ones to change (read: “easier,” not easy).
(Also, you can have more next to each other, or have it differ on each product/service.)
#11 - Solopreneur option
Can you do it all by yourself?
Not a necessity at all, btw. But maybe you don’t like managing other people. Or you are unwilling to work with someone else. Then this is a factor that determines if the business will be successful or not.
Here again, there are pros and cons. e.g., Working alone makes you agile, which makes you able to pivot quickly. On the other hand, it may keep you in a bubble (too long) when working on something.
(For artistic endeavors having a solo option is usually very important, so as not to “muddle” your vision.)
#12 - Shareability and Likeability
Free marketing, anyone?
Building out a product that people like and even love makes them share it. Your customers sharing your product is the best marketing you can have. And it’s free!
So, is your business idea delivering something that customers can share? And can they share without friction?
An example of an industry that does this nicely is fitness apps. Another specific big one is Instagram.
#13 - Scalability
Do you have to manually do (a lot of) work for each customer? Can you provide service for one customer almost as easily as a thousand?
At the beginning of your business, this is not a necessity most of the time. But if you want to scale, better make your offering scalable.
If the scale is not of much importance to you (which is a fair option, by the way), then this factor is less of an impact on you. (Where the scale is less important is in a business doing custom jewelry work, for example.)
Something to keep in mind while thinking about this considering your business idea: “What parts of my business could I automate?”
14 - Multi-sided business model
Creating a multi-sided business has been successful for some companies. But it’s a prime example of the chicken-egg problem. You need both sides of the model/marketplace to work.
“Let’s build a marketplace for X!”
You need to create TWO separate value propositions for different types of customers.
Essentially this means you are starting two businesses at the same time. (As if starting one company is not hard enough already…)
(If you can start off providing value for one part of the marketplace already, then it’s not much of a problem. Then it may even be an excellent way to grow your business later.)
#15 - Data management (storage and retrieval)
Every business has some data (on their customers)—even just an email address.
But some products and services require an insane amount of information or computation. e.g., products where you provide recommendation services, cloud hosting, or use time-series data.
It doesn’t have to be an issue. And data being “the new oil” can give you side benefits you can leverage in your business. Selling that data (I recommend anonymized or aggregated insights only) is one option. Another option is building new products on the ideas you get from that data.
But storage en retrieval of a large amount of data does complicate your business. Your infrastructure, maintenance, and processes need to be efficient.
#16 - Dependent on one other business
I’ve seen some businesses that build on top of other businesses. Be it on top of Google, Facebook, or some API. This can be risky.
The company you build on top of can shut down its service without notice or fail for another reason.
Secondly, you have to maintain your connection with that business up-to-date in many ways. Update and upgrade your software or supply line to handle changes.
In the end, you’re at the mercy of the company or service on which you built your service.
In the beginning, it may be fine (to validate your business). But check if it’s possible to have more than one dependent-upon party.
Ok, that’s a wrap! These are the factors I have looked at when valuing a business idea even before I validate the product/market fit. If the business wouldn’t fit my lifestyle, it’s a waste to spend time and energy validating it.
So, while some factors are must-haves for me—like a “Positive impact on the world,” “Have fun doing the work,” and “Solopreneur —they’re different for everyone.
If you take away anything from this, it’s that you need to look at more than the product/market fit.
i.e., Ask yourself how the a How do you see yourself running your business in a year? Or in 3 years? Or with a spouse and kids?
So, let me know in the comments what kind of business fits you!
Cheers!
Jibran
“Product/market fit means being in a good market with a product that can satisfy that market.” — Marc Andreessen