How to Start a Business

Why So Many Startup Fail To Get Customers? Here's The Reason Founders Often Overlook [Starting a business 3]

SaaS Catch
February 12, 2024
Previous Post|Starting a business 2: Who and where are our customers?

1.What do you want to sell?

We have found our customer's problem and we know where they are, now we have to turn our idea into something concrete.

There are actually an infinite number of things you can offer to customers you meet online, but they can be categorized into 3 main categories.

1.Physical stuff: cars, computers, coffee, speakers, etc.

-Make stuff and sell it.

-Make a profit on the market.

-Sell other people's stuff for them.

-Take pre-orders and make things available.

2.Services: software, legal advice, travel guides, brokerage platforms, design outsourcing, etc.

-Earn qualifications.

-Hone your skills.

-Represent parts of other professional services.

-Redesign service paths.

3.Information: lectures, ebooks, analyst reports, survey data, customer information, etc.

-Create data yourself.

-Aggregate and reorganize scattered information.

-Provide important information separately.

-Do research for you.

In the real world, there are many ways to organize 1+2, 1+2+3, 1+1+1, etc. Among the infinite number of cases, we must determine how our idea will be properly realized.

과일을 파는 여성의 선택적 초점 사진
(Source : Unsplash)

Here are some criteria for selecting items

Criterion 1: Can it properly solve the problem of my ideal customer?

Criterion 2: Can I afford it with my resources?

Criterion 3: If this item fails, can I swing for the fences and try again?

If you can't solve it, the customer disappears.

If you can't afford it, it becomes a scam. If you can't handle it, you become obsessed with the small stuff.

To meet the criteria, make sure you know your capabilities.

*Personal resources

-Capital: You should have enough money to get your business up and running, even if it means losing some cash. Usually, you'll have to hang in there much longer than you planned.

-Time: Be able to carve out a chunk of time each day to build your business. A chunk will vary from person to person, but it's the minimum amount of time you can focus on one important task.

-Skills: At the core of your business, it's beneficial to acquire one skill that you can build on. I recommend choosing a skill that is directly related to making or selling, such as expertise, development, design, marketing, or sales.

-Personality: Assess your level of ability to create, manage, communicate, persuade, and bring people together in ways that directly impact your business.

*External resources

-Infrastructure: Software, equipment, physical space, institutions, government support, etc.

-People: acquaintances, employees, freelancers, partners, community, university, agency contacts, etc.

건물 안에 있는 사람들
(Source : Unsplash)

Just as the items you need to 'get around' vary from bicycles, motorcycles, cars, and airplanes, you can select items as you run out of resources. In fact, it's almost impossible to have them all, so there's no need to be too intimidated.

In reality, it's much more likely that you'll run into other unexpected problems that you'll have to creatively overcome than a lack of resources.

Also, if you go to market the hard way, you might get drowned out by too many existing quality items, or you might get stuck by the legal restrictions if you think your item is so innovative that it doesn't exist anywhere else in the world.

If you're not lucky, you might get sued by third parties who will cut into your profits because of what you've created.

The secret to overcoming all these risks is speed.

If you wait too long to come up with an innovative item, the world has changed. You have to double down on common sense. Make it quick and get it in front of customers. When you do something so fast that your competitors can't react, you're already past many of the problems.

We want to go fast, so let's start light. Don't try to have the perfect resources. Don't try to add all the features from scratch. Our aim is to solve a problem our customers are having in the here and now, not to build a work of art and show it off for ages.

2.How will you sell it?

"Items to sell" have one thing in common: they're worth their weight in gold. Whether it's a product, service, or piece of information, it has to be worth your money. A more formal way of saying value is "worth". In business, we say that customers set the value of a product, not us. In other words, they decide whether our items are useful to them.

The only time an item sells is when "value > price". Technically, you've created the possibility for the customer to buy, not because your item is the only one that can solve their problem.

1) With 10,000 won, I buy a total value of 15,000 won: If there are no other items around that are worth more than 15,000 won.

2) 10,000 won buys a total value of 10,000 won: It's too much effort. Don't choose.

3) 10,000 won buys a total value of 7,000 won: It's a loss. I don't choose.

빨간색과 파란색 줄무늬
(Source : Unsplash)

Of course, there are cases where users are forced to choose, such as telecom providers, VISA cards, and certificates. However, for those of us who are just entering the tunnel of entrepreneurship, the strategy we should take is to increase the value expectation that consumers decide for themselves.

[Expected value = value of solving a problem + value of additional outputs]

For example, the cost of a pasta is around $30 won for a single serving. But in a restaurant, it can easily cost over $170. Even with a 200% profit margin, you'd have to sell it for $90, so why do people make reservations a month in advance to eat such expensive food?

Because there's something else you need besides pasta.

They are looking for a meaningful way to remember their day, a private room to have an important conversation, a gastronomic experience, and an 'Instagrammable' photo, and that's what makes it worth it.

So should we just sit back and wait for customers to recognize the value of our items? No. We need to work hard to communicate how our items can provide value.

There are two things we can tell our customers.

The value is higher than the price. The price is lower than the value.

회색 테이블 위에 다양한 음식
(Source : Unsplash)
1) Presenting value as higher than price is the process of differentiating your products.

As a seller, you want to showcase the value of your item as much as you can. In the example above, the restaurant should sell the atmosphere in addition to the pasta.

The point is that the value we offer should be of real benefit to the customer. Entrepreneurs say that it's common to provide at least 2x to 10x the value of your selling price to make it a compelling proposition for customers.

2) Offering a price that seems lower than it's worth is more of a marketing technique.

We've already seen a lot of techniques to make customers think they've made a good choice. These are good to keep in mind as you decide to list and sell your items, but we recommend avoiding methods that don't increase the value of your items in the beginning.

-This price for 7 days only

-Black Friday 70% off

-Special birthday discount

-Buy one get one free

-Special launch price

-Instagram only Joint purchase

-Component(1)+Component(2)+Component(3) = Set Discount

-Free shipping

-Discount for bulk purchase

-30% rebate for 90 days after purchase

-100 points for leaving a review

-Lifetime A/S guarantee

흰색 플라스틱 옷걸이를 들고 있는 사람
(Source : Unsplash)

3.What if you have an item?

There are a lot of different items that can bring your idea to life. Because there are so many ways to solve a problem, you need to change your item quickly if your ideal customer isn't responding.

Changing items is called a pivot. Pivots happen very frequently from the beginning of a business until it closes its doors. At that point, you'll quickly run out of capital, stamina, and sanity, so it's better to let go of perfection and go easy.

Let's use our imagination to make it light for us, but real for our customers.

-Before Toss (S. Korea fintech startup) built its money transfer service, it created a one-page website that said it would let you know when it came out.

-IBM secretly tested a stenographer to see if its speech-to-text technology was viable.

-Hong Chul Noh (Korean famous comedy actor) visited other travel agents to offer and sell his own travel packages before he started Hong Chul Tours.

-Richard Branson rented an airplane for a day and sold tickets before founding Virgin Airlines.

-Google made fake videos and uploaded them to YouTube to see what the reaction was before developing Google Glass.

-Steve Jobs used several unfinished iPhones with only one feature to make his announcement.

-Before developing business card recognition technology, Remember had humans look at pictures of business cards and enter information by hand.

-Coupang created PB Brands by collecting data on products that were selling well.

노홍철이 직접 짠 4월, 5박 7일 스위스 여행 코스 1탄
(Source : Hong Chul Tours)

Now it's time to grab our items and head to where our ideal customers are. We'll meet with them, see if it solved their problem, see what the results were, and evolve our idea, and then the real business begins.

Let's repeat the process until our ideal customer is attracted to our item.

Next Post|Starting a business 4 : Staircase of consumption

Written by SaaSCatch (Link)

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SaaS Catch
SaaS Catch
For anyone who wants to start a business, here are the tools and methods to make your idea a reality. Learn about setting up and growing a business, including business frameworks, product selection, how-to's, business operations, maker stories, user interviews, and more.