The Process

Introduction

2 Craft your value proposition

3 Define the business model

4 Define Go-to-market strategy

5 Identify and test hypotheses

6 Build an MVP

7 Launch, grow and improve

Introduction

When starting a business, aspiring entrepreneurs often look for business ideas that come with a good understanding of how a potential product should look and what it should do. However, starting with a solution in mind can be dangerous.

This is why, we will first look at some unique insights you may have, which will assure you have a competitive edge later on. Next, we want to identify a market you are driven about, to make sure you find a problem in an area you are passionate about.

1.1 Identify a unique insight

Your unique insights are what will make you succeed, not someone else.

• First mover advantage

1.2 Choose a large market you are passionate about

Next, you should identify a large market where you can apply your unique insights.

If your unique insights lead you towards specific markets, especially if your knowledge or network in a particular industry are your unique insights, then you already know where to go.

When looking for a market to operate in, make sure to choose one that fully motivates you. You will require lots of energy and persistence to build a successful business. This is why you want to provide yourself with a context you love working in. Therefore, choose a market you truly care about.

• Health and fitness
• Technology and software
• Education and training
• Sustainable and eco-friendly products
• Personal development and coaching
• Entertainment and leisure
• Food and beverage
• Travel and tourism
• Home improvement and DIY

If you struggle to find the right market, you could think of what you would do even if you weren't getting paid for it. Perhaps you love gardening in your free time, hence, you might consider launching a business in this field.

Is the market large enough?

When choosing a market, it is important to ensure that it is large enough. The reason for this is simple: in a small market, you need to capture a large share of it to become significantly profitable. In contrast, in a large market, it is sufficient to capture a small share of it to build a financially interesting business.

USD 1 Billion +

Let’s understand what that would mean. If you capture 1% of a 1 Billion USD market, which is already difficult to achieve, you would create USD 10 Million in revenues. If you have a profit margin of 10%, you would make USD 1 Million in profits. If your market share falls to only 0.1%, then you make USD 100’000 in profits.

This is why it is important to focus on large markets, to ensure that you can become profitable even when conquering only a small share of the market.

Growing above 20% (CAGR)

There is a good reason to build a business in a market smaller than 1 Billion USD, which is if the market is experiencing fast growth.

Fast-growing markets present many opportunities, as products and services are just beginning to emerge and establish. In the best case, such markets become huge, and early movers may become dominant companies.

The speed of growth is usually expressed as CAGR, or Combined Annual Growth Rate—the rate at which a market is growing each year.

It's that simple to determine whether you have a good business idea. Get these points right, and you'll be off to a great start.

How to size a market?

I don't want you to spend too much time sizing markets, but I do want to raise awareness about why it's important to target a large market and create a basic understanding of how to measure it.

Above, we looked at the market size of the Total Addressable Market (TAM). If you engage with investors, there are typically three kinds of market sizes you would look at.

You can either arrive at this number by making a top-down or a bottom-up market sizing. If you are interested in learning more, you can take a deep dive by clicking on the following toggles.

1.3 Find a significant problem to solve

Once you've identified a potential market for your business idea, the next step is to find a significant problem to solve. This is crucial to ensure that your product or service meets a real need and has the potential to succeed.

The biggest mistake aspiring entrepreneurs make when launching a business is to focus on a solution, rather than on a problem they want to solve. Often, they spend a significant amount of time and money developing a product before reaching out to potential customers, only to learn that they have built something that no one needs. But don’t just take my word for it. CB Insights looked at 110 startups and why they failed, 35% did so because there was no market need for their product.

This is why you have to focus on identifying a problem first. The bigger this problem is, the more will potential customers be willing to pay you for solving it.

Here are some examples of significant problems in various markets:

• Health and fitness: Lack of access to affordable healthcare
• Technology and software: Cybersecurity threats, lack of user privacy, threats from AI
• Education and training: High tuition costs, lack of access to quality education for underprivileged communities
• Sustainable and eco-friendly products: Climate change, plastic waste, deforestation
• Personal development and coaching: Mental health issues, lack of work-life balance, career stagnation
• Food and beverage: Food insecurity, unhealthy eating habits, animal welfare concerns
• Travel and tourism: Overtourism, the environmental impact of travel, lack of sustainable tourism options
• Home improvement and DIY: High cost of home repairs and renovations, lack of affordable and sustainable home products

When searching for a significant problem, it's essential to consider not only the problem's size but also its frequency. In the best case, you identify a problem that people face every day, versus a problem people have only once a year.

To better understand a problem, generating more data is essential. Following you find some strategies that can help you doing this.

Interviewing potential customers to generate insights

One of the most powerful ways to generate insights about potential problems is by talking to potential customers. Unfortunately, many entrepreneurs shy away from this approach, preferring to hide behind their screens. However, if you cannot handle a conversation with a potential customer, how can you ever successfully launch a business? Therefore, I highly encourage you to have these conversations very early on.

• Posting on social media and asking for volunteers to be interviewed
• Attending industry events and conferences to network and meet potential customers
• Reaching out to existing customers or users of similar products/services in the market

When you find someone to interview, it's essential to follow a script that helps you identify problems.

You should interview around seven people who share the same problem and are potential customers. Interviewing more people will not necessarily result in additional insights. When conducting interviews, make sure to keep accurate records of the conversations. You may want to record them so that you can focus on the conversation and later analyze the answers more carefully.

Conducting surveys to generate insights

Another popular approach among aspiring entrepreneurs is conducting surveys to generate insights about potential customers and their problems. Although surveys can be adequate tools in some cases, they come with many challenges that some might not be aware of.

1.5 Draw first conclusions

After completing the first step of the Venture Building Process, it's time to evaluate your progress. To do so, refer back to the 10 Building Blocks of a Business as presented in the Introduction. At this point, you should have found answers to four of these blocks.

For each of the four building blocks, you should have at least medium confidence that your findings are true. If you have low confidence in any of them, consider doing further research or customer interviews.

However, if you feel confident enough, you may proceed. In any case, you will build up more confidence in your assumptions as you progress further in the process.

Contact

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