What is the Best Solo Startup Idea? Part 2. How to Win the Market

Part 2. The Market – Your startup should become a leader in a market niche.

You can find a great idea that solves a real problem that people are willing to use and pay for. And still, your startup could fail on the market. Wrong target customers, tough competition, low visibility, and lack of profit can kill your idea.

Check your startup idea success against the market forces with the next set of tests.

TEST 6. YOUR IDEA ATTRACTS THE RIGHT USERS WITH LOW-TOUCH SALES AND SUPPORT.

What is your target audience?

These questions can help to figure out your users.

• How are the problem and the solution central to their life or work?
• Who are these people – age, status, income, habits, location?
• How can you reach and convince them?
  • Are they consumers, business owners, or enterprise specialists?
  • Are your potential customers open to new software?
  • What are their barriers to switching?
  • Are they people who like to play with new tools and give up after a short time?
  • Are they pragmatic adopters who will stay if it works well?
  • Or conservative guards of the status quo always resisting any new change?
  • Can you find them on the internet, social media, or forums?
  • Can you use SEO and marketing automation to reach them without much manual effort?
• Do they need a high-touch sales process with demo and calls?
• What is their tolerance for technical complexity? Do they expect an intensive level of support?

You can find people who need your idea, but not all of them are the best customers for your startup.

Find who are the right people for your idea and startup. They will

• be easy to reach, attract, and convert
• become your loyal users, and cause less trouble with support.
• make your startup grow fast.

Who are the right users?

Look for self-serving customers with fast buying decisions and low expectations for support. They will sign-up and use your software without much of your involvement. Online marketing becomes the primary growth channel and a way to reach such people.

Position your idea to target the best customers for your solution.

The enterprise segment requires a sales engine with many demo and talks before the sign-up. You need this model for software that costs more than thousands per year. You can avoid high-touch sales if you keep your software plans low and aim for a larger customer base.

End-consumers are difficult to keep, and they are more price-sensitive and demanding. You need to amaze them all the time.

The sweet spot is small/medium businesses. They have less ceremony than people from enterprise and more pragmatic than the end-consumers. They will continue paying money as long as your solution works for their business well.

With time, you should spend less and less time on marketing for the existing target audience. Your focus should be more on developing the product and acquiring new user segments. Automate conversion, discovery, and onboarding process and intervene only when real problems happen.

The right users will make your startup grow in a happy and scalable way. But, with time, prepare that you will change the definition of the right user. Encountering real people using your app will challenge many of your hypotheses.

TEST 7. YOUR IDEA PLACES YOUR STARTUP IN A SMALL AND FOCUSED NICHE MARKET.

The niche market is a habitat of similar buyers who have a common serious problem that your software can solve.

What are the main components of a market niche?

People: Who are the potential customers? What are their

• professions, ages, education, lifestyles, locations?
• interests and expectations?
• readiness to pay for you to solve their problem?

Products: What are the existing solutions in this market? What are their prices? What is the quality level of these products?

Competitors: Who are direct competitors, and what are their marketing and sales practices? How many customers and sales do they have? Are there strong competitors?

Alternatives: How do customers currently solve the problem? Are there workable alternative solutions outside of this niche? How difficult is it for your idea to beat these alternatives?

Platforms: What are growing platforms around this niche? Can you leverage marketplaces, app stores, or services to reach their customers? Many platforms will welcome new players that compliment them with new capabilities. For example:

• Shopify, or Etsy for e-commerce,
• Zapier or IFTTT for automation,
• Intercom or Mailchimp for communication.

What is the best market niche for your startup?

The niche is not a fixed realm. You can redefine or even create it. Define a niche by changing elements as target customers, product offering, pricing, or novel use of platforms.

Here is a simple compound that you can change for the startup idea and move across markets and solution space: People’s Problem, Software Idea, and Market Niche

By defining your idea, you define the niche at the same time or vice versa; if you find a good niche market, you can shape your idea to fit the niche. Finding a startup market niche gives you a good orientation and helps you focus on the solution. Defining a problem makes you think about a solution and the best niche to apply your idea.

You will iterate many times in your startup life until you find a good compound mixture.

1. The niche includes people already paying to solve the problems that your idea solves. It is much easier to sell a product in a niche where potential customers already spend money. Otherwise, you will need to put a lot of effort into marketing to make them start paying!
2. The size of the niche matters; it must not be too small or too big. The market niche should have enough right customers to make money for your startup. At the same time, it should be small to avoid the interest of large competitive sharks.

A good strategy is to start from the smallest niche that has the most favorable market conditions. Focus marketing on the best matching customers. Get a deep understanding of their needs, expectations, and responses. Make them happy with your solution. Winning the small segment will provide a great beach-head to attack larger segments.

Remember that Facebook started its world conquest by winning over Harvard University students.

TEST 8. YOUR IDEA SHOULD HAVE A COMPETITIVE ADVANTAGE IN THE TARGET NICHE

In the previous test, you evaluated and positioned your idea in the niche to have enough matching buyers. This test is about carving the sub-niche to win the competition.

Finding a calm profitable niche is very difficult now. Many ambitious businesses are looking for any opportunity to make money anywhere. They take advantage of every person and business problem or even create new needs. As such, the niche you find will already have some competition or alternative solutions.

But it is actually a good sign to have competitors in a niche. That means that there is a demand that allows them to do business. And you can make money there too! But before this, your startup idea should win a strong position in this niche market.

What is competition in the niche?

First, analyze your competition by finding if there are:

1. Strong big companies – their presence is a threat and an opportunity. They could solve problems for the large market but not do well for your small niche. You can jump into a well-developed customer pool with a favorable comparison. Many dissatisfied people could switch to your solution in a short time. But companies with big budgets could improve their offer and win back a niche if they see a missing opportunity.
2. Many identical products already exist – consider changing the niche. Many products mean a competitive and difficult environment for survival.
3. No competitors. If you can’t find a single product addressing a similar need, this is a warning sign. It means that there is no market need for your solution or that your idea is too novel or genius (the latter is much less probable).

So, you should try to find a niche with enough buyers and a few direct competitors. Their products should have obvious weaknesses which are easy to attack with a better solution.

The key to your startup survival is a competitive advantage in your niche market! Then people will choose your software if it is better than the others.

Note that your product is more than just your software. You can further influence buying decisions with

• Packaging your idea for marketing and sale
• Delivering and supporting your software
• Extra services, education, and tools you provide to help customers succeed

How can you position your product to be competitive in the target niche?

Create your own unique new product category to have an unfair advantage. You should be a clear winner right from the beginning. This sub-niche should be a starting point to take over most of the remaining niche with time. The targeted niche still should be big enough to make money, but small enough for your startup to win over.

Here the goal is to show an advantage over alternative solutions (and not only by the lower prices). Consider the following steps:

1. Place your product within a buying category with already established credibility—target pragmatist buyers with familiar choices and comparison points.
2. Position your product as the best buying choice:
   1. Attractive – has a nice set of core features with a simple and easy user experience.
   2. Credible – people can trust your startup to deliver quality support and be a reliable provider.
3. Create referral and differentiation points related to competitors.
4. Your product should be the best at something in your sub-niche without any tricks! Know and present your silver bullet.
5. Do not afraid to mention and compare your competitor’s products. People will compare anyway, but you can frame this to your advantage.

Look at how Amazon positions its many products. They promote a book #1 seller in Industrial Management eBooks while it could be #24,200 in the larger category of eBooks. The product could be #1 Under-Bed Storage, but #9 in Space Saver Bags and #1,702 in the Home category.

You could create the best

• CRM for Python Freelancers,
• Messenger for Real Estate Agents, or
• Task Management for Plumbers.

For example, Mike McDerment started FreshBooks in his Toronto basement after losing his client’s invoice. He created an invoicing PHP program for IT professionals. Later McDerment turned his makeshift program into a popular online invoicing and expense-tracking software. His main customers are self-employed people who didn’t want to learn business accounting. Now, FreshBooks has a revenue of more than 60 million a year.

Another startup, Airtable, converted a humble spreadsheet into a powerful tool to create simple apps. This sub-niche has very popular products such as Microsoft Excel and Google Sheets. And still, Airtable has hundreds of thousands of users and an evaluation of more than 1 bn.

Continue re-positioning your idea and redefining a sub-niche to increase your winning chances. Your product should become a leader with a strong competitive advantage.

TEST 9. YOUR IDEA SHOULD WIN CUSTOMER ACQUISITION IN THE NICHE.

How would you get many new customers without big spending and everyday involvement? How much effort and money would you need to get the next 10, 100, or 1000 paying customers? Is it sustainable?

Can you get many customers without spending a lot on ads, influencers, or promotions? Can you get them without individual calls?

Ideally, you should put everyday acquisition on autopilot and take manual control only for new features, marketing findings, or corrections.

It is not enough for your idea to have a strong competitive advantage in the niche with many buyers. Your product should appear on people’s radar immediately once they search for a solution. From the first encounter, they should get a clear message of why your product is a good fit for their needs.

People are impatient and busy with no time for long research for the best software. In most cases, they select top products that match their needs. And the channel leader usually gets the most customers.

Being an indisputable #1 solution in a tiny niche is better than being the #100 in a large market.

• The #1 result in Google’s organic search results has an average CTR of 31.7%.
• The #1 organic result is 10x more likely to receive a click compared to a page in #10 spot.
• The top 3 Google search results get 75.1% of all clicks.

Organic Click Through Rate Research

Your idea should rank first in search queries, the marketplace, the app store, or other channels.

How to place your idea to win keywords?

1. Search your space with Google Keyword Explorer, Moz, SEMrush, or other tools. Check the competition and difficulty to win first place.
2. Learn SEO if you don’t know how to research and build a strong search engine presence. This is the most important marketing skill for you now.
3. Re-position your idea and niche to find keyword topics where you can win SEO even if it is a very long tail spot.

Winning organic SEO is the best auto-pilot marketing strategy. It requires no spending on ads, no dependency on app store quirks, no big effort to produce social media content. The leader in a niche marketplace (e.g., Apple Store, Google, Azure, or Shopify) is a good starting position too. But, if you are dependent on their game rules, it could create long-term difficulties. So, focus on winning SEO and use the marketplace positioning as a complementary strategy.

TEST 10. YOU SHOULD BE ABLE TO BOOTSTRAP YOUR IDEA AND BE PROFITABLE AT A LOW PRICE

Estimate your expenses and potential revenue for your idea. If you don’t see a reasonable way to make a profit, the idea is not good.

A self-sustainable bootstrapped startup is the best way to start your business. You will avoid the pressure of growing at all costs and losing control of your startup. You can build a company how you want (not the investor’s way) and be your own boss.

Product pricing is then a strategic choice. You have to align all of your costs to fit your available budget and still make a profit.

One important point is that your subscription price should be low at the beginning (less than $1000 per year). This will reduce barriers for many self-serving customers and avoid high-touch sales. Otherwise, you have to mount large sales and support efforts.

Estimate revenue:

• What is the potential market size, and who are the buyers?
• How many Google queries people make for similar problems?
• How big and successful are your competitors? What do they charge?
• What is the purchasing power of the average customer (think teenagers vs. enterprises)?

Estimate expenses:

• Hosting
• Services – support, payments, subscriptions
• Advertisement
• Freelancer payments
• Required software purchases and licensing
• Royalty payments
• Your personal computer, Internet, and mobile bills

Estimate profits:

• What is the breaking point to make a profit?
• What will your pricing tiers be?
• How many customers do you need to cover these expenses?
• Does it match your low-end expectations for a market size?

Estimate opportunity cost:

• Do you give up other income to work on your project? You can be a freelancer rejecting new projects or a full-time employee moving to a part-time.
• Can you start cheap and survive longer?
• Will you be able to transition over time from your current sources of income without giving up much?
• Can you bootstrap yourself from your existing savings instead of taking credits and investments?
• Will you avoid financial hardship and still enjoy life?

After answering these, shape your first version of the idea to be profitable and low risk for your finances and future.

The next post will test the last area for finding the best solo startup idea – Yourself.