I get dozens of DMs and emails every week from aspiring and early-stage entrepreneurs who are trying to build an internet business.
Sometimes, I refer people to a section of my Micro-SaaS guide. More often than not, I respond to their ideas and questions with prompts of my own.
I find prompts as a better way of helping someone find an answer on their own and developing deep understanding of it. That’s how I ended up writing this post.
Through a series of prompts, this post is designed to help you ask the most important questions you need to answer when starting a business.
- Is this a real problem that needs solving?
- Can I build a business by solving this problem?
- Is there a large enough market to help my business reach its revenue goals?
- Who are my competitors? How do I beat them?
- Can I differentiate on product, or distribution?
- How well do I understand my target customers?
- How will I market my solution to my target customers?
- Does working on this business idea play to my strengths or weaknesses?
- What is success to me? And do I have what is needed to get there?
Building a successful business is like solving a complex multivariable equation. The more part of the equation you solve, the higher your chances of success.
At its very core, there are 3 pillars to building a successful business. But those pillars provide a very high-level overview. This post is about the nitty gritty details.
In case you’re wondering why 42 questions, well it’s just the number of bullet point prompts in this article. Or perhaps 42 is the answer to life, the universe and everything.
Let’s dive in 👇
Is this a real problem that needs solving?
An idea is just the beginning of a long journey to making a business successful. From my observations, one of the top reasons a business fails is because they don’t solve a real problem for their end customers.
Not solving a real problem doesn’t mean you can’t build a business. You can sell vitamins instead of painkillers. But selling painkillers just makes it significantly easier for you and increases your chances of success.
Ask yourself these questions as a heuristic whenever you consider a business idea.
- Do people or businesses really face this problem?
- How often do they face this problem? Is it several times a day, few times a week, or once in several months?
- How acute is this problem when they face it? Is it painful and frustrating, or is it “ugh, that again!”.
- How important is it for them to solve the problem for their lives or business to continue functioning normally?
Can I build a viable business by solving this problem?
Even when a problem is real, it does not automatically translate to a viable business. Your goal at the end of the day isn’t to just solve problems, but it’s to make a profitable business while solving them.
The best way to understand whether a problem has enough legs to turn into a business is by asking:
- How much time, effort, or money do they spend on solving the problem? What is their budget for solving this problem?
- Do they solve the problem manually, by paying someone to do it, using hacky solutions on a spreadsheet, or paying for existing solutions? Or do they just live with it?
- Do they put up with existing solutions that aren’t well-suited, have drawbacks in terms of functionality, customer service, UX?
- Are they unable to afford existing solutions due to their budget and the tool’s pricing? Can I build a more affordable solution that brings the same value to more people?
Is there a large enough market to help my business reach its revenue goals?
Even though the problem might be real and validated enough, you need to know whether there are enough people or businesses in the world who could become your customers.
- Are there enough people in the world facing this problem?
- How many of those people can I reach? Can I turn enough of them into customers?
- Suppose I convert all those people into customers, would I achieve my revenue goals?
It’s possible that the problem you’re solving is super niche, and hence only 100 people will pay for it. If those 100 people can help you reach your revenue goals, then that’s great. If your goal is $10k/mo, then you would need $100/mo from each of those 100 people.
But suppose the budget for your solution is only $10/mo - are there 1000 potential customers who you could reach in order to build a viable business?
This is where building solutions in large markets work to your advantage. Simply because there are so many potential customers in the world, and thus it makes it easier for you to reach the 100 or 1000 customers you need to build a viable business.
Examples of large markets:
- productivity software
- design tools for marketers
- podcast publishing and hosting solutions
- tools for Ecommerce brands
- people looking to build a website
and so on.
To estimate market size for your idea, use this simple heuristic
- total number of people who are likely to face this problem * how much they are willing to pay on average.
To estimate your potential revenue, use
- market size for your idea * % of market you will realistically capture.
Here’s an example to illustrate:
- if there are 2 million Notion users on the planet, and
- 10k of them want to build websites using Notion, and
- they can pay $50/year at max, then
- your potential revenue is 10k*$50 = $500k per year
Who are my competitors? How do I beat them?
Contrary to popular opinion, competition is a good thing. It serves as a validation for the problem and idea that you’re pursuing. I’m someone who gets extra inquisitive if a problem has no existing competitors, simply because the most likely (but not definitive) answer is that it isn’t a real problem.
- What are the existing solutions in the market? Are there none? If so, does that mean there’s no demand, or does that mean that nobody has understood the problem as well as I have?
- What are the strengths and drawbacks of these solutions?
- How much do these existing solutions charge? Is there a space for a more affordable offering for the small-sized customer base, or a pricier but super-customised offering for large customers?
- What are customers of these solutions saying on sites like G2Crowd, Capterra and other public forums. What are the positives, the negatives?
- How do I build a better solution than competitors? Can I build a better solution for all? Can I build a better solution for a very specific subset of customers?
- Are existing solutions poor at UX and require training? Are they missing functionality that a subset of customers desire and complain about?
- What is the Minimum Loveable Product that I can build that gives target customers enough reason to try my solution out?
Can I differentiate on product, or distribution?
Building a differentiated solution isn’t the only way to a viable business. In the real world, between two solutions on equal footing, the one who has figured out how to reach customers at scale, or at a lower cost per acquisition, wins. Distribution is a real moat.
- If the solution will be be similar and only at par with competitors, can I do a better job at reaching and acquiring customers?
- Can I show up as the top result when my ideal customers look for my solution? Am I better at paid marketing, have I found specific channels, niche publications, or keywords that my competition doesn’t currently target?
- What are some of the reasons why customers will prefer my solution over the existing alternatives? It could a new trend that’s gaining momentum, such as “privacy-friendly analytics tools”.
- It could be that customers care about supporting indie organisations over large corporations. Could I position my solution to take advantage of such a trend?
- Could it be that customers want the personal care and attention that a small team’s customer service can provide, which they currently don’t get from the existing large alternatives?
How well do I understand my target customers?
A deep understanding of your customers will help you define the jobs to be done for the solution you build. It will help you build a solution that is better than just looking at competitors and cloning it or building something extremely derivative.
It will also help inform your product’s positioning, the language you use when describing the problem your customers face and how your solution makes their life better. This language will show in your website copy, ads, and basically everywhere you communicate.
- Can I describe the ideal customer in great detail by getting in their shoes?
- Can I write a 500 word summary about their daily life, the problems they face in their business, and the specific context under which they face the problem that is the basis of my business idea?
- Can I picture how their business runs, how many people work in their business, who are the people that will use the solution I build, who all would they interact with while using my solution? Are my tool’s would-be users the same people who would approve and purchase it?
How will I market my solution to my target customers?
The previous section is focused on understanding your customers deeply. By further extending that understanding, not only will you be able to build a great product, but you will also understand how to market your solution and reach your customers.
There are two stages to marketing your business. The first involves identifying how you will get your first 10 customers, and the second involves building a repeatable or scalable system that takes you to 1000 customers and beyond.
- Do I know where my ideal customers hang out?
- Do they browse Twitter everyday and belong to certain circles (eg. Marketing Twitter)? Are they more active on private Slack groups and forums? Or are they Facebook group members? Perhaps they are active on LinkedIn and can be recognised by their designation information.
- Do they browse certain websites, publications, newsletters, podcasts regularly that they trust? (eg. how bootstrappers and solopreneurs browse Indiehackers).
- What do my ideal customers do when they face a problem for which they need a solution? Do they go to Twitter and ask others for recommendations? Do they ask for recommendations in a Facebook or Slack or Discord group? Do they talk to people in their network directly over private messages?
- Do they type certain phrases into Google like “I am facing problem X” which I can target using pain-point SEO?
Does working on this business idea play to my strengths or weaknesses?
- For solopreneurs - Do I have all the skills to make this business idea work?
- If you’re a team of two or three, then ask yourself the same question as a group. Do you have all the skills amongst yourself needed to make this business idea successful? This could be marketing, design, sales, engineering and more. Understand the difference between going at it alone vs with a team.
- Which strengths of mine can I utilise if I start this business, which gives me an upper hand?
- What are some of my weaknesses that I would need to overcome to make this business successful?
Understand your strengths and shortcomings better and use them to your advantage. If you are good at design, and the problem you’re solving can hugely benefit from a better designed solution, it’s a strength.
If you’re bad at cold outreach or 1:1 sales, and the business you want to build requires you to do outbound sales and sales demos and calls, then you are at a disadvantage.
A disadvantage is not an immediate disqualification.
It’s possible that you don’t like doing cold outreach and sales, and you’re bad at it. Then perhaps you should avoid a business idea that strongly relies on these skills.
At the same time, you may not be good at content marketing, SEO or social media marketing, but becoming better at these skill is something that excites you and is something you are willing to work on to convert it into a strength.
Starting a business does not mean you go through a world of pain doing the things you hate.
Your business, if it takes off, will be a key component of your life. Which means if you have the chance, you should pick a business idea and path that brings you joy, or at the very least does not make you miserable everyday.
What is success to me? And do I have what is needed to get there?
Perhaps this section should be bumped to the top, but I’m operating under the assumption that people start with a business idea and so this section acts like a last-level check.
Also, the answers in this section won’t change even while you go through the process if considering, rejecting, or further researching into multiple business ideas.
- What is success to me? Is it making $1000 per month? Is it $10,000/mo? Is it $100k/mo?
- How much time and energy will pursing a business idea take? Do I have the bandwidth to give that building this business will demand? Are there any obligations in my life that could prevent me from giving this business my 100%?
- Can I start this business before quitting my job?
- How much does this business need to make for it to be ramen profitable, or for me to work full-time on it?
- How much in savings do I need to sustain myself until the business is ramen profitable?
- Am I willing to work on this idea in the long term? Can I dedicate myself for the next 12 months to make this idea into a viable business? Entrepreneurship at its core is about the long haul.
- If my business does not work out as planned, how long will I give it before I try something else?
- What am I giving up by pursing this idea? Are there other business ideas whose equations are better solved and might be better for me to pursue?
Building a successful business doesn’t have to be a black box. It doesn’t have to depend on “luck” or other factors beyond your control.
If you are building a bootstrapped business with modest ambitions ($100k/year revenues), then you don’t even need 100 things to fall in place in the right sequence for you to succeed.
Every additional question that you answer from the list above moves you closer to building a successful business.
It will definitely be frustrating to answer questions instead of writing code and building the product. However, it is possible to answer most of these questions without writing a single line of code. And hence, you should.
Building a successful business is within your control, by solving the complex multivariable equation, one variable at a time.
Now, what are you waiting for?