24. April 2014–
You had this brilliant idea, developed the business plan and started talking to investors? Everyone keeps asking for an MVP and first KPIs? This is the time when a lot of people start looking for someone with a broader technical understanding – a technical cofounder, an agency or freelancers – to get this area covered.
At webcrowd, we often meet people at this stage. Rightfully, as we cover all of these aspects. But before you get someone on board, you should take the time to get at least a general understanding of “tech”. It will help you identify the right approach for your business idea.
Step 1: “Learn Coding”
Spend 24 hours to get an idea of what coding means: take an introduction to coding course e.g. with Ruby on Rails or visit an OpenTechSchool workshop, read about agile methodologies and user stories on Wikipedia. Once done, get back to your idea: what needs to be done? What interactivity with the user is happening within your business model? And last but not least, is there a standard tool set for what you’d like to do? If you are selling physical products online, look at a Shop-Hosting-Solution like Magento or Shopware. Are you publishing content or are you are building a community? Drupal might be offering what you are looking for. Your business model is more complex? Nevermind. The next step is coming.
Step 2: “Fake It Till You Make It”
Go back to the business model and figure out what the most valuable part of it is – the one thing that is crucial. This is your minimum viable product (MVP).
Now build a website that demonstrates this service/product to potential clients and generate first key performance indicators (KPI). Run a Google AdWords campaign with it and monitor how many people register for the newsletter. Send yourself a sales request or actually sign up to your non-existing product. Important: First think about which KPIs are relevant and then model your website accordingly.
If you have a good understanding of your product, and you really know what you are going for, then this kind of MVP should be as easy as pie. Once modeled, hire someone in design/interface/user experience to draft your MVP and a developer to setup a click dummy. This shouldn’t cost you more than 1% of what you are asking the investor for. Fair deal don’t you think?
Step 3: “It’s not done until it’s done…actually it’s never done”
Once you have that MVP and first KPIs, you can explain to the investor that already 5,000 people requested your service and you’d need the millions to get it up and running. But how?
Your business plan should have an obvious “We are the X of Y“ claim. Something along the lines of “We are the Airbnb for caravans” – yes, this business exists. Think about what your tech team needs to look like in a year or two from now. Go to linkedin.com and search for tech employees working at the company you are comparing yourself to or check out their jobs-page to get a rough idea. Besides the one who is leading the pack, you’ll need graphic designers, frontend- and backend developers, database engineers, one or many for your mobile application(s) as well as system and server administrators. Even if you only hire brilliant developers, you’ll need at least 5 to 10 people within a year or two to cover the main aspects. Based on an average gross salary of around EUR 55.000 p.a., this sums up to half a million per year for the staff alone – excluding recruiting or management costs.
It also makes sense to think twice about which aspects really need to be done in-house with long-term hires and what can be done cheaper, quicker and in a limited timeframe by a freelancer, through agencies or bought in services. Also consider maintenance and change: Is it important in the first year to be able to switch that button’s color from green to blue in an instant? Are your business processes set in stone or are they going to change frequently? With that in mind, create a product and resource roadmap. Of course, it will change, but at least you have something to compare with.
If you’d like to get further insights and discuss your business idea and IT requirements, join my workshop at HEUREKA Conference, 6th of May in Berlin!