Startups are companies created with the expectation of rapid growth, shaking up their industry, and challenging the status quo, and in this startup guide, we will dive into the topic in more depth.
When it comes to building a startup, it’s crucial to first understand what is the main difference between a startup and more traditional business models and entrepreneurship. The key thing here is the approach, namely that startups are aimed at new promising ways of doing business. In other words, it means searching for non-standard or undiscovered solutions to reach a new level. After all, both a startup and a small business usually do not have the same resources and influence as established market leaders. Therefore, to achieve business goals, ensure startup growth, and make your product or service accepted by the target audience, it’s necessary to have a competitive advantage — offer something different and exciting, encouraging potential customers to explore and use your product to solve their problems.
By focusing on offering unique and innovative technology solutions, a successful startup has a high potential for growth and profit. The value of such a business model is that startups can change people's lives. Companies like Airbnb, Uber, WhatsApp, Pinterest, Instagram, and many others have all grown into multi-billion dollar organizations because they found not just an attractive business idea but managed to change people's habits by providing them with a new, easy-to-use, and more convenient solution.
At the same time, when talking about how to start a startup business, one should keep in mind that 90% of startups fail. Unfortunately, many startup entrepreneurs cannot achieve their goals. The main reasons for failure are incompetence and lack of experience in terms of creating an effective business structure, as well as understanding market trends & conditions to determine whether their products and services are needed by target customers, at least in the form they are available right now. So it's worth not only having a brilliant idea but also knowing what it takes to start a startup and ensure its proper development.
Let's look at the main steps to build a startup and the critical aspects to consider to avoid mistakes and increase your idea's chances of business success.
10 Steps for Creating a Startup
Creating a startup business includes several steps, from conceptualizing the idea and market analysis to implementing a viable business model, creating a marketing plan, and understanding the next stages of startup development according to your vision, as your product or service will never be done, there is always room for improvement.
Here are 10 essential steps regarding how to build a successful startup. Each of them has its own features and aspects that require special attention to ensure smooth growth in the long run. Following these steps can help you become part of successful startups that have managed to realize their potential & achieve their goals.
1. Identify a Promising Idea Profitable
Starting a startup begins with an idea that is then supplemented with a vision to turn it into reality. But how do you find a good and, most importantly, promising startup idea?
One of the first places to look is your experience. What you already know and understand increases the likelihood of the idea's viability, yet you don't always need to be a technical expert in the field. Another place to search for startup ideas, which we consider among the most effective, is the inconveniences you encounter. For example, the startup owners of companies like Airbnb and Uber found their ideas after personally facing an inconvenience.
Most often, startup ideas are developed by solving a problem. Whether it's your personal struggle or a problem you've identified, you can form a product or service around the identified issue. If no one has a solution for the problem on the market right now, your startup can be the first one to offer it. If solutions already exist, you can identify an idea that might offer a different way to solve the problem and develop an alternative solution.
In the next stages, it makes sense to release a minimum viable product (MVP) to test your hypothesis and find your target market.
When considering potential ideas, focus on quantity rather than quality at first. Brainstorming practices are extremely useful here:
● Brainwriting. Organize a creative session with like-minded individuals. Each participant takes turns writing down their ideas and passing the sheet to the next person, who adds to and develops the previous thoughts. This promotes deep reflection and mutual exchange of ideas.
● SCAMPER. This technique includes seven key actions: Substitute, Combine, Adapt, Modify, Put to another use, Eliminate, and Reverse. This facilitates creative transformation of existing solutions and creation of innovative concepts.
● Mind Mapping. Visualize your thoughts by placing the key idea in the center and creating branches with related concepts. This allows you to gradually reveal all facets and nuances of the main theme.
● Problem-solving. Analyze the real problems and needs of your potential customers, then create a list of possible solutions that can form the foundation when developing a future business plan.
After brainstorming, it's necessary to carefully analyze all ideas. Highlight the most promising ones and try to expand or combine them with others to make the process more effective. This will provide an opportunity to examine the idea from different angles and evaluate potential synergies.
Whether an idea is good enough to start a startup, check if it meets these three aspects:
● It solves a common problem
● It can offer unique value
● It can be technically and financially feasible
2. Conduct Market Research
Market research and searching for a profitable idea go hand in hand, correlating with each other: the better you understand the market, its trends, needs, and dynamics, the more viable ideas you can generate, and also evaluate existing ideas in terms of practical value and chances of being embraced by the target audience. Therefore, one of the critical steps in how to do a startup is to conduct market research.
This allows you to gather data about your industry, target market, and competitors, thereby gaining insights regarding customer demand, behavior, and preferences, which is extremely valuable. One of the reasons for failure is that some business owners may not understand that it doesn't matter what you want the product to look like—it matters what customers want, even if they don't know it yet.
Key aspects of market research include:
● Defining Your Objectives. This is necessary to understand what data and information you need, as well as how you can use the research results.
● Primary & Secondary Research. Primary research includes surveys, interviews, focus groups, field trials, and firsthand observation which allows you to gain insights from your target market. Secondary research includes using various sources such as reports, academic studies, government statistics, and news articles, which allows you to estimate the market opportunity.
● Defining the Target Market. Here you create your Ideal Customer Profiles and based on this collect information regarding basic demographic, geographic, psychographic, and behavioral data.
It's important to create a research plan in advance. You need to determine the following aspects to do this:
● Timeline. How long the research will take.
● Budget. How much you'll need to spend on tools, software, data purchases, etc., to get results.
● Methodology. How you plan to collect and analyze the data (surveys, interviews, focus groups, or a mixed methods approach).
● Technologies. Which market research software, data analysis tools, and survey builders you plan to use.
● Sample Sizes. Appropriate sample sizes for surveys or interviews.
Once you get the research results, you'll need to analyze them:
➔ Quantitative analysis for survey data
➔ Qualitative analysis to identify themes in questions and interviews
➔ Segments comparison to spot differences in responses
➔ Benchmark competitors to understand how your startup could improve upon existing solutions
The final touch is to refine your idea based on the data obtained:
➔ Find weaknesses and gaps in the existing solution
➔ Adjust your roadmap considering customer feedback
➔ Set optimal prices considering potential customers' willingness to pay
➔ Find and strengthen your competitive advantages
3. Define Your Target Audience
Understanding your audience, their problems, pain points, and needs is critical to start and grow your business. When defining your potential customer base, you should pay attention to the following questions:
● Demand. How desirable can your product or service be?
● Market Size. How many people might be interested in your product or service?
● Economic Indicators. What is the income range and employment rate?
● Location. Where are your potential customers from?
● Market Saturation. How many competitors do you have in the market?
● Pricing. How much are potential customers willing to pay for your solution?
The most effective method to define a target audience is creating an Ideal Customer Profile (ICP). Briefly, an ICP is the person you're planning to sell your product to, their features, habits, desires, and problems. The aspects to focus on when working with ICP are Readiness, Willingness, and Ability to buy/use your products or services.
A working template for finding your target audience and creating an ICP looks like this:
➔ 1. Start with general assumptions
➔ 2. Narrow down the audience list, starting with those who likely don't fit
➔ 3. Analyze your competitors' target audiences
➔ 4. Conduct research on your target audience
➔ 5. Select the audiences most likely to buy your product
➔ 6. Conduct surveys and interviews with these focus groups
➔ 7. Define possible Ideal Client Portraits based on the information gathered
➔ 8. Refine your Ideal Customer Profile
Once you understand who your customer is, it makes sense to present your idea/solution to gather feedback and evaluate interest. Here it's also important to focus on pain points (the 5 "Whys" is an effective method, allowing you to get to the root of the problem). When presenting your future product or idea, focus on the following factors:
● Specifics of your target market
● Focus on one particular problem
● Communicate problems clearly
● Root causes of the problem/pain point
● Provide a working solution
4. Discover Your Competitors
When launching a startup, it's important to thoroughly study your business competitors as this will give you a more realistic understanding of the market, audience needs, and potential pitfalls, since it's always better to learn from others' mistakes.
Competitor analysis provides several valuable benefits:
● By studying competitors' strengths and weaknesses, you can develop a Unique Value Proposition (UVP) to stand out
● By analyzing competitors, you can find your target audience faster by focusing on their customers' profiles and paying attention to groups they don't cover
● You can discover new marketing channels for promotion
● Study current industry trends in more detail
● Find the main features, advantages, and disadvantages of your competitors' products
Another essential aspect is to research both direct and indirect competitors of your startup company. Briefly, a direct competitor is one who offers a similar solution to your target audience; an indirect competitor is one who operates in your industry but doesn't aim to sell products to your audience.
So, how can startup companies discover their competitors? We would consider the following practices effective:
● Search for your competitors online. Study their website and content, read press releases and articles about them, look at their social media accounts.
● Use analytical tools. This will give you a better understanding of their SEO and web traffic, PPC, ad specifics, blog posts, etc.
● Interview your competitors' customers. Such research will give you valuable information about what customers like/dislike about competitors' products, and if they no longer work with them, what was the reason (thereby protecting yourself from repeating their mistakes).
As a bonus, helpful tools for traffic statistics and analytics for businesses that you could use when analyzing competitors include SimilarWeb, BuzzSumo, Ahrefs, BuildWith.
Lastly, some startups after conducting market research might conclude that they have no business competitors. This is an extremely dangerous trap that we feel necessary to warn you about. Often this can be a result of superficial analysis or overconfidence in the uniqueness of your idea (however, it's more likely that your idea probably doesn't provide value to your audience, sad but true). In this case, you should either rethink the idea or look at other small businesses that might have a solution similar to yours, but in a nascent or very limited form.
5. Create a Business Plan
Without a solid business plan, even the most promising idea can fail. The value of a business plan lies in helping to better visualize how to build a startup and map out its sustainable growth.
The feasibility of your business model, risks mitigations, the alignment with the team & investors— all are crucial for your long-term operations, finances, and marketing strategies.
Creating a business plan includes several stages:
Target Market and USP
At this stage, you need to move step by step: identify the target market, analyze competitors, create customer profiles or personas, clarify your Unique Selling Proposition (USP), and prepare your answer to the question "Why should I buy from you?" by providing clear advantages of your product for customers.
Commercialization Models Monetization
It's essential to understand exactly how your startup plans to generate revenue. You can prototype different models to determine the most effective one (or combine them, for example, a subscription model and a one-time purchase option).
Commercialization models you can apply include:
● Subscription. Recurring fee for product access, perfect for services with ongoing value.
● Freemium. Free basic features but paid premium features, perfect to build a user base.
● Direct Sales. Direct product sales to customers, perfect for products with clear & tangible value.
● Licensing. Charging fees for using technology or intellectual property, perfect for unique tech solutions.
● Advertising. Placing ads on the platform, perfect for platforms with high traffic.
● Affiliate Marketing. Receiving commission for promoting third-party products/companies, perfect for content-driven websites.
● Transaction Fees. Collecting fees from transactions between users, perfect for fintech and marketplaces.
Set Your Goals
Your business plan should include short-term and long-term goals to demonstrate your commitment to investors and evaluate progress.
Short-term goals typically focus on one-year achievements and must be actionable and help build momentum to create a foundation for future development. Short-term goals should include tasks that can address your immediate needs within 3-12 months. This includes creating a Minimum Viable Product (MVP), securing funding, establishing partnerships, and acquiring paying customers.
Long-term goals are aimed at envisioning your startup in a few years. These goals should reflect your vision for the company's future development, including growth, market positioning, and financial aspects. Consider your desired position in the broader industry landscape, and ensure your plan aligns with your vision and mission for effective long-term goals.
Finally, use the SMART framework when setting goals. This framework serves as a filter, evaluating goals based on whether they are Specific, Measurable, Achievable, Relevant, and Time-bound.
Business Structure
It's important to pay special attention to your business structure to comply with legal requirements and avoid complications. It's also a good idea to consult with your local authorities in advance regarding taxes, liability, and management structure to know how to build a startup business correctly.
Common business structures include:
● Sole Proprietorship. You are the sole owner, income is reported on your tax return, and you bear liability for all business debts and obligations.
● Partnership. Multiple people are owners, income is passed through to partners' personal tax returns, and liability depends on the partnership type: General (distributed among all partners), LP (general partners are fully liable, limited partners have limited liability), LLP (limited liability for all).
● Limited Liability. This is a hybrid of partnership with liability protection, such a business can be taxed as a sole proprietor, partnership, or corporation, and all members have limited personal liability.
● Corporation. The company is owned by shareholders, there is corporate tax, profits are distributed as dividends and taxed at the shareholders' personal tax rate.
● S Corporation. Similar to a regular corporation but with a limited number of shareholders. Income is taxed at individual tax rates, and shareholders have limited liability.
Register Your Business
It's best to register your business before you start commercial activity. Registration allows you to turn your startup into a legal entity, so your actions will be legal, as well as you receive legal protection. The process includes several steps:
● Choose a unique name for your startup
● Get an Employer Identification Number (EIN) to pay taxes, hire people, and open bank accounts
● Register your business with the state/region to obtain permits and licenses
● Open a business bank account
● Take care of insurance
Enjoy Custom Technical Solutions for Your Idea. Request an Initial Consultation with Jappware!
6. Secure Funding for Startup
One of the key aspects of seeking funding is choosing the right partners who believe in and understand your vision. Additionally, financial metrics and potential return on investment play a crucial role.
When seeking investors for your startup, you must clearly explain why you need investments, provide detailed descriptions of specific funding needs, and present a solid business plan and fund allocation strategy. The key objective is to effectively communicate your needs to potential investors.
Therefore, prepare the following documentation to increase your chances of success:
● A business plan that includes your business model, market opportunity, growth strategy, and competitive advantages
● Financial statements and projections
● Company's equity capitalization
● Legal documents, licenses, and permits
● A pitch that includes the following aspects: how you can solve the problem, the uniqueness of your solution, the monetization model, how much funding you need and for what purposes, and how investors will profit.
Based on our experience, we would advise against seeking funding from the start. Instead, wait until you have a working product (like an MVP) and a user base. The days when investors would put money into just an idea are over. Today, it's critical to demonstrate practical results here and now first.
7. Develop a Marketing Strategy
When you first start a business, you likely have a low budget, so your marketing plan needs to be effective. How can you achieve this? When creating your strategy, pay special attention to the following factors:
● Clear Goals. This includes brand awareness, generating leads, and customer engagement.
● Understanding Your Audience. Create an Ideal Customer Profile (ICP) to identify the needs, problems, expectations, and specifics of your target audience.
● Effective Practices. Your strategy should be based on your goals and audience features, while being cost-efficient and requiring minimal expenditure.
● Budget. Allocate funds considering the potential ROI of the strategy when creating your plan.
● Actionable Steps. Break down your strategy into steps that address different aspects of promotion.
● Tools. Use free or low-cost tools to implement your strategy, such as Buffer (for social media), Canva (design), Mailchimp (email marketing), etc.
● Analytics. Use Google Analytics and social media analytics to track the progress of your efforts and adjust your strategy accordingly.
● Refining & Expanding. Your strategy should be continuously updated, expanded, and improved.
Affordable practices for a startup promotion strategy include:
➔ Content Creation (blog posts, infographics, video content)
➔ Social Media Marketing (choose platforms where your target audience is most active, use hashtags to increase visibility, post regularly)
➔ Email Marketing (use email campaigns for promotion, send valuable content and updates)
➔ Search Engine Optimization (optimize your content for search engines to increase organic traffic)
➔ Partnerships & Networking (collaborate with other medium/small businesses for co-promotions and attend industry events)
➔ Referrals (provide discounts and attractive offers for referrals, encouraging your satisfied customers to recommend you to others)
➔ Public Relations (distribute press releases about your business through local media and niche blogs to raise awareness)
➔ Guerrilla Marketing (create public installations and organize attention-grabbing events)
8. Create a Minimum Viable Product (MVP)
Building a Minimum Viable Product (MVP) is one of the critical stages for startups. It allows you to practically evaluate your idea by implementing a minimum set of features with enough value to attract potential customers.
At the same time, you should keep your long-term vision in mind to guide the future development of the company when planning an MVP launch. Additionally, your Minimum Viable Product should inform the next stages and improvements, as lack of a clear vision leads to stagnation. Any product should always strive for growth.
The value of an MVP is primarily the opportunity to validate your business and create an initial customer base. By receiving user feedback, you can improve your product and plan future development, making data-driven decisions.
How do you create an effective MVP to achieve your goals? Focus on two important aspects: the minimum number of features and the value they provide. It's also essential to consider budget and prioritization here. Choose features that you can implement within your budget constraints and that are most valuable/unique:
● Create a list of must-have features that are crucial to your product, ensuring smooth delivery of the main services your startup provides.
● Create a list of unique features to add something new and stand out from your competitors.
After releasing your MVP, actively collect feedback, explore how users interact with your product, and focus on the product's strengths and weaknesses: fix major obstacles and shortcomings while enhancing the product's strong points.
9. Validate the Idea
With an MVP, you can practically test the viability of your idea. The key thing in validating a startup idea is assessing the real demand for your product/service, as well as how much customers are ready to pay for it.
When you start a startup around your idea and vision, it's necessary to have a clear answer to the question "Are people willing to buy my idea?"
Among the effective ways to validate an idea are:
● Understanding target customers and forming core hypotheses. You should identify who your customers are, what problems they have, and how your product can solve these problems.
● Gathering information and data. By using reports and research, as well as conducting surveys and focus group interviews, you get clearer information about the needs and behavior of your target audience.
● Launching an MVP. By implementing a minimal set of the most important features through an MVP, you can gain a deeper understanding of how customers actually use your product, what's missing in your product, and which features your users identify as most valuable to them.
10. Scale and Grow
Your vision is one of the key drivers of scaling and growing your startup. When it comes to scaling, it should be understood as the process of building up your potential and expanding capabilities to meet growing customer needs, explore new market niches, and effectively manage business processes while maintaining profitability.
During the scaling phase, a transformation occurs from a small startup that's still searching for its business model into a dynamically developing company ready for expansion.
Successful scaling includes several main factors:
● A startup improves its products and services by expanding the range and enhancing quality based on customer feedback and competitive environment.
● A startup optimizes processes by implementing advanced technologies and increasing operational efficiency. Also, you can attract additional investments through venture capital, loans, or IPO to support growth.
● A startup expands the team with new specialists to enter new markets faster and strengthen marketing efforts to attract new audiences.
Many large corporations started as small startups with ambitious goals. With a smart approach to scaling and the right partners, your project can follow this path and become an industry leader. The key is understanding where you're heading to ensure alignment between your vision, idea, business plan, target audience needs, and actual capabilities.
Launch Your MVP with Seasoned Developers. Let’s Talk
Startup Challenges Often Face
Lack of Demand
This is one of the most common reasons why many startups fail. Lack of demand results from poorly conducted market research, which leads to a lack of understanding of the market's real needs.
That is why thorough validation of the idea through both research and MVP is critical. Your job as a startup is to have a realistic understanding of your idea, solution, and market, given specific data.
Slow Scaling
Scaling is a complex process that requires resources and expertise. The reasons behind this challenge are often the lack of secure funding to invest in technology and specialists, as well as haste.
Additionally, you must conduct market research and idea validation to first understand whether people need your product. If yes, the next step will be to determine what you can do now, what you can’t do, and what needs to be done to achieve the set goals for growth and scaling.
Insufficient Profit
If you've launched a product/service but are struggling with profitability, most likely, you've chosen an ineffective monetization model for your solution. It's necessary to understand the specifics of your product and audience to determine which monetization method will be most appropriate.
Also, a startup's unprofitability may be the result of a poor business plan, superficial market research and target audience, or insufficient technical capabilities to release a high-quality and stable product.
Insufficient Budget
The main causes of insufficient budget include poor estimation of actual product development costs, underestimation of marketing expenses, and overly optimistic forecasts for reaching the break-even point.
Such problems can be avoided primarily by realistically assessing your capabilities and having a robust business plan and a product for attracting investments. It's a good idea to start with launching a Minimum Viable Product (MVP) to test your solution and analyze market response. Also, it makes sense to use outsourcing instead of hiring full-time employees.
Other solutions to overcome the challenge can include seeking out angel investors, crowdfunding, barter arrangements, and focusing on organic growth through social media.
Lack of Business Planning
Poor business planning stems from several causes. Common issues include:
● Lack of clarity regarding vision, goals, and strategies
● Poor adaptability and slow response to changes
● Poor communication between teams
● Limited available resources
It's crucial to have a clear and detailed vision first and foremost to avoid this challenge. Additionally, you should implement an agile and flexible approach to planning, allocate your resources wisely, and ensure clear communication and collaboration across all levels.
Finding an Expert Team
Lack of expertise and experience in launching new projects and products from scratch is a common problem. When creating a startup, it's important to understand your strengths and weaknesses to be able to fill the gaps.
By partnering with outsourced developers, you can expand your team with third-party experts who have the technology and knowledge needed to achieve your goals.
Our Experience in Startups
At Jappware, we provide custom software development services, from planning and MVP launch to full product release and ongoing support. Through our work with companies and startups across various sectors including fintech, e-commerce, legaltech, and logistics, we have the technical capabilities to implement diverse ideas and the necessary knowledge regarding all stages of development, growth, and scaling, as well as the challenges businesses face at these stages.
We offer our clients two collaboration models:
● Dedicated Team. This model is perfect for complex or ongoing projects. You get a team of highly skilled specialists, including developers, project managers, and QA testers, fully committed to your project.
● Team Augmentation. Our augmentation services are the perfect option when you need additional expertise. Our senior developers, designers, QA specialists, and consultants can take on specific tasks and fill knowledge and skill gaps within your existing team.
Our goal is to establish long-term partnerships, moving step by step toward new milestones and helping you bring your vision and ideas to life, providing the necessary expertise and technological solutions. If you have a promising idea and are motivated to turn it into reality, our team at Jappware is excited to help you navigate this journey from start to finish!
