So, you have a great software product idea which you think will be the next billion-dollar venture like a Facebook or Twitter. Ideation is a very good way to start out. All successful ventures start with an idea. Now, let’s work through a few steps regarding how to make your idea a real money maker.
Ask yourself, what problem are you trying to solve?
In my role as CEO and Chief Architect at NOCHALLENGE Technology, I have had the honor to talk to many entrepreneurs on a daily basis about their software ideas. Frequently they do not have an answer to “What problem are you trying to solve?” Ideas are only ideas if there is not an answer to a specific problem for your end-users. Having a clear definition of the problem which you are trying to solve will help you make the next-step decisions. Don’t worry about funding or becoming a billionaire at this point. Just focus on becoming the SME (subject matter expert) of your solution.
Who else might have a similar idea?
When you have a clear understanding of the problem you are trying to solve through a software product, you are ready to look around and see who else might have a similar idea. Ultimately there are two outcomes; either someone else is already solving this problem with a software solution, or you’re on the cutting edge.
If there is already someone else in the market-space you are trying to occupy you should ask yourself, “is my solution better and simpler than my future competitor(s)?” If not, continue to refine your resolution until it is better than your future competitors. If your answer does not provide a significantly better experience to the end-user, move on to solving another issue you may have encountered along the way. From my own experiences, your answer to the problem has a much better chance of succeeding if you have personally experienced the obstacle in your day-to-day life. A great example is Reed Hastings, the founder of Netflix, who was inspired to start Netflix because he paid absurd late fees after renting Apollo 13. End users currently working with an existing solution will only switch over to your software if it is significantly better than the current software product they are using. Switching over to another software is an expensive proposition.
As an example, we use QuickBooks for all of our accounting needs. There are other accounting software products out there which may do a slightly better job than QuickBooks, but we have been using the software for over six years now. Switching over to a brand new accounting software would be a large undertaking for us. We would have to transfer all of our existing data and notify our customers about the new invoicing system. Along with that, we would need to re-integrate all of our bank accounts to the new software which would take valuable time away from our current projects and clients.
If your research tells you that no one is solving the specific issue at hand, then you have to ask yourself, “why not”? Large tech firms have nearly indispensable amounts of R&D money and are usually willing to to take on the problem. So the question is, why has no one come up with a solution yet? Many times companies are too busy to serve their current clients and do not have time to focus on solving a new problem. If you have discovered that no one is working on solving the problem you have identified, you may have potential opportunity for your venture.
How large is the market?
Now that you have a clear problem statement, have done your research on your competitors and your research data shows that you have a viable software product, the next step is to research your market size. If you develop an app which solves problem “X” and your goal is to make a million dollars, the first thing you have to consider is that the average price of an application in the Apple app store is 19 cents. With that information given, you would need approximately 5.3 million downloads to make a million dollars. Does your app or software solve a problem that may be experienced by 5.3 million people? Your solution may solve for a large enterprise issue, but you need to know your market and potential revenue before engaging in the next step, which is finding a software vendor to develop your application or software.
How can I find the right team to develop my solution?
Once you know your problem statement as well as the solution, your competitors, and have an approximation of your market size, the next question is, “is this still a viable venture?” If your answer is yes, the next step is to find out who can build your application. At this stage I would strongly recommend building an MVP (Minimal Viable Product) with the least amount of investment possible. If you don’t know anyone with software development experience, you can start with a simple Google search: “custom software developers in {your city name}” There are a lot of custom software development companies in the world, but my advice would be to start the conversation with someone local. The reason reason being, in the initial stage it’s very important that the development firm understands your vision 100%. Face-to-face conversation is a critical component to the success of your project. www.upwork.com and LinkedIN ProFinder are also very good resources to find local tech talent for your project.
Prepare a very detailed requirements document and if possible a concept wireframe to start the discussion with the development firm. If you do not have a clear requirements document or a wireframe, most development firms will engage in a time and material session where you pay by the hour. The hours can add up quickly and you could end up spending a significant amount of money before you even have your MVP. If you already have a detailed requirements document and a wireframe, the development firm should be able to provide you a fixed-bid project cost.
Once you gather several proposals, check their experience. Select the one which has experience in the industry you are trying to solve the problem within. Check references thoroughly; you will get a wide range of costs for your project. I suggest going with a middle of the road proposal as they probably have the experience you desire, but don’t have the large corporate overhead expenses you wish to avoid. Make sure that their proposal includes the following: the UX/UI design idea, the graphic design, product development, phases of testing and finally a project manager to manage your project on a day to day basis. In the software development industry, each role adds a distinct value to the project. After making sure that the firm has the proper experience and that the total project cost and the estimated project timeline match up with your expectations, you’re ready to select the vendor and move forward.
Where can I get money to fund my software venture?
So far you have defined your problem statement, you have a well defined solution to the problem, you have researched your competitors, and you know your market size. You have also selected a development firm to take on your project. Now you need to solve one of the most important parts of the venture, “where do I get the money?” The answer to this question varies from entrepreneur to entrepreneur.
A typical MVP engagement can cost between twenty and thirty thousand dollars. Most people don’t have that much money sitting around in the bank to fund a new software idea. If you have a full time job you can save, but you’ll need to figure out how long it will take to save specifically for your project. If it takes more than six months someone else may have already started working on a solution. I wouldn’t suggest borrowing from friends or family as it may create bitterness if your venture fails, and unfortunately 90% of startups fail at the end of the day.
Additionally, many banks may not lend you the money because you are in the conceptual stage of the project. If you own a home you could potentially take a loan out against it, but that is very risky. One viable option may be to offer equity to the development firm in exchange for their work. They might decline, as they have an idea if your venture will succeed or not. Also they will miss out on other revenue opportunities while they work on your equity based project. Unless you have a very clear and proven path to revenue, most development firms will not engage in an equity partnership.
So where can you get the money needed to fund the project? This is often times the largest challenge an entrepreneur will face. Solving the money problem and being able to fund your MVP will definitely earn you respect in the start-up community, and you will end up with a compelling story to tell potential investors. Investors always want to see how dedicated you are and how far you are willing to take your venture. Everyone understands that you alone cannot fund a million-dollar venture, but raising the first twenty thousand is a big achievement to start your project.
So can I do it?
Yes, you can. You may fail and you may succeed. If you fail, you’ll likely learn something about yourself and the market you tried to disrupt. If you succeed, you can retire early and travel the world.
With a passion for problem solving, data-backed research, and a smart yet aggressive mindset, you can build a successful software product. Many have already done so. There is no such thing as a good time or a bad time to begin your software start-up. Jump into it and navigate it the best you can. Know when to quit and move onto the next adventure. If you follow these steps, you too will be successful.
Zulfikar Ali, Founder and CEO
Nochallenge Technology LLC
Have a software concept? Let’s talk.
