How to start up a Start up

how to start a start up business and how start up computer in safe mode
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AustinMcmahon,United Kingdom,Researcher
Published Date:16-07-2017
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IEEE-USA E-Books Starting Your Start -Up Book 2 Book 1Developing a Business Plan Book 3 Competitive Analysis Book 4 Pricing Strategies Book 5 The Launch By Tanya Candia4 The Startup Guides he Starting Your Startup Guides are designed for engineers or entrepreneurs who have a Tgreat product or service idea, but no real marketing expertise. With a small budget and big dreams, it is difficult to know where to start. This second book in the series is designed for engineers and entrepreneurs who are in the process of determining their early target markets, value proposition, go-to-market strategy, and/or market segment. This book is equally applicable to entrepreneurs seeking outside investment, and those who simply want to better understand the market and how to capture it. It shows how to develop defensible market size numbers, fine-tune the market definition, understand the role of market share and penetration, and devise a method for understanding and communicating the value of the product, while developing a go-to-market strategy. The Startup Guides help you build out your understanding of your business and maximize your chances for success. • Book 1: The Two-to-Four Page Business Plan, shows you how to develop an initial business plan that contains just enough information to get started. It helps you define your concept clearly and concisely, build an effective elevator pitch, communicate your product and company positioning, and identify your critical success factors. • Book 2 (this book): Market Size and Strategy, helps flesh out the initial plan. It helps you find the real market size, even when dealing with disruptive technology where market size data is hard to come by. This book also helps the entrepreneur better understand the target buyer, and how to communicate the value of their product or service, increas- ing the probability of early and ongoing sales. • Book 3, Competitive Analysis, guides you through the competitive landscape, help- ing you to understand who your real competition is, and why it’s important to see the landscape the way your customers do. This book will help you develop an effective positioning strategy, determine the true value of your product or service to your target customer, and find ways to ensure your solution is the ideal one. • Book 4, Pricing Strategies, tackles one of the most difficult tasks for entrepreneurs— pricing the product properly. It will help you determine which time-tested pricing approach is best for you, show how to validate pricing, and explore how to develop a long-term strategy. Book 4 helps ensure that your pricing is not too high or too low— but is a rate that will both satisfy customers and help you meet your revenue goals. • Book 5, The Launch, will present a detailed roadmap to successfully launching your company and product. From setting realistic goals for the launch, determining the key messages, and preparing the sales team, to briefing the press and analysts, finding the right venue, and enlisting the help of early customers, this book will walk you through all the necessary steps to a successful launch. Starting Your Star-t up—Book 2: market Size and StrategY Book 2 – Market Sizing and Strategy 5 Introduction This e-book is designed for engineers and entrepreneurs who have decided to start a company, and are in the process of determining their early target markets, value proposition, go-to-market strategy, and/or market segment. For those seeking outside investment, regardless of whether it will come from friends and family, crowd funding, angel investors, or venture capital firms, this exercise will be invaluable in determining market size data in defensible terms—a rarity when dealing with disruptive technology. More importantly, going through this process will help entrepreneurs better understand their target buyers, and how to communicate the value of their products or services. It is specifically aimed at technologists who are not ready for a full- time marketing executive, yet must overcome some of the early obstacles to building momen- tum for their company. This information has proven to be invaluable to many startups around the world. Since many people who seek funding stumble early on in the process, due to lack of solid data, this guide- book helps them quickly get past the obstacles and move forward with a plan and timeline to take their product to market. It addresses an area that is often ignored by entrepreneurs and technologists: market positioning and segmentation. We provide within a clear explanation of why it is important to narrowly define the market to be addressed. And we show exactly how to achieve this goal. Our experience is a combination of engineering, project management and marketing. Over the past 25 years, we have worked with literally hundreds of startups around the world, learning from their experiences, while we helped guide them to build successful companies and grow market share. Along with the other books in The Startup Guides series, this book encapsulates that knowledge and experience, presenting it in a way that is easy for busy entrepreneurs to act upon and internalize. Why are you in business? Ask entrepreneurs why they started a company, and the most common answer will be “I wanted to bring a better product to the market.” But that statement is often followed by the admission that fame and fortune are also important, as is the need to prove that they are ready to face this next big challenge. The overarching goal of a startup should be to grow market share, which is the secret to all of the above wishes. First you will grow market share in a small segment of the market, and then you will annex adjacent market segments, continuing to grow market share until your company dominates a significant market. Don’t even enter a market unless you intend to dominate it. A startup will inevitably require a tremendous amount of hard work, long hours and sacrifice. If you want to settle for second-best, then it’s not worth it. Starting Your Star-t up—Book 2: market Size and StrategYWhy Does Market Leadership Matter? 6 Why the fixation on market leadership? It is desirable, not only for the obvious reasons of revenue and profit; it also enables lower sales costs; makes it easier to access decisionmakers, increases publicity, lengthens product lifecycles, facilitates recruiting, and more. Market leadership makes everything better. Yet, one of the most frustrating issues for a sales force in a startup company is the enormous distance between where the company is today (“Nobody knows who we are”) and actually dominating the market. The key is to very carefully define a small but important market, build a plan to dominate it, ex- ecute that plan, and then attack adjacent markets to systematically build share in a continuously larger market. By choosing a small yet significant market, and working diligently to dominate it, then carefully choosing adjacent markets and working diligently to dominate them, you can eventually reach the position to which you aspire. This reasoning may sound counterintuitive, and risky. Many entrepreneurs feel that they cannot afford to ignore any potential buyer, and that the more markets they cover, the better. Experience shows that such a strategy almost always leads to failure—failure to “own” a market, failure to achieve significant traction in a market, and failure to produce a product that is a must-have. Choosing a Market Choosing a market cannot be done lightly, yet many startups ignore this step and rush to market with a product that they feel is suited to anyone. We have often heard CEOs claim: “As soon as anyone sees this product, they will want it.” That attitude is understandable, and it may, in fact, lead to some early victories, but it cannot hope to yield the early market segment dominance that leads to sustainable growth. Choosing the first market segment involves several steps: • Select the candidate industries/markets • Segment the markets • Define characteristics of each segment • Determine the optimal category • Short-list and size the segments • Select your first target market and segment • Determine your market share and competitors’ shares • Understand your customer • Develop the go-to-market strategy: sales • Develop the go-to-market strategy: marketing • Finalize your market size and share projections Starting Your Star-t up—Book 2: market Size and StrategY 7 STEP 1 Select the candidate target industries/markets here are two ways to select potential target markets, depending on the type of product you Thave built. The first is easy: your product was built to solve a problem that is specific to a given industry – e.g. it facilitates production of regulatory documentation required in the phar- maceutical industry. In this case, the exercise consists of drilling down into the pharmaceutical industry and understanding not just the obvious problem you solve, but other related problems you can also solve. With that understanding will come more information about sub-segments of the market that you may not be aware of. The second way is more common with technology companies, where the products could potentially solve any number of problems across many industries. In this case, you should start with a broad-brush approach to potential target markets. Keeping in mind both your initial bias as to the best target market, and the evidence gathered from early sales, you can expand your thinking through a brainstorming process. It is important to put aside any preconceived notions about why people will use the product, since you may well find that it solves different prob- lems. There are obvious markets: financial services, manufacturing, government, pharmaceutical, healthcare, education and technology. However, other less-obvious markets should not be ignored. These might include agriculture, mining, heavy industry, transportation and ware- housing, energy and utilities, telecommunications, wireless and internet, media, automotive, entertainment, construction, etc. Keep in mind that each of these can be further broken down into multiple industry segments, each of which has a distinct size and characteristics. Starting Your Star-t up—Book 2: market Size and StrategYSTEP 2 8 Segment the markets into smaller, easily-identifiable chunks market segment is a set of customers with common requirements and buying patterns that A can be marketed to. Startup companies spend a great deal of effort identifying the best tar- get market segment for their solution. To accomplish this goal, they look for a set of prospects that share these characteristics: • They have application requirements in common • They are easy to identify, and are self-qualifying • They are self-referencing • They provide a target for marketing programs Marketing segmentation can be a frustrating exercise, since there are so many potential mar- kets, early customers are widely divergent in their reasons for buying the product, and focusing is counter to the instincts of both the sales and the executive teams. It is important to keep in mind the reasons for doing it: the world and you cannot hope to conquer it all at once. By segmenting the market, and directing all the company’s resources toward one segment, you can focus scarce engineering, marketing and sales resources, limit the competition, more quickly come to market leadership, and then use success in this segment to springboard your company into other segments over time. Each of the major industries you have identified above as candidates can be broken down into a series of segments with similar needs, that will respond predictably to a marketing or sales offer. For example, in the automotive industry, identifiable segments might include dealers, brokers, fleet managers, and others related to sales and service, as well as a multitude of seg- ments that make up the supply chain: entertainment system vendors, manufacturers of brakes and steering systems and tires, as well as embedded systems developers. Keep an open mind when identifying the segments in each industry, since one potential group of buyers may lead to other equally promising groups. One caution when segmenting the industry: make sure that each segment is made up of indi- viduals who read similar publications, attend the same industry events, and rely on one another for recommendations and advice. Importantly, members of the segment share the same prob- lems and pains, and have similar needs when it comes to solutions to their problems. For example, auto dealers share common concerns and have similar requirements for solutions, and attend major industry events. It is relatively easy to target them through industry publica- tions, blogs and websites. However, “people who like orange cars” is a useless segment, since they are not reachable through typical marketing or sales efforts. Starting Your Star-t up—Book 2: market Size and StrategY STEP 3 9 Define the characteristics of each segment nce the primary industry and segments have been identified, it’s time to dig deeper into Owhat makes each segment a good or poor candidate for your early target market. This involves looking carefully at customer problems that your product is expected to address. For each segment, how important is the problem? Is it one of the top three problems that keep the target buyer awake at night? Are the target buyers budgeting for a solution today? Are budgets for this type of solution growing or shrinking? What is the overall business environment? Does the target buyer have the infrastructure necessary to adopt your solution, or will there be barri- ers to overcome before they can implement it? Are they likely to adopt a breakthrough technol- ogy solution, or would they rather wait for something more established to come on the market before adopting? The answers to some of these questions will be obvious, but others will require a bit of re- search. Our best advice is to try to quickly gain the information you need; at this stage, statisti- cal significance is not as important as your overall feel for the market segments. Where pos- sible, make a call to someone in the industry and ask for five minutes of their time to explore the problem and the importance of the problem, and gain an idea as to whether or not they would be open to a solution such as yours. Alternatively, put together a short (five question, max) survey and send it to your connections on LinkedIn, or another social network, and ask for their opinions. You may be surprised at the response. People love being asked their opinions, especially if there is no obligation to buy something in return Example: We worked with a company that produced a high-quality streaming video product, and early sales covered a number of markets, including the financial services and technology industries. However, these industries were too broad to allow a focused approach to product development, sales and marketing. In addition, some people in the company felt that the product should be very applicable to the movie industry, the real estate market, or others. We embarked on a series of lunchtime brainstorming sessions to try to narrow the market to a single segment with a high probability of successful sales in the first year. The brainstorming team included representatives from Marketing, Sales, Product Development, Finance and Pre-Sales. (It was a small company, so this was almost everyone.) During the first session, we developed a matrix that we would use to evaluate various markets. Shown below, it included important categories, such as industry, segment, target buyer, problem to be solved, importance of the problem, propensity to adopt technology solutions (innovators or early adopters, Starting Your Star-t up—Book 2: market Size and StrategY10 who would accept a disruptive solution, vs. late adopters or laggards who would shy away from anything new and different), availability of other options, budget, infrastructure, etc. We met over a period of four weeks, brainstorming various target markets and exploring their fit. As a team, we determined the best early market for the product (Financial Services industry, brokerage segment) and also developed a short list of second-stage markets that we could pursue after we had established a firm footing in the initial target market. More importantly, together we learned a lot about the product, the problems to be solved, and the characteristics that were important to the target buyers. This collaboration not only built a much stronger team, it enabled us to do a much better job of articulating the value proposition, determining which features to put into the product, and fine-tune the corporate messaging. FInanCIaL ServICeS InDuStry Segment tech tech Infrastructure target Problem ranking Budget referceability Other adoption Sophistication Issues? Buyer Solutions Position Brokers Innovators High None Deal Need to 1 - critical Yes High Multiple Floor view monitors Manager multiple live data streams simultaneously retail Early High None Regional Bring live 4 - Yes Low Live TV Banking adopters Manager feeds into no urgency branch Investment Early High None Managing Want to 3 - Yes Medium Single Banking adopters Partner provide competitive window bankers advantage on with desktop real-time data feeds Starting Your Star-t up—Book 2: market Size and StrategY 11 STEP 4 Determine the optimal category ook at your product in light of general industry categories. Does it fit cleanly into a Lcategory, such as an algorithmic trading application, a customer relationship manage- ment product, a security or storage solution? If your product fits cleanly into an established category, you will be able to more easily find the market size, since the size of the market involves not only the market and segment, but also the category of solution. For example, the market size for a web-based medical office billing system will be vastly different from the market size for an on-premise hospital operating room scheduling system. If your product does not seem to fit cleanly into a known category, you will have to find a way to characterize the product, such that it can be understood by your buyers, the press and industry analysts. It is best to focus on the problem you have identified above, and make a list of the various ways that target buyers are solving the problem today. Based on this understanding, you will be able to come up with a category that makes sense, As an example, suppose your product enables a security manager to prevent a certain type of security breach from happening. Today, there are two common ways to react to a breach, but few ways to prevent one. a. An experienced manager would look through reams of after-the-fact data to try to figure out how the breach occurred. b. The manager can use several available tools to help filter and isolate the important information. Both approaches are security analysis tools, used after a breach has occurred. But your product doesn’t fit. Perhaps your product can be characterized as a security breach prevention tool, rather than a security analysis tool. This characterization leverages a known and accepted category, but builds on it. In this case, finding market size data will involve both gathering information on the security analysis tool market for your industry segment, and determining the total potential market (including those who have not yet purchased a security analysis tool.) Starting Your Star-t up—Book 2: market Size and StrategYSTEP 5 12 Short-list and size the segments his step is where the actual market sizing takes place. It would be premature to size the Tmarket before it has been clearly segmented, since a startup will want to attack a segment of the market to build momentum for dominating a larger market over time. The list of poten- tial market segments produced in a previous step will probably be very long, and will include a number of industries and segments that do not appear to be good candidates for your product, at least in the early days. However, you will probably find three to five segments that look very promising, especially in light of the category of solution you provide. Focus on those segments, and determine the market size for each. There are various ways to obtain market data: targeted data is available from market research and/or industry analyst firms; financial analyst firms often produce reports about a given market or sector; published reports (including government reports) may contain detailed or summary information on market size and trends. However, no substitute exists for primary research, especially when dealing with a disruptive product, or one that is a true breakthrough. Market research Firms Market research and industry analyst If you are a client of a market research or industry ana- firms help vendors fine-tune their prod- lyst firm, such as Gartner or IDC, you can obtain market uct feature set, messaging and overall size data from their published reports. These firms and vision. at the same time, they evaluate others track market size, market share and important customer strategies, and suggest prod- trends. Such firms constantly gather and evaluate data ucts and potential partnerships that help on product categories, adoption rates, usage by verti- buyers achieve their goals. experience cal market segments, and the like, through discussions shows that it is well worth the invest- with both vendors and buyers. Important categories, ment to become a client of a reputable such as vertical applications (healthcare, financial and firm. not only will you gain access to government are commonly tracked), software and the research you need, you will gain hardware acquisition trends, infrastructure software access to the analysts. Such firms and (such as storage, security management and application information can be invaluable to you, as integration) and services are regularly followed. you fine-tune your initial product launch approach. analysts can be opinionated, Some well-known industry analyst firms—have a variety brutally honest and, at times, extremely of practices. Examples include Gartner (www.gartner. critical of your assumptions and ap- com), Forrester Research (www.forrester.com), Frost proach. It is good to hear feedback from & Sullivan (www.frost.com), International Data Corpora- someone who wants to help your com- tion (IDC) (www.idc.com), Ovum (www.ovum.com), pany, than to go out on the road with and others, such as Enterprise Management Associates, your product launch, and find that you ARC Advisory Group and Current Analysis. While it may have hopelessly misjudged the market. be easy to find analysts in these groups who cover your We recommend signing as a client with specific area of interest, there are also literally hundreds one quantitative firm in the first year of the company’s existence. Starting Your Star-t up—Book 2: market Size and StrategY of analyst groups that are less well-known that may be much more tightly focused on your 13 areas of interest. Look through directories of analyst firms to find those who might be the per - fect fit. For a directory of analyst firms, see http://www.techra.com/analyst-firm-directory- mainmenu-27 or analystdirectory.barbarafrench.net. You will be able to see information on a wealth of analyst firms that cover specific topics. If you are not a client of a market research or industry analyst firm, and don’t have the budget to become one, you may still be able to locate some information produced by them. You can often find information on the analyst firms’ websites, including summary information that may meet your needs. If you find “the perfect report” that promises to show the detailed data you need, you can purchase the report directly from the firm. This approach is usually somewhat less expensive than becoming a client, but you will not have access to the analysts themselves, as you would if you became a client. Example: We recently participated in a messaging workshop with an analyst from a major analyst firm. The analyst was able to give very clear, actionable guidance to the client, based on her years of experience in the field, coupled with her in-depth knowledge of the target customers and the competition. Instead of spending lots of money on market research, the client was able to understand how the product positioning would be received by the market, and gain insight into the ways that customers perceive competing products. For example, the analyst told the client to: “Be very careful about your choice of words. For instance, you boast that your product is “comprehensive” but to most buyers that translates as “complicated,” or “difficult.” so your word choice is actually working against you.” She went on to point out that competitors have actually made this claim, intensifying the perceived disadvantage. This type of feedback would have been very difficult for the company to gain on its own. Financial analysis Firms There may be financial analysis firms, such as venture capital (VC) firms, investment banks, private equity firms, and the like, that cover your target market or industry. It is not difficult to find out which VC firms and private equity firms are experts in your industry. Visit their websites and determine which ones have the best understanding of your target market. Many of them publish research on market size and trends. It’s usually available at no cost, and can be a valuable resource for you. It is also worthwhile making a call on the top firms that seem to understand your industry. Explore the possibility of getting a little time with one of the advisors who really knows this market. It is probably not easy to do, since financial analysts are always quite busy, and are committed to helping clients first, but it’s worth a try to see if you can get some time to discuss your ideas with one of them. This type of networking may also lead to other firms or people who are potential buyers of your product, industry pundits, or advisory board members. Starting Your Star-t up—Book 2: market Size and StrategY14 Example: A client developed a product that was ideally suited for enabling energy company planners to make instantaneous decisions related to fluctuating supply and demand on the Smart Grid. Since the company was a very early entrant in the market, and the Smart Grid was in its infancy, few industry analysts had begun to cover this aspect of the utilities industry. However, the company knew that a major technology vendor was entering this market. Our client did research to find which specific industry analysts and, more importantly, which financial analysts were following this company, and its entry into this market. The research uncovered a presentation, freely available on the Web, which included market size and growth data and its sources. In this case, the client found that the work had already been done, and it only remained to verify some of the numbers to ensure they were still up-to-date. Published Material Do an internet search, or go to the public library or a university library to search for published material related to market size and trends. Many sources are often overlooked. Examples include government publications (see published studies from the Department of Commerce, the Census Bureau, the World Trade Commission and similar organizations) that show growth rates for various industries, number of employees in specific vertical markets, important trends in spending by geography, etc. If your product has several very large competitors, and just a handful of smaller ones, it may be relatively easy to build solid market size estimates just by fully understanding the large competitors. Look at their annual reports to find market size data, as well as corporate initiatives that drive future growth and areas of focus. Keep in mind, however, that if the large company has several product lines, they may not break out revenues and spending based on individual products, so you may need to do some interpretation of the data you find. Armed with this information, you may be able to estimate 80-90% of the market size, even in the absence of other firm data. Don’t forget to network as you search for market size data. Ask your advisory board members if they have access to any relevant research. Ask friends or associates who might have access to such data, or might know someone who could get it for you. Primary research Perform customer-level or supplier-level research to try to estimate market size, market share, average order value, market penetration, and other relevant metrics. This type of research could involve surveys or focus groups that can offer valuable information on market size and characteristics. However, this type of analysis can be costly, time-consuming, and subject to interpretation. Developing a survey that will yield valid results can require expert help to ensure that bias is reduced and results are reliable. Focus groups can be quite expensive, and also require the expert help to ensure that the answers will lead to the quantity and quality of results you need. Although expensive, such research can bring valuable information about competitor Starting Your Star-t up—Book 2: market Size and StrategY strongholds, target areas for marketing, and other information that can help you fine-tune your 15 go-to-market approach. the value of triangulation If your product has no ready-made category, you will need to do some triangulation to find de- fensible market size numbers. In this process, you will need to find two or three related mar - kets for which market size and trend information is available. Based on that information, and a set of well-documented assumptions, you should be able to build a strong case for your prod- uct’s target market size and growth. An example of triangulating, or backing into, market size data: Several years ago we worked with a startup that was building software to secure wireless devices. Security analysts at market research firms tracked enterprise and consumer security, while other analysts tracked wireless devices. No one tracked the two together. In that case, the company looked at the total number of wireless devices (and anticipated growth rates), as well as the total amount spent on security software (and anticipated growth rates.) They picked the segments of the security market that best matched the functionality of the product, as well as those that showed growth that could carry the product along in the future. They also looked at past trends related to corporate uptake of security products for devices that en- tered the enterprise, and tracked corporate adoption of security products for those devices. In this way, they were able to develop defensible data on market size and growth. The result of this analysis will be solid numbers for the size and growth rates of the short list of target markets you may want to pursue. Rank-order them in terms of preference, whether due to size, growth rates, ease of access, domain expertise, or other characteristics. Starting Your Star-t up—Book 2: market Size and StrategYSTEP 6 16 Select your first target market and segment our research will lead you to the top segment that has the greatest need, as shown in Ythe previous analysis; and the highest growth rate and largest potential market. This top segment is your first target market. Keep track of the segments that are close to this one, in terms of market size and characteristics, that make them good candidates. You should be able to leverage the work you do in marketing and selling to the first segment for other segments, especially if they are adjacent. For example, if you choose the semiconductor segment of the manufacturing industry, adjacent markets might be foundries or automatic testing equipment vendors. There is one potential pitfall at this point: there may be people in your company, or advisors or board members, who balk at the idea of focusing so narrowly on one market segment. They may say that you can’t afford to “put all your eggs in one basket,” and ignore other potential markets. After all, they will say, what if the choice is wrong? Then you will have lost precious time, and will not meet your revenue goals. Expect this feedback, and prepare for it. The experience of countless experts, including venture capitalists, and the famous work by i Geoffrey Moore (Crossing the Chasm), have shown that a focused approach is by far the best. By concentrating your energies on doing one thing extremely well, you can become Number One in your niche. And the niche is almost always much bigger than you think—when you zoom in, you will find that there are ample opportunities to meet your revenue goals and build a strong, sustainable leadership position. eXaMPLe OF tHe vaLue OF FOCuS: We once worked with a company that wanted to address two markets: Market A, with a market size of 250M and a growth rate of 14%; and Market B, a “sexy” market that appealed to the executive team, due to buzz in the marketplace and relatively few competitors. The execs felt that it would not be difficult to go after two markets at the same time, and they encouraged the team to include, not one but two, initial markets. This inclusion would have required rather substantial enhancements and extensions to the product. We did our research and found significant barriers to adoption, making it unlikely that Market B would grow significantly in the coming years. In fact, the total available market was less than 20 million. Armed with the evidence, we were able to discuss these obstacles with the executives in a dispassionate manner, and they agreed we should focus all our energies on Market A. Even if we could have dominated Market B, the revenues would not have compensated for the added effort and distraction. i Geoffrey Moore, Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers (New York, Harper Collins, 2002) Starting Your Star-t up—Book 2: market Size and StrategY STEP 7 17 Determine your market share, and that of your competitors ow that you have determined the size and growth rate of your target market segment, Ntake a moment to determine your market share and that of your competitors. You might think this comparison is a waste of time, since you probably have almost no market share. However, it is important for two reasons: • You need to set a baseline against which to measure progress. • If you are planning to get external funding, you will need this data (as well as projections of the market share you expect to reach in one, two and three years. If your product fits neatly into a recognized category, you can obtain market share informa- tion from industry analysts and market research reports. Obtaining the information this way is somewhat subjective, but it is very useful as a starting point. If you cannot find analyst reports that directly provide market share information, you can look at annual and quarterly reports from publicly traded competitors. However, such reports might not always break down revenues and expenses in terms of individual products. If your product has no ready-made category, you will need to use the data you gleaned from the previous triangulation exercise to find defensible market share numbers. Find products that fit into each of the two or three categories identified in the exercise, and determine their share of the market you have constructed for your product. The process can be long and arduous, so do not invest more time and energy than is warranted. For example, if the market is huge and growing rapidly, and no major competitors exist, that could knock you out of the running quickly. Do not spend months on the analysis. However, if funding depends on solid market share data, invest the time and money to do a comprehensive job. So far, we have only talked about the total market size, and the market share of your competi- tors. What is your market share? Miniscule? Too small to be measured? That’s Ok—you are a startup. But you need to be ready to commit to a bigger market share over time. The commit- ment is a bit tricky, since you know that your expectations need to be reasonable; yet, if you are going for funding, investors like to see impressive growth. You will need to decide what is comfortable for you. To apply a bit of math to the problem, use a model such as the one shown below to try to determine what your market share will be after one, two and three years. Note that the following numbers are not recommendations, but are merely presented as an example. Starting Your Star-t up—Book 2: market Size and StrategYSeGMent 1 (100M market) y ear 1 year 2 year 3 18 Units (K) 50 200 500 License Revenue (K) 1,500 6,000 15,000 Support /Maintenance (K) 270 1,350 4,050 SeGMent 2 (250M market) year 1 year 2 year 3 Subscriptions (K) 0 75 250 License Revenue (K) 0 3,750 12,500 Support/Maintenance (K) 0 0 0 Market Share (%) 0 1 5 Starting Your Star-t up—Book 2: market Size and StrategY STEP 8 19 Understand your customer eveloping a go-to-market strategy is important, so you can take a closer look at the actual Dpersonas of the individuals who will pay money for your product. This step will help you more fully understand the magnitude, cost and importance of the problem you solve, and determine who in your target industry feel the most pain relative to the problem. If you have already sold the product to early buyers, you will have some information on the target buyer and any burning problems. However, early sales can be deceiving. The early customers will probably come from a variety of industries, and will have widely divergent reasons for buying. Some will be innovators or early adopters, who are not afraid to try new things. Often, the value they perceive is very different from what you think you are providing. It is vitally important for you to speak with the customers and dig into the problems they face, and find out how important those specific problems are in the overall landscape of things they worry about. Speaking with customers can give you valuable hints and information about their environment, and can even uncover other potential buyers in their industry. example: A startup that had developed a digital rights management technology (to protect documents from unintended access) marketed it to Chief Compliance Officers, as a way to ensure compliance with various regulatory requirements, but had limited success. The early sales were brisk, however, and were actually based on the need for BOD communications. Board Secretaries were using the product to secure communications among board members, due to the extreme sensitivity of the information. The company was trying to sell to one type of buyer, while the actual sales were coming from an entirely different part of the target company. As a result, the company changed its marketing approach, revised the target market description and size, and redirected its efforts toward understanding and meeting the needs of this important market. Include information on your target buyer in terms of the actual job titles and/or functions within the organization. If you don’t have many early customers, you can use a brainstorming exercise to come up with the potential target buyers, and determine the best way to access them. Use a worksheet (see the example following), and enter the possible end-users and decisionmakers, and map against all possible ways in which your product could be used. For each potential user or influencer, note whether the product solves an important, difficult, or costly problem (must- have or M); solves a less-important problem, or only partially solves a problem (should-have or S); is a cool feature the user might enjoy (nice-to-have or N); or is not relevant (empty cell). Starting Your Star-t up—Book 2: market Size and StrategYapplications Sales Data Production Master 20 end users Forecasting Mining Planning Scheduling CEO M N N N CFO M N S N Finance Manager M N S S VP Sales M M N S Sales Director M S Sales Rep S VP Marketing M S N S Marketing Manager N N VP Manufacturing M S M S Production Manager M N M M Production Planner M N M M Once you have developed this matrix, pick the most likely candidate and develop an applica- tion scenario that clearly spells out the situation before your product, the specific problem to be solved, and the situation once your product has been adopted. Do the best you can, based on the information you know. Then ask colleagues and domain experts to evaluate it, and give you candid feedback on areas for improvement. In this way, you will get an intimate understanding of your target buyer, and will clearly understand how to communicate your value proposition. This Application Scenario will include some key elements: t itle Clearly indicate the target market segment and buyer target customer Who is the customer? What are the responsibilities? profile Situation What is the environment in which the customer operates? Day in the life Explain in as much detail as possible exactly how this – before person spends the day , including the time and effort spent addressing the specific areas that your product is designed to help with Problem to Specify the problem and indicate its importance/impact be solved Day in the life Explain in detail the ways in which your product can save – after time, money and effort, streamline workflows, or other - wise make a material contribution to solving the problem Starting Your Star-t up—Book 2: market Size and StrategY 21 application Scenario example: target Customer Profile: Alex Jones is the IT Director for a large regional bank in Port- land, Oregon. He is responsible for the internal infrastructure for the bank, as well as for the bank’s web site and all customer-facing systems. He is also responsible for ensuring that the bank’s information technology systems conform to regulatory requirements. Situation: Alex uses a number of different tools to accomplish IT operations manage- ment. There is a help desk system for bank employees, and another for the bank’s cus- tomers. Spreadsheets are used to track assets and software licenses. Various monitoring tools are in place to track network and server performance. However, the systems are not integrated, and information does not flow from one to another. Problems in one area could be causing problems in other areas, and systems may fall out of compliance with bank and regulatory policies. Day in the life—Before: Alex gets to the office only to find out that there has been a huge spike in customer incidents, a financial analysis project is behind schedule, and the self-service website is extremely slow. Reports from the various tools are not helpful in diagnosing the root cause of the problem. He calls together his technical leads and they compare notes. It turns out that one of the web servers has been having intermittent problems. This difficulty is the direct cause of the website slowdown, and resources have been “borrowed” from the financial analysis project. The head of the customer help desk reveals that 80% of the incidents over the past two hours are related to the Web- site. When all the pieces are seen together, the cause of the various problems becomes obvious. The steps to resolution are largely manual: reallocating resources, requesting a memory upgrade for the web server, checking to see if memory is in stock; and if not, issuing a purchase order, issuing a work order to get the upgrade installed, etc. The pro- cess, from start to finish, takes more than four hours. Problem to be solved: Alex needs a 360 degree overview of the entire IT operations environment, from one location, with a way to visualize the problem systems and appli- cations holistically. Data must be integrated, so that the effect of a problem in one area can be clearly seen in all its ramifications. He also needs the ability to drill down into any specific problem and perform contextual analysis of all the related systems. It would be really good to include not only the IT systems, but the purchasing, inventory and financial systems and project management systems, to make workflows more seamless. Day in the life—after: Alex manages in minutes, not hours, through his new web-based solution that incorporates all the necessary modules: help desk, asset management, server and network monitoring, financial systems, change management, and more. The data from each module flows seamlessly into all other modules, and is presented in a graphical dashboard. He is able to view all IT operations information as a whole, segment- ing it in terms of projects, departments, applications, user communities and more. He can drill down, via the dashboard, into any suspicious area and get real-time information on the state of IT operations as a whole. He is alerted when a threshold is in danger of being exceeded, or when an SLA is not being met. Tight integration into the purchasing and inventory systems means that he can instantly allocate resources, requisition materials, perform charge-backs, and ensure that his environment operates at an optimal level. No more hours-long meetings, tedious manual processes, or cumbersome workflows. Starting Your Star-t up—Book 2: market Size and StrategYSTEP 8 22 Develop your go-to-market strategy: sales ow will you bring your product to the target customer? Both the sales and the marketing Happroaches you take will have a profound impact on predictability and profitability. We will deal with the possible sales approaches in this section, and then explain how the marketing approach will map to each of these approaches in the next section. The basic sales approaches include field sales, inside sales, telesales, channel sales and web-based sales. Field Sales Force Field sales force is generally a high-cost, high return group of direct sales representatives that are located in geographical areas for the purpose of selling to major customers. The group focuses on specific prospects, and spends much time face-to-face with prospects and custom- ers. They are generally put in place when the average order value is high, such as 150,000+. For products that sell for much less, the cost of direct sales may seriously erode margins. However, a startup company may feel that a field sales force is worth the expense, in the early days, to sign marquee customers that can be used to validate the company and product. The field sales force is generally made up of seasoned, self-managing sales professionals who know how to sell to large organizations, feel comfortable speaking with senior executives, and understand how to navigate a complex sales cycle that often involves a buying committee. Inside Sales Force For purposes of this discussion, an inside sales force is a team of sales representatives that supports the field sales force. This team uncovers opportunities, qualifies them, hands them over to the field sales force, and then runs backup for them—ensuring that needed collateral material is provided, meetings are coordinated, follow-up is achieved. And when the field sales force actually gets in front of a prospect, everything is set to achieve forward movement. The role of inside sales as a partner with the field implies that both parties will operate to the same business plan for targeted accounts or verticals. They will have identified their target prospects, and developed, individually or jointly, a plan of attack for each strategic account. telesales Sales Force Telesales can be an extremely cost effective, and a simple, efficient way to sell high-tech products. In general, it costs less to establish a telesales force than a direct sales force, and the productivity over time can be as great or greater. Telesales representatives do not need to be seasoned direct sales reps. In fact, deep understanding of technology is not a must. While this may be counterintuitive (after all, even good field sales reps find that they often need the assis- tance of systems engineers), it relates more to intelligence and people skills, than to technical depth. Starting Your Star-t up—Book 2: market Size and StrategY

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