"Holes" of startups: the most common problems of young companies that hinder their development

Every month, the Internet Initiatives Development Fund organizes events for entrepreneurs called Business Secrets. At these meetings, the leaders of the startup industry share with the audience the secrets of increasing project profits and give tips on how to promote it. Such events for their participants are not only useful, but also free - you just need to register and come to a meeting in our multimedia conference hall City Hall in the business center Silver City.

In October, at one of these events, Artem Azevich, the head of the IIDF tracking, told about start-up “holes” or “bottlenecks” that need to be patched in order to improve their business performance many times over. This material, based on the presentation, supplemented with project cases, tells about the stages of development of an IT startup at an early stage and about the most common problems of entrepreneurs who prevent them from starting to make money. Why is this happening?


We give a visual comparison with a physical object. If you imagine a business in the form of a pipe, then at the entrance of this pipe are users, and at the exit is money. At the same time, there is usually a lot of traffic in the form of users, but in the end it turns out that there is little money; Roughly speaking, a lot of holes appear inside the pipe: people leave from the first page of the site, from the payment page and so on. The entrepreneur creates pressure in the pipe (“overtakes traffic”) and observes, due to which the number of users decreases at the output (in fact, it analyzes the conversion rate). The entrepreneur must keep track of the bottlenecks or holes in the pipe in which most users fall off. It is about them that will be discussed in the material, in them that lies the key to a profitable business.
')

FRIA Accelerator Methodology

What is the most common reason for closing startups?

Startups answer this question in different ways:

- Something went wrong;
- the product is not good enough;
- there was not enough PR;
- The founders could not reach the decision maker (decision maker);
- bad team, etc.

In fact, all businesses are closed for one reason - due to the absence of a paying customer .

Over the period of the Accelerator’s work, its experts have not yet met any business that has been closed due to a bad product, code or interface, but a whole “death valley” has emerged from businesses that failed to attract paying customers. If the company does not earn, the team is disappointed in the product, runs up, and the project is closed.

As part of the methodology in the IIDF, a stage-by-stage business development plan was developed for companies — a kind of road map or Road Map: what does an entrepreneur need to do to arrive at seed-investment and scale up a business. This is a critical chain of actions that allows you to build a successful earning business as soon as possible.



After analyzing the activities of any startup, you can determine at what stage of the path it is. The first big stage is Customer Discovery , when we look for customers, communicate with them and study them. It ends with the first sales - this is a turning point in the development of a young company. The second big stage is Testing channels , when we learn to attract customers from sales channels and reduce the unit-economy of the project. In other words, we ensure that the income that a single customer brings to the company is greater than the cost of attracting it . It is very important for an investor to determine at which stage the project is located. There is a very simple question to do:

“Do you have paying customers and how many?”

A massive mistake of startups is to go to the channels and pump up traffic before committing the first manual sales. It is ineffective. As a rule, such projects have an insanely low conversion, but they cannot explain why. Without communication with a large number of customers, projects will not be able to figure out how to increase conversion to paying users.

At the Customer Development stage, most projects have “holes” in the same places, which cause low conversion.

Mass problems of companies at the initial stage of development

1. Value not confirmed

At the first stage it is very important to confirm the value of the product or service, it is proved by the first paying customers. Most projects have no or very unclear value. When the value of the product is not confirmed, it is unclear whether people are willing to pay for the solution. And this is the main condition that a start-up could conditionally be considered promising. If customers do not buy, it is worth trying to reformulate the value proposition, change the recipient of this message, or even change the concept of the project.

Wowworks Project Case

This is a project from the third set of Accelerator FRIA. What was the essence of the project at the beginning of acceleration? Suppose a company has a remote branch or store where a light bulb has burned out, a computer, a printer, etc. broke, and there is no one to repair it or it is expensive. Wowworks founders came to the IT department managers or company premises management managers, described the problem and offered to find a specialist on the spot - right in the city where the remote branch is located, and these services are cheap. Firstly, the questions of economy did not always interest these managers, and secondly, they did not want to change their streamlined business processes. As a result, the project went to the pivot (reversal of the business model). In the new version of the Wowworks, founders already came to CEOs and wondered: do they know what is happening in remote branches? Does the condition of the premises correspond to the brand book, do the employees work effectively, does it not break anything? Wowworks offered to supply there clandestine customers who will be the check-list: does the plumber work, do the lights and so on, and then find specialists to solve these problems. What was important here was that it was CEOs who were more interested in saving. The project changed the value proposition, and the conversion increased significantly.



Accordingly, increased business performance.

Before and after Acceleration:

2. No customer portraits

Suppose a team has a task to increase the flow of users. They either decide it themselves, or contact the agency. In turn, the agency staff asked the team: describe your client, what problems and peculiarities he has, why does he buy your product? This information is necessary for marketers to target advertising and other channels to drive traffic to the right audience.

Most of the teams do not know the answers to these questions and cannot cope with the task of increasing traffic and attracting the target audience. When compiling a client profile, there is little only a socio-demographic description. It is necessary to identify behavioral patterns (for example, describe the situation that should happen to a person so that he hammered the necessary keywords into the search box and went to your website to advertise contextual advertising). Details on how to create a portrait of the client and how to use it later can be found in the article of the FRIA tracker Gleb Tertychny about one of the methods of creating prototypes.

Case of the project “Just a club of razors”

In the first set of the Accelerator of the IIDF there was a project “ Just a club of razors ” - razors by subscription with delivery. The product is simple and understandable in general, and the team had a fairly clear understanding of the end user, with his age and features, but it was incomplete. The portrait of the consumer product was quite accurate: an unshaven man of 20-35 years old who uses the Internet. Too many people fit this description, but that’s not the problem. First, the portrait was made without taking into account the specific situations when such a person would buy a razor over the Internet. Secondly, after analyzing the consumers, it turned out that razors buy online, including women, for their men as a gift. It was necessary to take into account that the purchaser may not necessarily be the one who will use it. After studying its target audience and behavioral patterns of both types of clients, the project received the following picture:



The elaboration of portraits of both types of clients and their behavioral patterns led to the fact that, as a result of Acceleration, the conversion into a purchase increased 2.5 times.

3. There are no arguments when selling

To make a portrait of a client is not enough; you need to try to sell the product to him manually and identify the arguments for the purchase that are most significant to the client. Every consumer has doubts when making a purchase decision, and you need to understand exactly what advantage of your product or service can affect the customer, and argue these points when selling. To do this, you need Customer Development - without talking to the customer, the entrepreneur does not know with what thought the user came to the site, and what exactly influences his purchase decision.

Case of the project Unim Histology

The services provided by this project from the third set of the IIDF Accelerator are, on the whole, rather difficult to describe: Unim Histology is struggling with making incorrect diagnoses in the field of oncology in the regions of Russia, sending biopsies to a high-tech laboratory for histological analysis in a short time. At the beginning of Acceleration, the project described itself as follows:



From this value proposition, it was not at all clear what the project was doing.

When selling, the team talked about histological analyzes, which in themselves are not valuable. In the process of acceleration, the wording has changed: now, instead of a tool - analysis, the company sells the result - oncological diagnostics or an accurate and reliable diagnosis in a short time without the need to go somewhere. What arguments does the project use now when selling services?

First, most of the company's clients are patients with suspected cancer who live in one of the regions of Russia where the necessary specialists are not enough, and they need to go to Moscow or abroad to make a diagnosis. Therefore, the first argument when selling to Unim Histology is distance - the courier delivers the materials for analysis to the laboratory, but the patient does not need to go anywhere.

Secondly, most often when cancer is suspected, the timing of diagnosis is very important in order to prescribe the correct treatment. In the regions, analyzes can be prepared only after a month or two, so the second argument when selling to Unim Histology is urgency: analyzes are prepared for 2-3 days.

The third argument, perhaps the most important one, is reliability, accuracy of diagnosis. The question that clients often ask employees of Unim Histology is why the laboratories to which the company sends the materials for analysis can be trusted? Here, the company talks about high-tech equipment, which laboratories in the regions do not have, highly qualified doctors, and an automated diagnosis process. The probability of making an erroneous diagnosis in the laboratory FNKTs them. D. Rogachev is close to zero, since doctors look at all the material coming in for analysis on a collective basis, thus the factor of subjectivity disappears.

For three months of acceleration, the cost of attracting a paying user has decreased by more than 2 times, and the company's revenue has grown 4 times.

How many sales do you need to go to channel testing?

In the Accelerator, IIDF believe that when determining the number of sales that are needed to confirm effective demand, you need to build on the average check. If your average check is less than $ 500, then the number of sales that need to be made is 200. If you have reached the number of 200 sales, then you can say that the value of the product is confirmed, you have found your customer segment and you can move on to “pumping” the channel with money. For a business with an average check from $ 500 to $ 20 thousand, the required number of sales is from 30 to 70. If the check exceeds $ 20 thousand, then only 5 sales are needed.

We hope that the above method of working with a startup at an early stage of development and examples of our projects will help you avoid mistakes and correctly formulate a value proposition for your product. Without a clear statement of the value of the product, it will be very difficult to grow a startup into a big company.