Check list of an IT startup at the initial stage of development: what needs to be done before testing sales channels

In the Accelerator of FRIA, work with start-ups begins by trying to determine at what stage of development the company is located. Why precisely from this? In general, most of the problems for startups arise from a lack of focus: entrepreneurs make many unnecessary actions, without concentrating on what will bring their business to the break-even point. To understand what actions the company needs to take at the moment, you need to determine at what stage of development it is. To do this, FRIA uses a tool such as a road map or road map. We distinguish three major stages in the development of IT start-ups - finding and researching customers, testing sales channels and scaling. In this article, we will step by step consider the first major stage of development of a startup - Customer Discovery, search and study customers. Typically, the turnover of companies at this stage does not exceed 100 thousand rubles. What steps should an IT startup take to confidently move on to the next stage - testing sales channels?

On each of the sub-steps listed below, there are certain nuances and difficulties that we will analyze using real-world start-up cases that have been Accelerated in IIDF. To begin with - a piece of the road map, which lists all six steps at the stage of Customer Discovery, which you need to go through again and again, until the number of sales exceeds the desired level.



The full roadmap for startups can be seen here .
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This scheme is based on the Lean Startup methodology (“a thrifty startup”), on the basis of which the work with projects is built in the IIDF . An extremely important process in this methodology is Customer Development - “customer development”. The first stage in the development of a startup by the methodology is Customer Discovery - the search and study of customers. This stage allows you to check the demand for a product, the main tools here are problem and solution interviews with paying customers and users, which allow you to test hypotheses and get feedback on the product. Let us examine each step that an IT entrepreneur must take before selling a product in channels.

Step One - Formulating Value Proposal

Selling a product is impossible without the formulation of a clear and understandable value proposition, tailored to the problems of the client. According to the metaphorical classification of the IIDF, products can be divided into several categories. According to the degree of severity of the problem, under which the solution is sharpened, the products are divided into "pain medications" and "vitamin". If you forget to drink a vitamin, nothing bad will happen. If there is a sharp pain, then it is impossible not to think about it, we must somehow solve the problem (“take medicine”) and as soon as possible.

Another segmentation is “fitness” and “cosmetics”. There is a problem - you need to get in shape. You can go to fitness, it is long, hard, you need to work hard. And you can put "cosmetics" and look better without much effort. If we apply this metaphor to IT products, then the first type of products is difficult and time-consuming to implement, the second is quite easy, and it does not take much time. For example, you just need to show the client a personal account. With the "cosmetics" customer does not think about the complexity and timing of implementation, but simply takes and puts the product. Accordingly, it is easier to sell such solutions.

If we talk about the complexity of sales, then IT products according to this classification can be divided into 4 types:



Having determined which sector your value proposition belongs to at the moment, you can try to change it so that the sales process is easier. By simplifying the implementation process (by moving the product from the “fitness” segment to the “cosmetics” segment), sales of B2B solutions can be significantly accelerated. Well, another way to do this is to choose another decision maker as your goal, for which the problem is more relevant.

An example from Accelerator: VeeRoute project - automation of transport logistics for business. Previously, the project founder, Vladislav Kudinov, came to the service station of online stores and said: we have a cool product for automating the delivery service. At that moment, the technical director most often began to ask questions about the implementation, tried to find out the release number, what the product was written on - i.e. asked questions that are not related to the essence of the project and the possible benefit of the company from the implementation of the system. All this was due to the fact that the CTO never faced the task of optimizing the costs of transport logistics (for them business efficiency is not so important), therefore, it was almost impossible to interest SRT (the only exception is companies in which CTO is the founder of business but this is not often the case). In this case, if the introduction is a long and complicated process (“fitness” in our classification), then most likely, the SRT will refuse. That is what happened most often. Then Vladislav decided to change tactics. He came to the CEOs of companies and said something like the following: look, the average check of your online store is 3,000 rubles, with each delivery you earn 50 rubles, and you spend 300 rubles for the delivery itself. If you start using VeeRoute, then on each delivery you will be able to save from 20% to 30%, i.e. 60-90 rubles, due to this, the profit from each delivery will double! Now the value of the product is pronounced, the problem that it solves can be attributed to "pain." Next, the CEO asks: what needs to be implemented, does the implementation process take a lot of time and resources? Here, VeeRoute came up with a hack: all companies had different systems, and the guys made a Rest API, through which you can implement VeeRoute into any system from SAP to 1C and samopisny systems in a couple of weeks. Thus, the complexity of the implementation of the product has moved to the segment "cosmetics".

Step Two - Problem Confirmed

This is the next step that needs to be taken when there are already customers who are ready to consider your decision in detail. It is necessary to confirm with the help of communication with customers that they really have such a problem (they themselves may not even think about it).

What is the difference at this stage in B2B and B2C companies? B2B companies need to make a start from client interviews: go to potential customers and ask if they have such a problem, and whether they need such a way to solve it, and if not, what needs to be changed in the concept. In Accelerator, we constantly return companies that have already started testing various sales channels to the stage of Customer Discovery, so that they communicate with customers and collect feedback from them. Most often, this leads to the fact that the product varies greatly. For example, the graduate of the 4th Accelerator of the IIDF StartExam initially tried to make a mass product - a common IT solution for testing personnel for any business. When the team members personally talked with decision makers from several dozen companies-potential clients, it became clear that a massive IT solution that was not grounded in the context of the industry was of low value. Each customer segment (FMCG, retail chains, car dealers, etc.) has personnel problems, processes, and the business metrics themselves that we need to work with, are very different. For example, the challenge for international FMCG companies is to evaluate the effectiveness of multi-million investment in staff training. The problem of retail networks is the failure of sales consultants to meet work standards and sales plans, their lack of motivation and high turnover. Accordingly, for each customer segment, the product must be adapted, change the value proposition, develop case studies, which was done in StartExam. Focusing on several key market segments allowed us to increase the average bill from 90 thousand rubles a year to 620 thousand rubles a year, and the company's financial results improved.



In the case of B2C at this stage it is necessary to interview a large audience in order to find those who are interested in this decision. Then you should talk to them and find out why they need it. First - search for customers for your decision, then - restructuring of marketing for them. Having identified the reasons why customers buy your product, you will most likely find effective channels to attract these customers.

How did the iPictory company graduate of the 4th Accelerator of the IIDF use this advice? The co-founder of the project, Kirill Gurbanov, and the rest of the team talked with dozens of customers who are already using their application to order the printing of photos and photo souvenirs with delivery, in order to identify the key reasons why customers use the service.

Customers were asked why they even print photos? Why through the application? What are the alternatives, and why they are not satisfied with customers? Are there any other barriers to photo printing? Here are the main conclusions:

1. If you print photos in a photo kiosk, you must first throw the photos on the USB flash drive, then come to the kiosk, stand in a queue and return in a few days to pick up the finished product. It takes a lot of time.
2. In addition, on the photo kiosk screen you can see the photo badly, it glows. This may result in the same photos being printed twice. In general, in this regard, the display of the smartphone is much more convenient.
3. You can also print from a computer, but there is usually no special paper in the printer at home or at work. Moreover, the smartphone in this case also wins, since initially all the photos are stored there.
4. It turned out that a lot of people are ordering photos as a gift, although before that the team was sure that most customers make orders for themselves.
5. People have a problem choosing photos. For example, after returning from vacation, hundreds and sometimes thousands of pictures may accumulate on a smartphone on a smartphone. And people seem to want to print them, but they don’t get their hands on parsing photos.

Having identified these reasons, as well as highlighting several client segments, the project formulated clearer appeals for advertisements and targeted them to the right audience. As a result, the average cost of customer acquisition (CPA) was reduced by 2 times, and it became two times less than the average user income (ARPU), that is, the company's economy came together (this is the next step).

Step Three - Modeling the Economy

This stage in the methodology replaces the classic business plan: the company's modeled economy gives an understanding of whether the project has prospects at all. How to calculate in advance the unit-economy of the project, not having a significant amount of sales yet? There are so many different metrics, but there is no point in counting them all. The simplest and most understandable method of modeling the economy was suggested by the instructor of the IIDF Ilya Krasinsky: according to his formula, it is necessary to calculate only three metrics in order to understand whether the project’s economy converges. In 60% of teams, the economy does not converge: the cost of attracting a user (CPA) is greater than the income from it (ARPU). Simplified: in order to attract a buyer, we spend 100 rubles, and at the output we get only 10 rubles from it.



The meaning of the formula is very simple: the more users you can attract and the lower the cost of attraction, the greater your profit. Each project has a key metric, focusing on which can significantly improve performance. How is it detected?

To disassemble the project's economy in more detail, the following label is used in Accelerator:



Having laid out the business economy according to these metrics, you need to try to “tweak” each metric in turn, having traced how this will affect the profits. Each metric has a “shoulder” - the maximum to which it can be increased / decreased in each specific case. For example, the average check to infinity will not work. Accordingly, after working with this tablet, you need to find "bottlenecks" where the restrictions on the growth of a specific project are concentrated. "Expanding" them, you can get a multiple income. We call such bottlenecks key metrics. To identify which of the metrics is the “narrow neck” of your funnel, you need to calculate, in turn, how the change in conversion, the cost of attracting a user, income from a paying customer, the number of users, etc., affects profit, and it becomes clear what you should work on first. turn.

Example: Depo.fm after concentrated work on metrics with Ilya Krasinsky understood that the key metric for them is the conversion into a completed application (the company is engaged in the selection of spare parts for cars). The team analyzed the behavior of users in Yandex Webvisor. It became clear that the most people “fall off” on the application form: the interface for them is incomprehensible and inconvenient. As a result, after improving (= simplifying) the interface and reducing the number of clicks on the form that are required from the user, the conversion to the completed application increased: it was 10%, and it was 12.5%. According to the company's co-founder Vladislav Karmakov, the new layout of the mobile version of the site also had a positive effect on the conversion.

The results of Depo.fm for the Acceleration period can be seen on the slide:

Fourth step - Ready prototype

To start selling a product, you need a prototype - the minimum viable product (MVP). FRII tracker Yevgeny Kalinin claims that the development time of any product can be reduced by 6 times. The solution is simple - you come to the developer, you say: you need to reduce the time many times. You leave, he begins to think about how to live with it, and it turns out that this is indeed possible. Yes, for the sake of this, most likely, you will have to give up some features, and the product will be far from ideal. But with the help of MVP, it will be possible to understand whether this solution is suitable for your clients. Starting from MVP and feedback from potential customers, you can already move on to a full-fledged product.

The fact that the development of MVP takes quite a bit of time confirms the results of numerous hackathons, which are held now almost every weekend. In the process of hakatons, it becomes clear that a couple of days of concentrated work will be enough to create a minimum product. This thesis is confirmed by the experience of one of the teams of the 3rd set of the Accelerator of IIDF - MoneyHero / EasyScript, which learned how to create MVP and check the demand for it within three days. The experience of the team is described in detail in the material “ Pivot: pitfalls and conclusions on the example of the startup MoneyHero ”.

Step Five - Solution Confirmed

You can congratulate yourself on the transition to this stage if the user is satisfied with the purchase: paid the money, recommended to friends, made a second purchase. What could be the pitfalls here? The client can use the service, but not pay for it. As long as the money is not transferred to the account, anything can happen. Not to mention the fact that a unit-economy of a company can have many restrictions: for example, the economy can converge only when it is re-purchased, or a high level of virality is needed - for a client to recommend a product to friends, etc. Here, in most cases, the struggle for an increase in the average check is unfolding: this is the easiest way to achieve convergence of the economy. How to calculate correctly, by how much you can increase the average bill and what new features to add, so that customers continue to buy the product? Again, here it is necessary to conduct interviews with clients.

Let us give an example of a standard decision-making interview in order to identify an adequate level of product value. Artem Azevich, the founder of the project, approached the head of trekking startups at the event, told about the product and asked: Artem, will you buy such a solution from us for 3 conventional units? Artem replied that he would buy. Further, the founder asked whether Artem would buy the product for 4 units, with the condition of adding certain functions. He agreed. The next question of the founder has already sounded like this: what do you need to do so that you agree to pay 5 units? Artem thought about it, threw a couple of ideas. And for 6 units? Here, Artyom has already said that 6 is unrealistic for such a product.

Using such an interview, the founder found out how much a potential client would be willing to buy a product, and what value should be added in order to increase the average bill. Conclusion: you need to communicate with the client and find out from him what exactly he is willing to pay more.

Sixth Step - First Sales

After making the first manual sales that the founders themselves do, you can proceed to testing different channels (for example, contextual advertising). However, the FRIA trackers constantly send commands that are already selling in the channels to conduct interviews with customers, even if the first few sales have already been done. There are two reasons for this: first, without Customer Discovery, it’s impossible to understand customer needs. And secondly, there must be a certain statistically correct amount of sales in order to move with confidence to the next stage. How to determine how many sales are needed for this?

For different types of businesses, this number of sales is different. To understand what quantity is needed for each specific project, we use a tool such as a Space model (Supplier — Supplier, Product — Product, Average Revenue Per User — Average Check, Customer — Number of Customers, Evaluation — Making a Purchase Decision). Tool developed by RIS Ventures.



The first version of the business model is a solution to a mass problem, a quantitative approach: the problem is clear, and you, as a solution provider, do not need to be examined and dive into the situation of each particular client, the average bill is small, potential clients are many, the product is typical and simple in use, the decision to purchase is made easily and in a short time. The second version of the business model is a qualitative approach: the specific problem significant to the client is solved, you as a supplier are required to deeply diagnose this problem, the number of clients is small, a high degree of personification of the product, it is difficult to understand, high average check, long acceptance period purchase decisions. And there are intermediate models. Ideally, for a unit economy to converge, you need to bring each of these elements into one plane, one circle of the SPACE model. To build this model for your product, you need to answer the following questions:



It often happens that one of the components of the model is out of range, for example, the average income per paying customer per year is small, the potential number of customers is large, but the product is difficult to understand, which means that customer service will require significant resources. In this case, you can think about how to make the product more understandable to customers.

By building a SPACE-model, you can identify the approximate number of sales needed to confirm demand and move to testing sales channels (for example, contextual advertising). In this question, we in the Accelerator are repelled from the average user income per year. If your average income is less than $ 500, then the approximate number of sales that need to be made is 200. For a business with an average income per year from $ 500 to $ 20 thousand, the necessary amount of sales is from 30 to 70. If the figure exceeds $ 20 thousand, then only 5 sales are needed to proceed to channel testing.

Using this scheme in the development of IT business, you can save a significant amount of money that start-ups often recklessly spend on marketing, and not checking how the demand for the product. We hope the information will be useful to you. Follow our blog posts!