As a startup founder, you’ll have to wear many hats. You’ll have to come up with an idea, raise money and then build it out. There are so many different tasks, but it’s important not to lose sight of what the ultimate goal is: finding product/market fit. If you’ve never built a company before (or if this is your first startup), there are some things that can help you de-risk your startup and ensure that it has a shot at success.
TAM, SAM, and SOM
TAM, SAM, and SOM are three important acronyms you should know before you build your startup.
Let’s start with TAM, or Total Available Market. It refers to the total number of people who might be interested in your product or service—the entire population of potential customers, minus those who are explicitly excluded by factors such as age, location or income.
You can find out if a market is large enough by asking yourself: “How many people will potentially buy this product?” If there are more than 100 million potential customers for your app—that’s a lot! And if there are less than 10 million—well, maybe it’s not worth spending too much time on it.
SAM stands for Sales Available Market and represents all those people who could potentially purchase your product within the next 12 months (or any other timeframe you choose). The key point here is that these buyers must meet some criteria: they need to be willing; they need access; they need money; they need an incentive; etc..
Research your customers through interviews
After you’ve come up with your idea, it’s time to find out if anyone else wants it. You can’t just ask people what they think of your ideas and expect them to be honest with you. Instead, find a few potential customers who might be willing to talk about their needs and wants (and hopefully pay for them). If you have friends or family who are willing to help out, that’s great! You can use their input as raw data from real world experiences and get feedback on how well this project will or won’t work in practice.
If no one is willing to help out, don’t worry: there are plenty of other ways to get information about potential customers without having any personal connection with them at all—and no matter what method you use, make sure that everyone understands that everything is confidential before giving any feedback!
Research your competitors
When you’re building your startup, it’s easy to get caught up in the excitement of your idea and forget that there are other people out there who have ideas too (and more than likely, ideas very similar to yours). So before you launch your product or service, take a few minutes to do some research on existing competitors.
- Look at their websites, apps, social media accounts and see what they’re doing well (and not so well). Make notes about these things as they’ll be valuable when we come up with our own marketing strategy later on.
- Look at customer reviews of their products/services/website—what do they say? What problems do customers report? How happy or unhappy is the overall tone?
- Look at growth: how many new users did they attract last month? This year? Is there an upward trend or has it plateaued lately? Where are most customers coming from geographically speaking—are there any specific cities or countries where most people discover the company’s product through word of mouth referrals instead of advertising campaigns which tend to be expensive if done right!
Develop domain expertise
It’s not just about understanding the problem you’re solving and the market you’re in, but also how to apply that knowledge. For example, if you’re going to build a dating app, don’t just think about how it affects your users—think about how it affects their partners too.
Or if your business will be based on providing healthcare services for children with asthma, don’t just focus on understanding how kids manage their condition and how they interact with others at home; look at what their parents go through as well because they can greatly influence access to care and treatment compliance.
You might want to start by reading some case studies on successful businesses within the same domain (e.g., health care). Study their competitors’ products or services too so that when launching yours later on there are no surprises along the way!
Find a co-founder who complements you
You might think that your dream co-founder is someone who is just like you. Someone who loves to code, and is a great designer. But really, they should be someone who complements your skillset.
It’s important to find a co-founder who will provide balance in the relationship, whether it’s financial or technical competence or an aptitude for sales and marketing.
Take Basecamp for example: Founder Jason Fried is well known for his design sense and user-focused approach, while co-founder David Heinemeier Hansson (DHH), known as “the coder” of Basecamp, helped build out their project management system from scratch when they were starting out.
You can de-risk your startup by doing this upfront work.
The first few steps you take are going to be the most important, and therefore they’re also the ones that require the most time, energy, and thought. But if you do them right, they’ll save your business later on.
This is why we recommend doing this upfront work as early as possible in your company’s lifespan—before any code has been written or any customers have been onboarded. You can de-risk your startup by doing this upfront work:
- Researching similar companies to yours gives you an edge when it comes to knowing what competitors are doing well and not so well. This edge will help inform decisions about how best to compete with those companies for market share.
- Knowing exactly who your customers are allows you to tailor products specifically for them—and removes potential guesswork from marketing material like landing pages and sales pitches down the road
Conclusion
The best way to build a strong foundation for your startup is by doing this upfront work. By validating your idea, researching the market and testing out new ideas, you’ll be able to avoid many of the pitfalls that plague startups.