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Products and Services for Startup Companies

By Beacon Staff

A viable product or service for a startup company must have at least one of three characteristics:

• Better (higher quality, unique) than the competition

• Faster (saves time for the user) than competitive product or services

• Cheaper (saves money for the user) than others selling competing products or services

Product companies commercialize devices, widgets, software, etc. Service companies perform operations that the buyer chooses to purchase rather than do themselves, such as accounting, food service, computer repair and consulting.

Product (or service) ideas materialize in the heads of entrepreneurs while studying or working, while at home or while recreating. (If you think up an idea for a new product or service at work, be careful to assure that you own all rights to the product and that your employer is not, in fact, the owner of the idea.) The key to a practical new product or service is that it helps users (customers who buy it) do something better, faster or cheaper than when using competitive products.

Too often entrepreneurs are heard to say: “We are the first movers in this product category. We have no competition.” That is never true. The library is the competitor of search engines. Competition of the first calculators was pencil and paper (or perhaps the slide rule). And, cooking (eating in) is McDonald’s competitor. Competitors are the user alternatives to your products or service.

Three resources are required for a successful startup company: [1] an innovative product or service, [2] a quality management team and [3] adequate capital (money). The most important of these is the management team. Investors tend to bet more on the jockey (the entrepreneur and the rest of the team), than on the horse (the product or service). Experienced practitioners recognize that most companies fail due to lack of execution of the business plan by the entrepreneur and the team, than those companies that flop due to lack of capital or a mediocre product or service. Investors realize that an “A Team” will quickly upgrade a “C Product or Service” while a “C Team” will not be successful in commercializing an “A Product”. So, while entrepreneurs are constantly promoting their products or services, those experienced in startup companies know that the key to success is the execution skills of the entrepreneur and those on the entrepreneur’s management team.

Better, faster and cheaper products compare favorably to competitive products and therefore customers choose to purchase them. How does a new entrepreneur determine if his or her new product will be preferred by customers? A good gut feel? Definitely not! Lots of experience in the business? No! Entrepreneurs must field test products or services and then listen to the feedback from potential customers. Customers will tell you if your new product is preferred over the competitive products (because it is better, faster or cheaper). These users will also tell you which features of your product or service are most important. Most entrepreneurs are surprised to find that some “bells and whistles” are uninteresting to customers. Make sure that your product or service contain “must have” features, not just “nice to have” qualities. Let potential users help finalize the design of your products and service.

Field tests (often called alpha tests or beta tests or prototype vetting) are essential to fine-tune your product into one preferred by a majority of customers. How does one select testers? Perhaps it is better to describe who not to choose. You will seldom get accurate feedback from friends and family members. They are much more likely to be concerned about hurting your feelings or telling you what you want to hear than providing the tough and accurate criticisms necessary to finalize a lucrative product or service for your startup business. Instead, arrange for testing by experienced users who are strangers. Why would they test your product? Find a way to motivate them to provide you with an accurate appraisal of your new product or service. Pay them. Offer them a prize for testing. Offer them free product or service for a limited period of time, once you open for business. Or, offer them exclusivity for a limited period of time (meaning, you won’t sell your new product to their competitors for a specific number of months).

Testing by potential users (customers) is critical to a successful opening of your business. Fine tune the product before your grand opening. Make sure the product is what your potential customers want and need before finalizing your product or service design. Rob Adams (author of “If You Build It, Will They Come?”) urges new entrepreneurs to have one hundred potential customers test and provide feedback on new products before finalizing the design. User testing is assuring yourself that the “dogs will eat the dog food”!

Finally, address the entire customer experience in acquiring products or services from your new company. Most users will not be repeat customers if the total experience is not better than the competition. The food may be great in a new restaurant, but customers won’t return if the service is poor or the ambiance is dirty or unattractive.