Starting your own tech business is possible, but it’s not for everyone. There are many barriers to starting a business, and even more if you’re trying to do so in the tech industry. Before you start dreaming about turning your idea into a thriving company, make sure that your plan is solid by considering these 27 things before you launch your tech business.
Seed-funding vs bootstrapping
Getting funding from venture capitalists or angel investors can be extremely beneficial, especially when building a product or scaling one that has traction. However, these investments come with strings attached in the form of equity ownership, involving different valuation metrics such as pro rata, VC cap table, rounds of fundings, etc. If you decide to bootstrap instead of pursuing seed-funding, there are other ways to finance your operation while keeping control over it. You could also look into crowdfunding, though that might not be the best option if you want to keep full equity ownership.
You don’t have to be a great programmer or designer to run a tech business, but you do need to know how to use the tools you intend on using. Make sure that your team members are capable of using these tools before bringing them onboard, because hiring experts later will cost more and put your project behind in terms of development.
Building an app or site is only one piece of the puzzle. You also need infrastructure that enables you to keep things running smoothly when thousands (or millions) of users come in at once. Before building anything, make sure that the back-end systems are well-planned out so they can scale with whatever you throw at them. This will save money in the long run by not wasting it on buying scalable solutions that you don’t really need yet.
Defining your product
This is arguably one of the most important things to consider before you start your tech business, because whatever it is will be the basis of everything else. Make sure that you know exactly what you’re working on, and if necessary — make prototypes for potential customers to test out. Doing so can help you avoid building something nobody wants (or needs!), which is a common reason why projects fail .
What problem are they trying to solve?
People want products that satisfy their problems , so find out who has these problems and if they’ll actually pay money or give up some other resource in order to get them solved. While it might seem simple enough, many entrepreneurs completely forget to do this, or find out that the product they envision doesn’t actually solve an existing problem.
Customer acquisition costs
Your tech business will have to deal with high customer acquisition costs if you fail to figure out how you’ll get your first few customers. That might be by spending money on marketing or other creative ways to grow your audience. You should seriously consider this before launching a tech startup, because it can cost thousands of dollars even for small companies .
Launch strategy / Plan B
It’s usually best practice to release early and often — but sometimes things go wrong, especially in technology where you need multiple revisions until everything works perfectly. If there are potential risks involved , make that you have a contingency plan to minimize risks and keep your business afloat if things go south. For example, building a prototype might be necessary to show investors that there’s some market validation for your product or service .
Pricing & Revenue
To make money, you need to have some idea of how much things cost — even if it’s something intangible like time spent on support phone calls. Do research so you can properly fit prices within the context of what customers are willing to spend. While having no revenue is bad, having low revenue because your prices are too high is also not beneficial — find an appropriate balance by doing more research .
Tech businesses often require drawing in large numbers of users at once, which means you’ll need distribution channels that can handle those kinds of numbers. Think about how you intend on reaching customers, and if necessary partner with other companies to reach even more people .
Tech businesses need a solid team , so make sure that everyone involved has a clear idea of what they’re supposed to be doing. Team members should have complementary skill sets because it’ll be difficult to build everything from scratch — but this doesn’t necessarily mean that you have to hire people who are already working in the same company or industry as your business! In fact, finding the right person might require looking beyond traditional networks for qualified candidates.
Sales & Marketing
Tech companies can benefit from sophisticated sales channels , which will usually consist of users across your product through referrals rather than a direct sales force. It’s also a good idea to have a marketing plan early on, which is why you should consider hiring a professional marketer . Demand generation and user acquisition can easily be one of the biggest expenses for any tech business , so find ways to do it cost efficiently by putting together the right processes in advance.
While all products are obviously important, it’s sometimes necessary to set some aside temporarily while focusing efforts elsewhere. A strong product roadmap that outlines what gets worked on when will help with this process, but teams often struggle with building something that doesn’t follow their prioritized list — either because they’re too ambitious or not ambitious enough .
This includes determining where (geographically) to target your market, which types of users to serve, and deciding on the best business model for your tech business . In regards to geographic location , you might want to consider partnering with companies in other parts of the world that have local insight. User targeting can be easier said than done when creating a product from scratch — so try building user personas early on help.
Freemium vs Paid
There are pros and cons to both freemium and paid products, but there’s a time and a place for each type of monetization strategy . You’ll need to find out which one is right for your company based on its stage, the user base it has, and what kind it provides. That said, you should never launch a product that immediately wants to be monetized — whether free or paid .
Minimum Viable Product
A minimum viable product (MVP) is one that’s built with the least amount of effort and expense necessary, but still provides value to users. This idea can apply to both products and services , which means you’ll need to build something that meets your customers’ needs while also pointing down the right path for future development . For example, you might decide on the type of feature set required for an MVP based on market feedback from early adopters.
Team Size & Structure
Having a small team can make it difficult to implement certain functions across an entire company — which is why it’s important to find the right balance between being small enough to be agile , but also large enough to achieve your goals . You should also structure the team so that there’s room for growth within it, and so that new employees can easily find their way around.
Tech businesses often have a target market in mind when they start out, but it’s important to have a strong understanding of what competitors are doing with this market . It’ll give you insight on how ambitious your product should be from the beginning, which ideas you might need to compete with head-on , and what kind of problems you’re best suited to solve in comparison. Plus, having a good idea of where others have succeeded or failed will help you avoid common pitfalls in the future.
The right type of user feedback can help you avoid costly mistakes in the development process. Even if it’s not always possible to make major changes to what you’ve created, input from users will go a long way in making sure that your tech business succeeds. This is why it’s important to monitor both qualitative and quantitative data, so that you’ll know what direction to take your product or service in based on real-world use.
Although it may seem cheaper to hire local talent for contracting work or building products, it’s important that your tech business takes into account the time zone differences , cultural challenges , and economic factors when outsourcing . For example, you might need to hire a dedicated team in another country if you’re looking for 24/7 support.
Maintaining a Product
In technology , it’s not unusual to have to build, maintain, or update a product. You can’t expect all of this work to be done for free, either — especially if the tech product is used by companies and individuals who require support . There are also times when we need to shut down products we’ve launched (and no longer want), which means having a plan in place for how you’ll handle this process beforehand .
Investing in People
Your tech business might take off like wildfire with one great idea, but it will eventually reach a level where growth begins to slow down; at this point , your team becomes critical to determining whether you’ll succeed or fail against the competition. Besides hiring the right kind of talent, it’s also important that you invest in their development by offering training , professional guidance , and good management . Without these things, your tech startup may go under for lack of strong leadership.
Understanding Your Company
At some point , you’re going to have to stop working on the product itself, and start focusing more on how the business runs . The ability for a company’s employees to work together towards common goals is what makes this process possible; without it, there’ll be chaos within an organization no matter its size (or if it has outside investors). That said, it can still be difficult to make everyone understand exactly what they need to do.
Product Life Cycle
Every product goes through three stages — introduction, growth , and maturity . This means you’ll need to modify the marketing approach depending on where your tech product falls on this spectrum. Generally speaking, however, even introducing a new technology requires some type of promotion beforehand: it’s important that your target market is aware of what you’re offering (and why they should care), which is different from simply building brand awareness.
Tech businesses survive on data, whether or not we realize it — especially since we can’t always rely on emotions when making business decisions . For this reason , it’s important to look at things such as initial cost of acquisition for every customer , lifetime value of each user , conversion rates between plans or features, and so on depending on what kind of business you’re running. If your tech startup doesn’t gather data on these things, it will be difficult hitting your targets (and knowing whether or not you’re actually successful ).
Regardless of what type of business model your tech company uses, everything begins with acquiring new customers . It’s important that you find the right way to reach them , whether that means paying for advertising , distributing flyers in local neighborhoods , publishing press releases online, or simply having a strong social media presence . Even if you get positive feedback from current users, this isn’t enough to keep your business afloat — especially when many of them may only use one part of what you offer.
Cost of Acquisition
Each new customer you acquire will incur certain costs — most notably, the initial cost of acquisition (which is the money spent to get people’s attention in hopes that they’ll sign up for something). If you can’t recoup this cost within a short period of time , your tech business may never become profitable . Some businesses choose to avoid these high costs by using organic growth tactics via hyper-targeting specific audiences (and avoiding paying for advertising when possible).
Even if your technology is superior, there’s always someone else willing to sell their product at a cheaper price point. The best way around this is not lowering your prices; instead , learn how to increase it while still making customers happy . This is where your business metrics come into play, since you’ll need to know how much money (and/or time) each customer or user saves in order to make this idea work.
Customer Lifetime Value
When customers first sign up , they’re worth a certain amount of money for however long they stick around . In some cases , customers may pay nothing upfront and have a monthly subscription fee instead — which means you’ll need to spend more money on acquiring them from the start . Regardless of whether they pay on a per-use basis or monthly rate, there’s always a point where the cost no longer makes sense based on what your company gains from their business . Since most businesses can’t survive with too many losses, you must determine a point where it’s no longer worthwhile to keep them as a customer.
The Number of Customers
In some cases, the number of customers ends up being more important than their overall value . If you have too few users , your tech company could fail completely — especially if they don’t generate enough revenue from what you offer . On the other hand , having too many customers can cost a lot of money and not necessarily increase your profits (especially if a majority of them aren’t using all that your company provides).