How to start an online company: Flesh Out Your Idea (continued)

To any new readers — this is the third in a series of posts with my humble advice for those thinking about getting into online entrepreneurship. Intro here, first post here.

web 2.0 “deadpool” courtesy flickr user c__

Before getting stuck into figuring out the nuts and bolts of my website and developing an investor pitch, I spent a few weeks conducting direct market research. I did this at the advice of a professor, and have to say that it was very worth the effort –had I skipped this step, I wouldn’t have known to plan for certain things and development of the site would have dragged out for months longer.

Focus Group

I did my recruiter research by cold calling HR departments, but for candidate research, I was in the fortunate position of being immersed in potential customers – my fellow MBA students. I organized a focus group (this would have been ideal for recruiters, but alas, unfeasible), and videotaped what transpired.

In terms of practicalities – aim for between four and twelve participants. I had eight, a good number that strikes a balance between diversity of opinions and the ability to keep everyone involved. You can play the part of moderator yourself or you could also have a participant act as moderator and remain an observer. Choosing participants ultimately rests on the market and the website concept: in my case I gathered several current MBA students, a few alumnus, and some teaching staff. At this early stage I would recommend a broad mix of people over a narrow group (in my case this would be just having current MBA students), because the aim is to find out as much potentially relevant information as possible: you can always host another, more focused one later.

I held my focus group in a classroom at ESADE, but it could have been at someone’s home or at an office after hours. For a lot of sites, the easiest way might be to host it online, perhaps through IRC, or Skype. There are some focus group sites offering software and/or participants, but considering that at this stage you are likely to be self-financed and frugal, it’d probably be an unnecessary expense. Ask friends of friends, use facebook, or look through forums; there are lots of free options available to you.

Next, make a plan of topics to cover. For CareerMee.com I had my group discuss post MBA recruitment channels: what options are there, how do they work, what could be improved, etc. Have a running sheet with you during the meet and make sure everything gets covered. If you have a participant moderator, give them a copy.

Mistake to avoid:

An easy mistake would be to gather a group of friends and have them talk about your idea. Two problems: they’re your friends, so they’ve probably been substantially inundated with the concept and will have personal considerations implicit in what they say; and in having them talk about your idea you are potentially excluding relevant but overlooked information. The right way to do it is to get a diverse group of people you don’t know (or acquaintances who haven’t heard your idea), and get them to talk about the market you’re entering, your competitors…everything related to your business, except the business itself (save that for last, if at all). This way you’ll find out less of what you already know, and more of the things that didn’t occur to you. Remember, you are trying to develop something that these people will want to use, so resist that fatal urge to prompt excessively and sell your idea to them – that comes (much) later.

In retrospect, these are some of the mistakes I made: I kept discussion a bit too narrow, I couldn’t resist telling them my idea, and I also prompted a bit too much. I still learned a lot, but it was more things I already knew. One absolutely key thing I learned through the focus group, and to a lesser degree through my recruiter research, was that confidentiality was a very important point for candidates. My initial idea had been to have open profiles, and this would have probably alienated a good chunk of my potential customers. If I had followed my own urge and gone straight into the business plan and development, this fatal flaw would have been built into the system and very expensive to remedy…and it’s now one of CareerMee.com’s key selling points and the backbone of our pricing model.

One more tip: video or audio tape the focus group – it could prove very useful down the line, so a reliable record is essential. If a good conversation gets going it will be difficult to take it all down on paper unless you are proficient at shorthand.

Following this research I went back to my drawing board and honed my concept. Think Russel Crowe in A Beautiful Mind – walls covered with flipcharts, post-its and butchers paper, and me in the middle of the room talking to myself. I gradually put it all down into a concise, single page outline of the business concept, including what it does, how it makes money, who it serves, how it is positioned, et cetera – there was a temptation to rush ahead and generate an investment pitch, but I resisted this for several reasons which I will get into in the next post, which will be on formalizing the idea.

-Flo

Have you started or considered starting an online company? What was your experience like? What questions or advice do you have? Leave your answers in the comments.