July 1, 2015 at 11:32How do we participate in a startup education program?
To develop our project and improve my business skills, I decided to participate in some program for beginning entrepreneurs. Studying is good, but I would like it to take place with minimal damage to the normal workflow, i.e. didn't take all the time. The choice fell on Netology , the leader in distance education for managers, marketers and other IT specialists. In this post I would like to tell you what the most useful knowledge and discoveries I have already taken from the course.
Web-payment - a highly specialized site about payment services, fintech startups and e-commerce with an aggregator of electronic currency exchangers. The goal of the project is to collect various services and useful information on electronic payment systems within the framework of one site, to create a platform on which industry experts and ordinary users can meet. We strive to make working with electronic money easier.
For those who will take this or a similar course, and indeed for everyone who is interested in entrepreneurship with a scientific approach, I advise you to read the following books as quickly as possible, this is the main literature referenced by, and which laid the foundation for the modern startup industry.
Startup: Handbook of the founder
Steve Blank, Bob Dorf
Business from scratch: Lean Startup method for quickly testing ideas and choosing a business model
Eric Rice
Running Lean
Ash Maurya ( retelling , the book is not translated into Russian)
Building business models: Handbook of a strategist and pioneer
Alexander Osterwalder, Yves Pigne
Blue Ocean Strategy
Chan Kim, Rene Moborn
Goal. The process of continuous improvement
Elyahu Goldratt
Startup Guide: How to start ... and not to close your Internet business
Ed. M.R. Zobnina
Design Thinking in Business
Tim Brown
Bridging the Abyss
Jeffrey Moore
How is product development usually done? People gather, come up with an idea, invest money and start sawing a product. It’s sawing, it happens, a year, it happens, two, the money starts to end or a crisis sets in and the question of making money becomes acute, and suddenly it turns out that the product is not needed by anyone and it is not possible to sell it. In such cases, the founders say: "although the company failed, but we gained valuable experience." However, such “valuable experience” is notorious; you will not pay salaries to employees, you will not return dividends to shareholders, you will not invest in development.
Lean Startup methodology can help to avoid such a situation, concentrate on the most important, reduce risks and start making money. For me, Lean turned out to be one of the most interesting topics. Although we do not consider our project a classic startup, I wanted to take from this methodology what can be used in Web-payment.ru and adapted as necessary.
So, the main fundamental ideas from Lean:
- 9 out of 10 startups fail. The main reason - no one needs the product.
The reasons for the failure of startups. Source CBinsights.com
- Any of your ideas is just a hypothesis requiring verification. You can check in different ways: through a client interview, MVP, Landin page with an advertising company. But you should check any idea before spending your energy, money and time on it, so that later it turns out that few people need it and you have wasted your resources.
As Thomas Edison said: “Success is determined by the number of experiments that can fit in 24 hours.” Your daily work should take place in the following cycle:
Form a hypothesis -> Think up and conduct an experiment -> get some data, draw conclusions based on these data and correct the hypothesis. Repeat the cycle until the hypothesis is confirmed. The sequence of such actions is also called the HADI cycle.
- Any idea can be tested before product development. Create a landing page on which describe your product or service, set a price and make a “Buy” button, which leads to the form where you need to leave an email. Allow targeted traffic, for example, from the context, calculate the conversion for this funnel, and even before developing the product, you can estimate the demand and calculate the convergence of the economy (i.e., do you pay the cost of attracting a client with the profit that it will bring).
- Minimal Viable Product - MVP. Before you develop the product itself, you should start with MVP, but this is not just a bad version of the product, it is an experimental process of finding a solution with constant feedback from the client. You must make a minimum version of the product, which is designed to verify the activation of its most important target function. You need to check whether the people you were able to bring to the product will really use its key function, whether it solves their problem, whether they will come back. For example, the MVP of an optimal route planning service for a courier service may initially be able to lay a route in just three points, or a route can be drawn manually by the founder. Then you will certainly make a very cool product and it will have many useful features,
“Get out of the building!” - Steve Blank. The main principle of Customer Development is that there are no reliable facts in the office or in your head. To test your hypotheses and get to the bottom of some insights and insights, you need to communicate with your potential or real customers. Only they can push you to the truth, to what they really need.
- Any business model can be described on a special canvas. The first such canvas was developed by Alexander Osterwalder and Yves Pigne in his book on building business models, which I mentioned at the beginning. Canvas itself in the original can be downloaded from the book's website, and it’s easy to find an adaptation in Russian in Google at the request of “business model canvas”. But it is well suited for existing companies with an established model, and for startups it is recommended to use the Lean Canvas variation from Ash Maurya (here is a retelling of the book where it is described). Download in Russian, you can pdf or ready-made template for filling in Google Docs .
These are the most basic principles of Lean Startup and CusDev, for a more detailed study you need to familiarize yourself with the work of Steve Blanca, Bob Dorf, the founders of CusDev, “Startup: Founder’s Handbook” and from Business from scratch: “Lean Startup method for quickly testing ideas and choosing a business Models ”by Eric Rees, who developed the Lean Startup methodology.
Product metrics are like a dashboard in a space shuttle - if you don’t measure them, you don’t know where the ship is flying.
If it’s quite simple then:
CPA (Cost Per Acquisition) - the cost of attracting the user to the beginning of the funnel, i.e. to the landing page, sometimes the cost of registration.
ARPU (Average Revenue Per User) - the average income from each attracted user.
You earn if ARPU> CPA
You lose money if ARPU <CPA
But here you can rightly object that there is a business where an attracted client can bring money for a long period, for example, a year, then:
LTV (Life Time Value), he ARPU LifeTime, is the income from the user during the entire period of use of the product.
Therefore, in this case, you earn if LTV> CPA
And you lose money if LTV <CPA
Therefore, in competitive niches in contextual advertising, bids often reach several tens of dollars, the advertiser does not always pay back investments right away, the client is bought with the expectation that he will make a profit in the future.
In fact, the product’s economy is simple, users (B2B leads) enter, money leaves:
Users flow → Product → Money
User Acquisition is the number of users involved.
The more users you can attract and the lower the cost of attraction, the greater your profit:
User Acquisition × ARPU = Revenue
User Acquisition × (−CPA + ARPU) = Profit
How much LTV should be more than CPA?
As we already found out, LTV should be higher than CPA, otherwise you spend more on attraction than you earn - the business model does not converge. But we have not yet figured out how much higher, and most importantly - for how long? Indeed, in addition to the cost of attracting customers, you pay salaries, rents and bear other expenses. It is believed that the business model is stable if the income from the attracted user is 3 times higher than the cost of attracting it and the attracted user pays for itself in a maximum of 3-6 months.
LTV> 3 × CPA - a sustainable business model
In practice, it is more useful to calculate the revenue from a user or lead for the first month (Revenue30) and compare it with the cost of user acquisition (CPA).
If the user does not pay for himself in the first month, then on each attracted user the profit goes into minus and the risk of a cash gap increases.
But what about c b2b and b2b2c?
With b2b, everything is basically simple: instead of the User Acquisition user stream, substitute the Lead Acqusition potential client stream.
But in the b2b2c model, as in our project, when users pay us with their attention, viewing banners and clicking on the sites of partner exchangers, ARPU should be considered as the ratio of the income received from advertisers and partners to the number of attracted users.
It so happened that it is customary to monitor metrics like DAU, MAU, income, the total number of registrations and try to draw conclusions with the help of them about the product, the impact of changes and the effectiveness of marketing activities.
But such metrics are growth metrics. It is useful to follow them for a general understanding of the situation, but with regard to working on a product, such metrics are not very useful, since it is impossible to make product decisions on their basis.
To continue a more in-depth introduction to product metrics, I recommend the gopractice.ru blog , which is run by Oleg Yakubenkov, product manager at Zeptolab.
But first, a few words about our project
Web-payment - a highly specialized site about payment services, fintech startups and e-commerce with an aggregator of electronic currency exchangers. The goal of the project is to collect various services and useful information on electronic payment systems within the framework of one site, to create a platform on which industry experts and ordinary users can meet. We strive to make working with electronic money easier.
Literature
For those who will take this or a similar course, and indeed for everyone who is interested in entrepreneurship with a scientific approach, I advise you to read the following books as quickly as possible, this is the main literature referenced by, and which laid the foundation for the modern startup industry.
Startup: Handbook of the founder
Steve Blank, Bob Dorf
Business from scratch: Lean Startup method for quickly testing ideas and choosing a business model
Eric Rice
Running Lean
Ash Maurya ( retelling , the book is not translated into Russian)
Building business models: Handbook of a strategist and pioneer
Alexander Osterwalder, Yves Pigne
Blue Ocean Strategy
Chan Kim, Rene Moborn
Goal. The process of continuous improvement
Elyahu Goldratt
Startup Guide: How to start ... and not to close your Internet business
Ed. M.R. Zobnina
Design Thinking in Business
Tim Brown
Bridging the Abyss
Jeffrey Moore
Lean Startup & Customer Development
How is product development usually done? People gather, come up with an idea, invest money and start sawing a product. It’s sawing, it happens, a year, it happens, two, the money starts to end or a crisis sets in and the question of making money becomes acute, and suddenly it turns out that the product is not needed by anyone and it is not possible to sell it. In such cases, the founders say: "although the company failed, but we gained valuable experience." However, such “valuable experience” is notorious; you will not pay salaries to employees, you will not return dividends to shareholders, you will not invest in development.
Lean Startup methodology can help to avoid such a situation, concentrate on the most important, reduce risks and start making money. For me, Lean turned out to be one of the most interesting topics. Although we do not consider our project a classic startup, I wanted to take from this methodology what can be used in Web-payment.ru and adapted as necessary.
So, the main fundamental ideas from Lean:
- 9 out of 10 startups fail. The main reason - no one needs the product.
The reasons for the failure of startups. Source CBinsights.com
- Any of your ideas is just a hypothesis requiring verification. You can check in different ways: through a client interview, MVP, Landin page with an advertising company. But you should check any idea before spending your energy, money and time on it, so that later it turns out that few people need it and you have wasted your resources.
As Thomas Edison said: “Success is determined by the number of experiments that can fit in 24 hours.” Your daily work should take place in the following cycle:
Form a hypothesis -> Think up and conduct an experiment -> get some data, draw conclusions based on these data and correct the hypothesis. Repeat the cycle until the hypothesis is confirmed. The sequence of such actions is also called the HADI cycle.
- Any idea can be tested before product development. Create a landing page on which describe your product or service, set a price and make a “Buy” button, which leads to the form where you need to leave an email. Allow targeted traffic, for example, from the context, calculate the conversion for this funnel, and even before developing the product, you can estimate the demand and calculate the convergence of the economy (i.e., do you pay the cost of attracting a client with the profit that it will bring).
- Minimal Viable Product - MVP. Before you develop the product itself, you should start with MVP, but this is not just a bad version of the product, it is an experimental process of finding a solution with constant feedback from the client. You must make a minimum version of the product, which is designed to verify the activation of its most important target function. You need to check whether the people you were able to bring to the product will really use its key function, whether it solves their problem, whether they will come back. For example, the MVP of an optimal route planning service for a courier service may initially be able to lay a route in just three points, or a route can be drawn manually by the founder. Then you will certainly make a very cool product and it will have many useful features,
“Get out of the building!” - Steve Blank. The main principle of Customer Development is that there are no reliable facts in the office or in your head. To test your hypotheses and get to the bottom of some insights and insights, you need to communicate with your potential or real customers. Only they can push you to the truth, to what they really need.
- Any business model can be described on a special canvas. The first such canvas was developed by Alexander Osterwalder and Yves Pigne in his book on building business models, which I mentioned at the beginning. Canvas itself in the original can be downloaded from the book's website, and it’s easy to find an adaptation in Russian in Google at the request of “business model canvas”. But it is well suited for existing companies with an established model, and for startups it is recommended to use the Lean Canvas variation from Ash Maurya (here is a retelling of the book where it is described). Download in Russian, you can pdf or ready-made template for filling in Google Docs .
These are the most basic principles of Lean Startup and CusDev, for a more detailed study you need to familiarize yourself with the work of Steve Blanca, Bob Dorf, the founders of CusDev, “Startup: Founder’s Handbook” and from Business from scratch: “Lean Startup method for quickly testing ideas and choosing a business Models ”by Eric Rees, who developed the Lean Startup methodology.
Product Metrics
Product metrics are like a dashboard in a space shuttle - if you don’t measure them, you don’t know where the ship is flying.
If it’s quite simple then:
CPA (Cost Per Acquisition) - the cost of attracting the user to the beginning of the funnel, i.e. to the landing page, sometimes the cost of registration.
ARPU (Average Revenue Per User) - the average income from each attracted user.
You earn if ARPU> CPA
You lose money if ARPU <CPA
But here you can rightly object that there is a business where an attracted client can bring money for a long period, for example, a year, then:
LTV (Life Time Value), he ARPU LifeTime, is the income from the user during the entire period of use of the product.
Therefore, in this case, you earn if LTV> CPA
And you lose money if LTV <CPA
Therefore, in competitive niches in contextual advertising, bids often reach several tens of dollars, the advertiser does not always pay back investments right away, the client is bought with the expectation that he will make a profit in the future.
In fact, the product’s economy is simple, users (B2B leads) enter, money leaves:
Users flow → Product → Money
User Acquisition is the number of users involved.
The more users you can attract and the lower the cost of attraction, the greater your profit:
User Acquisition × ARPU = Revenue
User Acquisition × (−CPA + ARPU) = Profit
How much LTV should be more than CPA?
As we already found out, LTV should be higher than CPA, otherwise you spend more on attraction than you earn - the business model does not converge. But we have not yet figured out how much higher, and most importantly - for how long? Indeed, in addition to the cost of attracting customers, you pay salaries, rents and bear other expenses. It is believed that the business model is stable if the income from the attracted user is 3 times higher than the cost of attracting it and the attracted user pays for itself in a maximum of 3-6 months.
LTV> 3 × CPA - a sustainable business model
In practice, it is more useful to calculate the revenue from a user or lead for the first month (Revenue30) and compare it with the cost of user acquisition (CPA).
If the user does not pay for himself in the first month, then on each attracted user the profit goes into minus and the risk of a cash gap increases.
But what about c b2b and b2b2c?
With b2b, everything is basically simple: instead of the User Acquisition user stream, substitute the Lead Acqusition potential client stream.
But in the b2b2c model, as in our project, when users pay us with their attention, viewing banners and clicking on the sites of partner exchangers, ARPU should be considered as the ratio of the income received from advertisers and partners to the number of attracted users.
Finally
It so happened that it is customary to monitor metrics like DAU, MAU, income, the total number of registrations and try to draw conclusions with the help of them about the product, the impact of changes and the effectiveness of marketing activities.
But such metrics are growth metrics. It is useful to follow them for a general understanding of the situation, but with regard to working on a product, such metrics are not very useful, since it is impossible to make product decisions on their basis.
To continue a more in-depth introduction to product metrics, I recommend the gopractice.ru blog , which is run by Oleg Yakubenkov, product manager at Zeptolab.