Don’t build an app. Create a solution, then use technology to scale it.
Justin Kan, American internet entrepreneur & Co-founder of Twitch
Once you clearly understand and articulate the problem, you can start thinking about the solution.
Regardless of your industry, your customers will be either businesses, or individuals, or both! Don’t get lost in the jargon, B2B, B2C etc. What they mean to ask you is ‘do you know who you’re going to sell to?’ Your answer doesn’t need to be exact, this is a starting point, your plans may change at later stages.
When you meet an investor, they’ll be interested in the initial ‘traction’ you have which means, ‘were you able to sell your product to anyone?’. This shows them that there’s actually demand in the market you’re targeting. So knowing who your initial customers are is a very crucial part of your business plan.
In addition to that, think about;
The form of your solution: digital or material? It’s a totally different ball game to produce hardware vs digital products. If it’s a material product; you’ll need to think about the cost of production in a factory, supply chains, and transportation in more detail. Answering this question will open up a whole new set of questions for you in the next steps.
The technology you’ll use to develop your solution: do you have access to that technology? Are there any dependencies (is your success dependent on the availability of the technology to you today)?
Your competition, are there any big players, or is it fully fragmented? What will you do better than your competitors?: Your strategy and need for capital and resources will be very different depending on your answer to these questions. There’s no judgment here, as in, ‘if it’s fragmented you shouldn’t enter this market’ or ‘if there’s no competition you should definitely enter it’. This is about how prepared you are, what you should do to get ahead of your competition.
Your sales strategy: subscriptions (your customers pay periodically to use your product), one time only (say if it’s a material or licensed product and they buy once and do not need it again), basic fees and add ons (say you have a fixed price but if your customers want more features they pay for the add ons). These questions will set the direction for your customer acquisition strategies and costs.
Don’t fret if you don’t immediately know the answers to these questions. Be aware of them, write them down and come back to them as you continue your research and preparations. Investors want to know if you know your market, how you plan to sell and deal with your competitors. Being confident when asked these questions will help you stand out.