So You Want To Build A Software Product

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If you like the idea of being your own boss (I certainly do), chances are you get the itch sometimes to create your own product — a product whose direction you control, that you do not have to compromise on with someone else, and whose fruits you get to fully enjoy, instead of being paid by the hour or a flat rate. It could be a Web service, a WordPress plugin or a desktop application, but the core problem is the same: how do you pick an idea that will succeed?

Most of us take a very simple approach: we stumble on something that doesn’t work well for us or we identify a problem that we have a lot of experience with, and we think, “All right, I’ll just build x for y and make a mint.” The problem is that we don’t have any indicators of whether others feel the same pain and would be inclined to pay for a solution.

This post presents a systematic approach to finding inspiration for a good software product, and to validating that there is an actual need for it in the real world. No product is guaranteed to succeed, yet our goal should be to minimize risk and maximize opportunity by picking the ideas that will most likely succeed.

(Please note: this article concerns developing commercial ideas. If you want to build an open-source project and do not care about commercialization, then it might be less relevant to you.)

Finding A Good Idea For A Software Product

Some of us develop a product after naturally coming up with the idea while performing a certain task. But what if you want to start your own venture but don’t yet have an idea of what to build? How do you find inspiration for a new software product?

Community Websites

A great source of inspiration is community websites, such as Q&A platforms, forums and social networks such as Facebook and Twitter, where your target audience hangs out. Want to build a WordPress plugin? Visit a forum for professional bloggers. Want to build productivity software? Visit a LinkedIn group for the professionals you want to target. Searching on Twitter for your preferred platform or product type can be an amazing source of inspiration.

Find out where your potential audience hangs out and soak up the atmosphere. Read about people’s problems and pains with their current software. Pick up hints on what would make their lives easier (or, in the case of games, what would entertain them most). Search for things that most of the community agrees on, and try to develop it into a concrete concept.

Don’t expect an idea to be handed to you on a silver platter. Rather, get a feel for what your target audience needs, and from there build a concept. (We’ll go over how to figure out the potential of that concept in a bit.)

Variation of a Successful Product

Successful products have the advantage of a proven concept. Many other factors come into play, of course, such as execution, marketing and timing, but a successful product already at least has traction and a user base that you can target right away, increasing your chances of success.

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(Image: Viktor Hertz2)

I’m not suggesting that you simply clone an existing idea. That could work, but competing with an established product with a mere clone would likely result in failure (unless other factors were involved); and, frankly, cloning an existing product isn’t much fun. You could, however, attack a weakness in another product, turning it into a strength in yours and creating an attractive variation that feeds on the popularity of the original product.

Playing to Your Strengths

Each of us has experience with certain tools, frameworks, APIs and projects. Go over your old projects and library of code, and think of how to build on that experience to create something new. This is how I created my own product, Binpress3, a discovery service and marketplace for source code.

Covering familiar ground by building on past experience instead of trying something completely new helps to eliminate some of the risk. Using old code libraries can save significant development time, thus reducing some financial risk. I’ve previously written about how to extract code from old projects4, the benefits of which seem especially relevant when you’re trying to reduce risk in a new software venture.

Taking Notes for Later

You’ve probably had many small a-ha moments, when you identified a missing feature in a software product. I have those all the time, when I think “If only this had feature x” or “This junk just doesn’t do what it’s supposed to do.” Each discovery is an idea for a potential product.

Such ideas pop up and then disappear from our memory. If only we take note, one of these minor revelations could turn into an action item. It’s all about discipline. The next time you have such a thought, write it down somewhere you’ll find later. Going over these notes in a few weeks or months could lead to your next breakthrough.

Assessing The Market

By now you have a few product ideas. But how do you know which is your best bet? A few parameters will affect your choice of which idea to develop. And this information will be useful if you ever want investors to support your product financially.

Market Size and Addressable Market

The bigger the market, the higher the potential payoff. Because you will likely be putting in the same amount of effort and time regardless of market size, targeting a big market makes more sense.

The important metric here is total addressable market5, which basically means the total amount of revenue you can expect to capture.

There are two common ways to calculate this number: top down and bottom up. In the top-down approach, you start with the total size of the market, and then filter down to your target audience. For example, you could start with the total amount of revenue generated for online t-shirt sales, and then multiply it by the fraction of the market that you intend to capture (let’s say, biker-themed t-shirts).

In the bottom-up approach, you calculate the addressable market size by developing a formula that calculates profit based on your business model. For example, if your model is subscription-based, then multiplying the amount that you intend to charge by the number of people in your target audience will give you your total addressable market.

This is, of course, a simplification of the process. The complexity of measuring the total addressable market will depend on the market in question and the information available for it. You might want to read “Addressable Market: Making the Estimate6” by Mark Peters Davis and “Market Sizing: Numerical Narratives7” by Jay Haynes.

Actual and Potential Demand

Total addressable market represents the revenue that your product can capture. But will people actually pay for it? To answer this question, more research and thinking is involved.

Search Engines
You wouldn’t believe how many ideas could have been dumped if people had just bothered to search for them. Think of several keywords that represent the problem you want to solve and run them through Google (or Bing, whichever you fancy).

If more results are for people looking for a solution than for actual solutions to the problem, then you might have a winner. Run several variations of the queries based on the search results, until you have a good sense of what is publicly available when people search for a solution.

If you find little mention of the problem, then either your keywords are wrong or the problem is not as big as you think. This is not a game-breaker, but do take note. Some products create new markets or change established ones by generating demand. The demand for such products is harder to assess through a search engine and requires that you trust your vision and instincts, if you decide to follow through.

Staking Out Your Audience
We mentioned community websites in the idea-searching phase, and your research there might tell you what the community thinks. If not, now would be a good time to read what people are saying about the problem. Relevant discussions in online communities could be a great resource for validating and improving a product idea.

If you have experience in the market, then you might already know potential customers (online or off). In that case, you can get great feedback by approaching the ones you trust and asking them about your idea.

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(Image: Viktor Hertz9)

You might be protective of your idea and reluctant to share it with a relative stranger, but I recommend putting it out there as early as possible and getting real-world feedback. Feedback will help you determine whether the idea is worth pursuing and how to refine it. Steer clear of feedback from family and friends, because their opinions will obviously be biased.

Don’t let negative feedback get you down either; take it at face value. Remember, despite the old adage, the customer is not always right — otherwise, we’d be all riding faster horses instead of driving cars.

Your Personal Evaluation
Despite these methods, getting a sense of the demand might still be difficult, especially if you expect the product to generate new demand. In this case, you will have to rely more on your market experience and intuition.

It all boils down to, do you personally believe this idea is worth developing? From my experience as an entrepreneur, if you believe strongly enough that something can be a big success, then you will find a way to make it happen. It might not go as smoothly as you’d like, but as long as you keep believing, you will pull through eventually. Your personal belief in the potential of the idea should be the determining factor in developing it.

Check Out the Competition

You can learn a lot about the market by checking out the competition. Even if you don’t have direct competition, you will have indirect competition that competes for the attention and pocketbooks of your target audience. Not being able to find any competition at all is usually a sign that your idea is not commercially feasible — unless it is truly revolutionary (which is rarely the case). The existence of competition will validate your idea and could be a trove of inspiration and information on what works and what doesn’t.

Check out your competition’s websites, their mentions in traditional media (news websites and blogs) and their presence in social media. You will learn a lot about where they are as a business, what people think of them, their level of success, their main problems, people’s complaints about them and much more.

Are there major players in your market already? How entrenched are they? How hard would it be to compete against them? Competition provides both validation and a challenge, and it should factor heavily into your decision on whether to develop your idea.

In The End, It’s All You

Building your own venture might be a little intimidating, but it’s an amazing experience. Reducing the risk by doing research is an important first step. That being said, the most important factor is your belief in the potential of the product.

A strong belief in the product will help you get through difficult times, when development stalls or sales decline. It will be your shield against the doubters and haters — and if you gain any traction, you’re certain to get both.

To build your own business, you have to believe in your abilities and in the product. Everything will fall into place from there, and it will be one heck of a ride. Don’t be afraid to fail; make your best effort and learn from your mistakes. If you can tough out the bad times, the good times will arrive, and they will be worth it. Good luck!

(al) (il)

Footnotes

  1. 1 http://www.flickr.com/photos/hertzen/6006458099/in/photostream/
  2. 2 http://www.flickr.com/photos/hertzen/6006458099/in/photostream/
  3. 3 http://www.binpress.com
  4. 4 http://www.binpress.com/blog/2011/07/25/extracting-code-from-old-projects/
  5. 5 http://en.wikipedia.org/wiki/Total_addressable_market
  6. 6 http://www.markpeterdavis.com/getventure/2007/07/addressable-m-1.html
  7. 7 http://www.jayhaynes.net/2010/04/market-sizing-numerical-narratives.html
  8. 8 http://www.flickr.com/photos/hertzen/6006457977/in/photostream
  9. 9 http://www.flickr.com/photos/hertzen/6006457977/in/photostream

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I'm an entrepreneur and web developer. Formerly started Lionite, a web development shop and incubator, now I'm CTO on Binpress, a discovery service and marketplace for source-code.

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  1. 1

    Well-written and inspiring article. Many years ago I was involved in a project just like yours (Binpress) called OneDollarCode.com. Good luck!

  2. 2

    Great advice, Eran. Thank you.
    One question. When you say “You might be protective of your idea and reluctant to share it with a relative stranger, but I recommend putting it out there as early as possible and getting real-world feedback.” What would you say “as early as possible” would mean, i.e., how long after the original idea and after what steps have been taken would you put your idea out there for everyone to evaluate?
    Thanks again.

    • 3

      Hi Helen,

      By “early as possible” I mean quite literally – when you have an idea, do not be afraid to share it. Not after you have a business plan, or have developed a product – but before you act on the idea, get some feedback on it from as many people as you can.

      “Putting it out there” could be taken in many ways – discussing it in person or online, creating a prototype and getting feedback on that and generally bouncing it off relevant people – your target audience or people with relevant experience.

  3. 4

    Loved the quote about variations on a proven market. Not choosing a proven market has made our startup ( kickofflabs.com ) hard to launch because people didn’t know what to make of it. Yes, there is less competition, but you fight your customers inertia when you are on the edge.

    BTW – A lot of our own customers have success using our service (or similar ones) to prove whether not not a certain idea is worthwhile. That would be in addition to finding the market sizing/validation.

  4. 5

    Thanks for this article, when do we get step 2? I.e. all the problems above are solved – what now?

    • 6

      Now it’s time to develop a product :)

      How you do that is very dependent on your particular circumstances – if you are a developer (I am) you can dive right in, if you are not – you need to recruit someone who can, either with pay or by finding a technical partner.

  5. 7

    Great article Eran,
    what about when you know the product will help people, but you don’t know if it’s possible to capitalize on it.

  6. 8

    Eran, how do you deal with the problem of having TOO MANY ideas? :P

    Focus is such a difficult state to master. I’m currently working on multiple projects, and I’ve had to turn down probably 50+ others (lots of them, great ideas!) that I was interested in. I’ve learned to do a bit of research before investing a good amount of time, and sometimes this research phase can take weeks to complete. This ‘research’ is what you’ve summed up above, so thank you for condensing all that info into a nice article :)

    So to answer my own question – do the research on ideas that really strike you!

  7. 9

    Eran – this is a great post and an inspiration for budding software entrepreneurs. Thanks for sharing your expertise.

    I think an especially sensitive part of the process is once you’ve identified a potential product and need to figure out whether it’s going to be a business or a hobby. For that, I highly recommend the Customer Development Model (built by Steve Blank) where entrepreneurs “get out of the building” and in front of real, live, potential customers. Basically, go do as many informational interviews as humanly possible to determine where your assumptions are correct:

    1) The customer faces an actual problem
    2) Your product is a potential solution to the problem
    3) The customer recognizes this and is willing to pay for the problem to be solved

  8. 10

    Good stuff Eran.

    Two things to add:

    1) I believe you might have done yourself a disservice by titling this as being Software Product-centric. These concepts apply to any product, service or any idea that one might wish to sell.

    2) If your product/service is innovative and not the norm then be sure to spend some time focusing on how you’re going to make your idea bite-sized and consumable. If you can’t package it into something others – who are not as passionate about it as you are – understand then simply put, you’re screwed. That is, are you able to address your addressable market in a way they’ll stop long enough to understand?

    For example, to paraphrase a key passage from “Made to Stick” this concept is exemplified with “Snakes on a Plane” being described as “Die Hard with snakes.” Oh I see. See? :)

    As Eran mentions, you don’t want to be a clone. There’s no point. However, without context potential buyers might not become interested to the point of being motivated to buy. Differentiation is bullshit if it’s not something that’s going to trigger motivation to buy.

  9. 11

    Everything is fine:
    -“niche” is found,
    – product is ready,
    but then what?

    Should we setup website and wait until it will be googled, or any other ideas? I suppose, there were millions “startups”, that did similar path – though it is good idea, did research, build something, and finally noone ever heard about them.

    How to pass this moment?

  10. 12

    Nishant Priyadarshi

    January 29, 2012 9:16 pm

    Nice article. I am thinking to start my own and was just wondering about how to start. it will surely help me a lot.

    Thanks…..

  11. 13

    Good article, dude. I am still having confusion on what software should I build…
    If you have another idea refer to my mail

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