Mobile Academy: Constructing a Business Case for an App

Posted on October 22, 2012


B3 Con­structing Busi­ness Cases So you think you have spotted an oppor­tunity? In this session you will be given tools to start con­structing your busi­ness case. Explore the various ways to mon­etise your offering; work out dif­ferent revenue streams; make sure that you have included all your poten­tial costs and have val­id­ated your busi­ness assumptions. Ian Mer­ricks 27/9, 6.30pm (Thurs)
Ian Mericks takes his second session,  he has experience from his work as an investor in late stage and early stage investments
Figures from Startupbritain show that 395500 start ups were formed last year,  [that’s a lot]
He sees 50 business plans per month,  so you need to stand out,  and do a good job,  or you’ll be rejected very quickly.  The Venture capitalist chap coming up in a future class [I’m not catching up on writing these,  honest] also made the point that he says 10s of requests per day, and again there are a lot that are poorly formed.
There are low costs of entry in mobile,  but this means there are so many around,  and of course we are in the middle of the hype curve for apps.
It is not true that a good idea equals a good business.
Ask yourself (or selves!) Four key questions
  1. What sets you apart?
  2. Could “anyone” do what you do?
  3. What is your motivation?
  4. How will you succeed?
The answers lead to the reason why you’re business should exist.
When writing your business case, be clear, simple and construct a summary in less than a sentence [remembering that you have to gain interest from readers very quickly,  they will not read beyond the first para,  this includes VCs, Press and the like.]
Your Unique Selling Point (USP) must be compelling to customers,  however be warned this will mean that folks will copy you,  so what is your future USP as your product or service matures.
[There is a tie up here,  cost of entry is low, so people will copy you,  and can do it cheaply,  you have to plan for this.]
[USP: back when the early days of the www the term USP was the be all and end all, and  guess that it is returning because of the burgeoning market for apps, mean you have to stand out,  and that is the USP.  However,  if you USP is paper thin,  you’ll not survive,  and you’ll go the way of the dot com bubble.]
Make sure you have a plan of how you will manage the business for example what will the team be, and when will they be brought on board.
[This is critical, I’ve been involved in startups and the team is very very important.  Try to gets birds of a feather, because if they are just journeymen or worse just after the money, then it will not work,  if this proves to be the case, then do move them on, it’s far harder that keeping someone,  but you cannot do that, a small team has to gel. Once you get past the 20 employees mark,  then you need more processes, and can have more types of folk,  before then, it’s tricky]
Investors look for the problem being very clearly explained therefore be specific about:
  • Your target audience and its
  • Size,
  • route to market,
  • best price point,
  • future trends.
  • Who are the key opinion makers in your area,
  • what are the trade shows and other areas of research / market options etc.
Do your research, be thorough regarding market, commercials and product,  because the better the research the more likely you are to succeed.  You must substantiate your claims you make in the list above,  proof is everything.  If you cannot prove it then make it clear it is an assumption.  Make sure the assumptions are getting less as you progress.  [be ready to show these progressions from assumptions to proof,  because this is a key way of gaining trust in  your audience, be they investors, potential employees, partners etc]
When you do the research look for trends, such as demand, revenue, and market creation.
Look at competitors, price/demand curve etc
Be truthful about the competitors, direct or indirect.  One way to research them is to get their accounts from companies house.
Totally new solutions have the problem of creating the market,  how will you educate your market to buy your product.  These are “binary” markets, and typically the answer is 500k away.
For second mover advantage, show how the incumbent how grown, what they have, what their products and customers etc.  Then show how they are weak, could be service, price, function,  and how your product exploits that weakness, and is supported by their strengths.
Look for cost of acquisition of customers etc.  make sure you have a future USP to protect against them attacking e.g. They may discount etc.
Some other questions to ask yourself
  • How needed are you by your user base ?
  • How fit are you for your market,  get feed back from target customers.
  • What is the minimum viable product ?
  • And from this minimum have a roadmap with features and growth plans with users etc,  this roadmap should be assessed.
  • What are the features that lock your customers in so that rivals cannot steal your customers.
When you are pre-launch, get some letters of intent from your customers,  use the survey approach [from Priya’ session about knowing your target audience], as well as direct interviews etc.
When looking at the question above your commercialisation strategy needs to cover these areas.  Get the figures for the percentages of users, buyers etc.
the mobile app market is so large, and growing so fast your app is like a tin of beans in a hyperstore … So how will you stand out.
Especially if your not in the top 50 on the app store.
Make sure your cost base includes both fixed and variable costs, test all your assumptions, with dynamic forecasting that includes sensitivity to variables.
Make sure the costs are well researched and complete.
For example can you switch brand marketing into CPM or CPA costs to generate more customers etc.
[So my takeaway from this lesson, was that you cannot have a business case with holes in it.  You may not show the complete case to all audiences,  but for yourself you need to cover the bases.  It is work, and it is difficult to fill some of them,  and I know I struggled,  especially when I was on my own.  However there are lot sof places you can meet and talk with others,  the IOD, the Mobile Monday,  and the like.
Don’t go to investors or VCs too early because if there are lots of holes you will be ignored or shot down.
Look at your USP,  test it with the users.  get their opinion,  so it’s not just you saying it’s good, because, honestly, your opinion does not count, your biased.
Create a spreadsheet with your numbers (more on this later) and have someone look at this for you.  Better this than loosing a lot of money.
and lastly,  there are a lot of questions above,  re-ask them time and again, and track the changes to the answers