Signs you should not be spending money on software

This is part of a series of posts we’re writing to help entrepreneurs work better with external developers. This post will help you decide if you should wait before you hire a software developer.

Software entrepreneurship is a tough business. Mistakes are easy to make and they’re expensive. The advice we’re about to give you can save you thousands of dollars in costly mistakes and time wasted.

Entrepreneurs tell me horror stories of failed software projects frequently, like spending 5-6 figures on apps with no downloads. Their stories are surprisingly similar, even across different projects and industries, and all stem from misconceptions from how the business of software works. Fortunately, the biggest mistakes are easily avoidable.

The first sign you are not ready to spend money on software.

You haven’t read the The Lean Startup by Eric Reis.

Reading “The Lean Startup” is one piece of advice I give to nearly every new entrepreneur who asks about developing software. Most startup ideas are solving non-existent problems or problems that aren’t worth the effort it takes to solve it. Many problems have solutions that won’t support a business. This book will help you highlight the flaws in your idea quickly (and cheaply). It provides a framework for making smart decisions about developing software. You don’t have to follow every step in the book. But you should be familiar with the concepts. The goal of early stage software is to learn what your users want — and will pay for.

Here are some other common misconceptions:

If I build it, they will come (No marketing, and no marketing budget).

This is great for baseball diamonds in Iowa, but a recipe for disaster for starting a software project. Established companies that build new software products have existing users who understand what those products and those companies do. Entrepreneurs don’t have this luxury. They have to find the users, tell them about their solution and convince them to use it. This requires marketing. Ignoring the marketing step is a frequent mistake for new startups. For startups targeting the general public, your marketing budget should be in the range of your software budget. For professional users, you need to know where they get information about their industry. This could be conferences, websites, or industry publications. You need a plan to get your story through the channels your users are already using.

My idea will disrupt the industry (Lack of industry knowledge).

Many entrepreneurs create solutions for people and industries they don’t understand. This is a recipe for failure. Ideas are cheap. Software is just one component of a successful startup. The real value of your startup is solving a problem real people face.

Ask yourself the following questions, and if you find yourself answering no to any of them, it’s a strong sign you should do more research before spending money on software development:

Are you a core user of this project? Or do you regularly interact with your users? Do you know the problems they’re facing? How much will they pay to solve it?

If you’re starting a business-to-business company, do you know the movers and shakers of your industry. Do you know the people in charge of making the decision to buy your software. Do you know how to find them? Have they told you they like your solution? More importantly, can you get them to write checks?

v1 will be enough to get your company off the ground (No runway).

Many entrepreneurs gather enough funds to build one version one of an application, and think this v1 will jump start their business. They are mistaken.

Reality:

No software survives its first contact with users – Scott Davis

The user interface will confuse them. They won’t press the buttons you want to them to press. They won’t understand why they need your solution. You need to plan for this. Startups need a plan and budget that extends beyond v1. Going back to “The Lean Startup”, v1 is the first step about learning what your users care about. Successful software products are the result of many iterations of building and learning. You need a budget to allow you to continue development while you learn what your users actually want.

It will go viral.

This is the cousin of “If I build it, they will come”. We love the story of a product that gets shared across the globe. But the reality is grass root viral campaigns – especially ones that lead to real users for your produt – are few and far between. Most successful campaigns are highly organized productions by organizations who understand the psychology behind sharing. The days of hoping people will magically find your app and share it widely are long past. If you want users to find your app, you need a solid marketing plan.

Conclusion:

We’ve gone over the most common holes in the new entrepreneur’s thought process. Once you’ve corrected these misconceptions, you’re better equipped to build your idea into a real company. You’re on your way to thinking like a successful entrepreneur. Go forth and build something great.

And give us a call when you’re ready.


Also published on Medium.

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