One of the most satisfying journeys anyone can undertake is to start a startup. There are so many stories about how a start-up makes it big in the market, reading them will inspire you to take a similar journey. However, starting a startup and scaling it up can be a daunting task as there are multiple steps involved in running a startup. Identifying a problem and finding a solution is not only important when setting up a startup, but there are many other parameters that need to be considered in the journey. By looking at multiple successful startups and the big picture, the journey of a startup can be considered in stages. Skipping any of these steps and moving on to the next step will definitely lead to failure.

The different stages of a startup's journey

1) Identifying the problem.

Anyone can come up with an idea, but the most important thing is to come up with an idea that solves a particular problem. This phase is about finding out the obstacles and problems faced by the customers in the market. The stage at which a startup should focus is on what the customer needs rather than what a startup needs to do. This is where start-ups need to interview customers and find solutions to the problems they face. For example, Uber found that customers needed a simple way to get into a cab and came up with their platform that connects cabs with customers.

(2) The idea

The next step is to find a value proposition for customers. It starts with ideas for finding opportunities and creating good solutions. There are high chances of good ideas emerging at the discovery stage in customer interviews because they may give their own insights and ideas. By the end of this phase, a startup should be able to find a solution that solves a problem by providing a solution that an existing competitor does not provide.

3) The problem / solution is suitable

There is a high probability that the first solution will not be the correct solution. Initial plans may not be successful, so Plan A should never be considered the right solution. Sometimes an immediate solution doesn't motivate a customer to buy. This step can be used to perform multiple iterations and if possible pivots to different product models. At this stage, a startup needs to present a product design, clickable prototypes, or product features that customers can physically interact with. The initial problem is solved if customers show interest and pay for the product upfront or take a set of steps that you can define based on your product, goal, and market.

The product is suitable for the market

To move towards a product / market fit, a startup needs data such as customer acquisition cost (CAC) and customer lifetime value. This can only be done with a launch product in use. One of the best indicators of a good product / market fit is acquiring customers at a low acquisition cost. A CAC can be calculated by dividing all expenses incurred to acquire more customers (marketing expenses) by the number of customers acquired during the period in which the money was spent. For example, if a company spends Rs 100 on marketing in a year and acquires 100 customers in the same year, their CAC is Rs 1. The Net Promoter Score (NPS) is the easiest way to measure product / market compatibility. Net Promoter Score is the percentage of customers who rate their likelihood of recommending a company, product or service to a friend or colleague, with 10 being highly likely and 1 being highly unlikely.

5) Scaling up

This is the stage where a startup should focus on diversifying their product offerings. This is where a startup needs to iterate on what works and incorporate these workflows into expedited processes. This is the point at which a company can consider renting more resources, opening a larger office space, and expanding into different areas. For instance, when the hyperlocal delivery startup Dunzo was launched, it was limited to Bengaluru. However, Dunzo soon began to expand and scale their operations to other metropolitan cities.

Many start-ups and entrepreneurs focus on scaling rapidly without going through the proper start-up lifecycle and often end up with losses. While building a startup can be fun, it's important to pay attention to each of these steps throughout its journey.