App Ideation & Picking the Right Business

You're going to spend months building an app. Make sure you pick one with the highest chance for success.

Welcome! Today, we’re going over how to pick an app and business idea. More importantly, one that offers you the highest chance of success. You’re going to end up spending a couple months building it, so you want to make sure it’s one you’re ultimately dedicated to.

Disclaimer: Ultimately the market decides if a business is viable. No one can shoot 100% and pick successful ideas every time. While execution is more important than the idea, you still want to make sure you pick an idea that’s even worth executing.

Disclaimer 2: In the end it’s up to you what you want to build, both as an app and a business. I’m not an expert in picking ideas. I’m just giving you a glimpse into what I’ve seen work over the years.

Let’s get into it..

---

Common types of web apps

In no way is this list exhaustive. We just want to give a quick breakdown of some of the most common types of successful apps. Some that you see and mostly likely use.

Utility/SaaS (Software as a service): Here, you’re making the users life more efficient through the use of an app. As the name suggests, you package software and sell it as a service, typically with a subscription model. The good thing here is that you’re not reinventing the wheel. You just take an outdated way of doing something and create a piece of software that makes the process easier, cheaper, and more streamlined.

SaaS apps you see/use every day = Slack, Canva, Box, Zoom.

SaaS revenue models = Almost always subscription based. Either monthly or annual payments.

Marketplaces: What do Uber, AirBnB, and Etsy have in common? They own no physical inventory. They have no tangible assets. Pure software marketplaces that simply exist to connect buyers and sellers more efficiently. When you create a marketplace, it’s your number one goal to make sure you control the supply and demand of buyers and sellers. You want to make sure that the ratio of each are somewhat even. Also, you want to make sure that you connect the two (buyers & sellers) as efficiently as possible. In the case of Uber, their bread and butter is assigning a driver that’s closest to the rider (among other things such as ride optimization). In addition, you offer the buyer and perhaps the seller peace of mind through offerings such as seller/product verification, insurance, escrow/payment protection, and more.

Marketplace apps you use/see every day = Uber, Lyft, AirBnb, Etsy, Ebay

Marketplace revenue models = Transaction fees. Every time a transaction occurs, you take either a flat-fee or percent cut. Additionally, premium services to both buyers and sellers to increase product offerings & revenue.

Booking: Notice the amount of QR reader apps launched since covid hit? Almost every restaurant has transitioned to QR codes for online menus & ordering. We’re referring to QR apps that allow the customer to order food directly within the app. In this case, 99% of restaurants did not build this technology in-house. They simply signed up for a booking (one can argue SaaS) app that allows them to assign seats, upload their menu, and take orders all through the application. Another example, barbershops. When you book & pay for a haircut online, you’re using a web app that was licensed to a barbershop. When you create a booking app, you want to try and make it as broad as possible (being able to serve across a whole niche/industry), although in some cases a client will want additional features. There are quite literally thousands of different booking apps out there. The possibilities are endless.

Booking apps you use/see everyday = Calendly (Scheduling), Expedia, Bentobox

Booking revenue models = Typically, licensing payments from the business. QR booking apps will charge the restaurant (Not the restaurant customers). Also, pricing may be dependent on the size of the business. For booking apps like Calendly, they charge for premium services. Revenue models are varied depending on the type of booking app and who the customers/users are.

Social Network: Self explanatory, although we’ll cover it. In a social network, your primary goal is to keep users engaged and using the app as much as possible. Since we don’t see Facebook, Instagram, and Twitter being disrupted anytime soon, we suggest going the niche route and creating a social network for a very specific audience. For example, if you’re interested in traveling and want to create a travel social network, make sure you offer travel-specific features in your app that aren’t offered in bigger networks such as Facebook.

Social Networks you use/see everyday = Facebook, Instagram, Twitter, Youtube, Pinterest

Social Network revenue models = Advertising. Social network apps are the hardest to monetize in the early stages. This is why we suggest going the niche route if you do decide to create a social networking app. If you create a ‘Travel’ niche network with 1000-5000 users, you will be able to find travel-oriented companies willing to pay you for advertisement space. In the end, when you create a social network, the users are the product, and that’s how you make money.

Community: We’ve seen a huge increase in community apps over the last 4-5 years. People are starting to get overwhelmed from the large social media sites and want to be involved in smaller communities with shared interests. For community apps, you want to pick an interest that’s both large enough to accommodate thousands of members, but also small enough where the interest doesn’t apply to every person on the planet. *Most* people like traveling. But in our opinion that’s still too broad. Maybe focus on nomad traveling. *Many* people are interested in music. Maybe focus on guitar lovers. You have to find a very thin line between having enough of a market/user base and keeping it interest-specific so everyones interests are aligned.

Popular communities = Nomad List - Nomad travelers (while Pieter also incorporates a web app portion, the community here is extremely tight and close). Nomad List generates over $1M annually! WIP - Task tracker/community for web devs ($2-3K MRR). Ness Labs - a community for human mind exploration ($18K MRR).

Community Revenue Models: Subscription based. A member pays $X/mo/yr to join the community. Members are inclined to pay as they’re joining a community with like-minded individuals who share the same interests *and* by paying, low-quality people and spammers are incentivized to stay out.

---

Picking the right idea

When it comes down to it, there are two primary forces you should lean into when deciding on an idea.

1. Problems & inefficiencies you face

2. Interests & passions

Problems & inefficiencies: In our experience, this is the best reason to start a business. If you have a problem or inefficiency in your life, chances are someone else does too. The founders of Stripe (payment processor) built the business because Patrick (founder) was building side projects and didn’t understand why online payment processing was so difficult (LINK). One important note here, you want to make sure the problem you’re having can be solved through the use of a web app. Finding brushing your teeth inefficient? Sorry, I doubt you’ll be able to solve this with an app. So take a look at your day-to-day life and see if there’s an aspect of it that you can make more efficient by building a piece of software.

Interests & passions: Second in line, if you’re not interested in your business' mission, you’re likely to burnout or lose passion. If you create a business centered around music but have no interest in it, the chances of you abandoning the project are much higher. That’s not to say that you shouldn’t start a business in something you’re not interested in, however. The reasons for starting are just different. If you create a SaaS business around music and aren’t interested in music, it’s most likely that you saw a problem or inefficiency in the current status quo.

From our experience, here’s how the two forces breakdown for the type of app:

Problems & inefficiencies: SaaS, Utility, Marketplace, and booking apps.

Interests & passions: Social networks and community apps. E-commerce too.

Summary: In picking your app, you want to make sure that the primary driver of wanting to start the business aligns with either 1) a problem or inefficiency that you have or 2) an interest or passion of yours. Make sure the business you are founding *can* be solved with the use of a web app.

---

Side Note: Want an idea that works over 90% of the time? Pick an idea that *helps* users make money. Take a small cut when they make money. In that case, it’s a win-win. When your user makes money, you make money. And that’s exactly how you should market it.

---

Business & Revenue Model

When you pick an idea, you want to make sure that it’s viable and can generate revenue. Remember, you’re starting a business, not a hobby. So planning out the business & revenue model is *just* as important as the idea itself.

Business Model: When you think of your idea/app, make sure you note the key features & functionality you’ll provide to your users. Creating a messaging SaaS? How will it differ from Slack? Creating a social network? How will it differ from Facebook? You’ll want to jot down the *key* value propositions your app will provide to your users.

Revenue Model: Extremely important question here, how will you monetize the app? Are you going to charge businesses, the users, or outside vendors/advertisers? How often will you charge them, monthly, annually, or both? Will your app offer a freemium version or paid-only? What happens if a customer doesn’t pay? Will you kick them off the app or let them stay? These are all incredibly important questions that you have to decide on *before* you start your business. The only exception here is a social network. For social networks, it takes time to see how the network grows and understand what direction to take in terms of monetization. Everything else = have a revenue model planned and ready before you start.

Summary: When you’re deciding on an idea, start with the business model which includes the high-level value propositions that you provide your users, in addition to the key features and functionality. Work on a revenue model which details how you plan to monetize your app, as well as deciding if you’ll offer a freemium plan or go the paid-only route.

---

Moving forward

Now that we have the first issue out (defining no-code) and this one (app ideation), it’s time for you to decide on the app/business that you want to launch. As you work through this, you may have questions in terms of business viability or technical feasibility. Feel free to DM on Twitter and I’d be happy to talk to you about your business idea + sign an NDA if needed.

In the next posts (1 or 2 depending on length), we’ll go over how to build a landing page and gauge market interest (those posts will be the last free posts before we dive deep into app development). It’s extremely important to test your idea out in the market before committing several months to app development. Many founders skip this stage and end up spending months or years on building an app that ultimately gets no users and fails. We want to make sure you can collect email prospects, or better yet, sales, before you even begin developing your app.

Have any questions or general feedback? Please do comment below.

See you on the next issue,

-BowTiedVampire