Too many software products fail because no-one bothered to do basic market research. This is a guest post from Edmundo López B. with some useful advice on finding a viable market niche before you start creating your product.

The process of building software for a niche market is more or less well documented online. The basic workflow I found is (for example here or here):

• choose some niche (with potential)
• find out the problems that you can solve in that niche
• create a product to solve the problem
• sell it
• enjoy life :-)

Here are three things you can look for when asking people about their problems.

Ask for the painful tasks that they do, not for the problem you can help with

The people I first talked to were persons that I already knew, so my pitch for them was: “Hello. As you know I’m a software engineer. I’m looking for problems to solve. I want to build software and sell it. And, if I solve a real problem, I’m sure people will pay for it. I was wondering if there is some problem in your business where you need some help. I could create some software, solve your problem and then sell it. I can help you with your problem and you will help me to find my problem.”

The first response was always positive however, everybody I talked to started to look at a problem they thought could be solved by a computer. The problem with that is that people’s vision of computers is very limited. First, some people limit the software I can build to desktop applications or some platform they know well. Second, they try to find problems to give you, and not the problems they really have. For example: one of my interviewees said to me that she needed some kind of tracking system for the expenses of her very small business (a small farm producing eggs). I told her: “Wow, that sounds like a problem I could solve, how are you solving that problem right now?.” She told me: “I’m not, I’m busy bootstrapping the whole business right now. But later I’d certainly like to have something for that.” Of course, if she is not solving that right now, then that is not a real problem. She sort of made that problem up to give an answer to my question.

People have real problems but sometimes they don’t even know they could tackle that problem with a computer. So, the lesson here is that you have to get them to tell you their real problems. Even the ones they don’t think that could be solved by a computer. You are the computer expert, not the people you interview, so you need to find out the real problem out there. Also it doesn’t have to be a problem from the future, it has to be an actual problem now. The question that I found works best is the following: Tell me about your day and what activities are the most tedious and boring to do, but do not add much value to your business. (I’m not the first to come up with this question, but I don’t remember the source, sorry.)

Look for their existing solution and ask what is wrong with it (the Excel spreadsheet)

From the people I interviewed, 2 of them had an Excel spreadsheet that solved their problem in a way that was not the best, but did the job. The third one had plans to solve her problem with an Excel spreadsheet in the future. Joel Spolsky talks about how Excel and other horizontal software are nothing more than glorified data structures. It is true, you can do almost anything involving simple mathematics and tables of data within Excel. Keeping track of costs, sales, etc. are a perfect match for it.

The common engineer will say: “If there is already a solution for that, why roll my own?” The entrepreneur will just ask what isn’t possible with the existing solution and think of ways of improving that. The existence of the Excel spreadsheet is a clear sign that there is a computing problem that can be solved in a better way. I can give you an example. Two of the persons I interviewed showed me their Excel spreadsheets (an architect and an event manager). A common problem was being able to slightly change some prices in a budget and immediately be able to show the old and the new price to the client.  This kind of information is gold to the person creating an application. This is something they use, and if you can save them time using it, you can add value to their businesses.

If there is no Excel spreadsheet, I just try to find software on the net that does what they need. If there is something really good on the market, I don’t want to compete with them. If you are wondering why didn’t I let them do the search, the answer is simple: they do the search using the traditional channels, colleagues and networks of peers; I focus on the Google search. I’m a developer, I can Google for software in a much better way than they do. It took me an hour to do a research on software for architects. Then you can explain to them the pros and cons of the solutions, help them to sign up for a free trial and tell them if their set-up is supported. The golden rule is to be really helpful. It is true that you might end up finding a customer for someone else. But if there is not a good solution, you are finding a niche for yourself.

Do some simple mathematics to see if the problem is worth solving

My last tip is about the financial aspect. Let us say that you finally found a problem that you can solve. It is painful and there is no solution in the market that can solve it in the way people in that niche want. The question to ask now is: “What are people willing to pay for something like this?” I cannot give you an exact answer but I can tell you that it depends on the value you add to your client’s business.

What you want to know is:

• How much time does it take monthly to do the task you are solving?
• How much money could be earned in the same amount of time?
• How much faster would it be to do the same task with your solution?

The basic idea is to convert saved time to saved dollars. Of course, if your solution saves dollars monthly, it becomes an investment for the business. My limited experience showed me that saving people money and pain gets them really excited.

I can give you an example from my interview with the architect. Once again, the problem was something he was solving with an Excel spreadsheet. I asked him how much time did it take and he told me at least three days. Three days of architect’s time means a lot of money. So, if you can help him solve the problem in one day, you are not only saving his money but avoiding pain (because the problem was painful to solve, but  it needed to be done).

Conclusion

Now it’s up to you. Try to put these in practice, and find a niche to build your first product. Please share your thoughts and remarks in the comments.

Edmundo López B. is a PhD student in computer science at the University of Geneva and an entrepreneur in the making. He loves building things, learning new stuff, and  playing classical guitar. He decided to make the jump directly from school to entrepreneurship. He blogs at edmundo.lopezbobeda.net.