By now, we all know that the sharing economy has been steadily growing for the last few years without needing to read long reports about the growth rate (which is higher than that of every traditional rental sector, just for the record). We can see it all around; we search AirBnB first when planning a trip and our thumbs naturally gravitate towards the Lyft app instead of dialing a taxi service. Entrepreneurs are especially familiar with the sharing economy, as it’s a great way to launch a business without owning the actual product for sale. Some may think a sharing economy startup is easier to launch, since these services are mostly digital and externally owned. On the contrary, between building up a previously nonexistent marketplace for unique off-site meeting rooms and brainstorming endlessly for operation solutions, our startup (www.spacebase.com/en/) has kept our sleeves rolled up for over 3 years.
As with every piece of the startup founder’s puzzle, there are plenty of articles about what to know before going all in on your startup. You will, as a startup founder, find unlimited advice about what other people think you should do. These tips are simply reflections about the biggest tasks we’ve faced and how you should approach them. The most important tip isn’t on the list, but right here: get ready to roll up your sleeves and put in the hard work that every successful startup needs.
Research Your Market and Test if (and Where) You’re Useful
Businesses in the sharing economy are dependent on the customers and providers to make the service useful. You may feel pretty sure that your new P2P service is going to revolutionize its industry, but without first making sure there is a market demand as well as supply, your idea will quickly become a dusty, unused site taking up space in a corner of the internet. After you’ve figured out the business model and basic organizational decisions of your idea, you need to find a big enough, responsive enough marketplace for your startup to sustain itself. Both the supplier and the customer side of the market must be extensively researched – and don’t forget to consider the geographic location in your studies. You may find that there are tons of customers in your city but hardly any suppliers. There are lots of options for doing market research on a budget and it can even be totally free if you check out enough resources.
After you do the legwork of your market research, market testing is the next step. The market research may show you that there are plenty of ready-to-buy customers and a matching amount of ready-to-sell suppliers, but that doesn’t mean they’re going to use or care about your service. All the research in the world still can’t give you a bulletproof, surefire guarantee that your startup will succeed. The only way to find out how your product will do is to release it and see. Build a basic product, put it out there and see if people go for it. In the beginning, it will take some effort to entice people to use your brand new product but overall, it will help you spot problems that would inevitably occur down the road.
My co-founder Jan Hoffmann-Keining and I founded our sharing economy startup because we were tired of the fact that the meetings market was monopolized by boring, traditional venues. We realized that the sharing economy could offer a solution to the monotony and began researching our idea and trying to figure out if it would work or not. We read all the research that was available on the demand for meeting services, the supply, the growth of the industry, you name it! Still, there were things that we could’ve only learned by conducting a market test.
We released our product in a few different large cities at first. We did well in Paris and Berlin, but saw very frustrating results in Barcelona. People often saw us as a sketchy middleman and worked to cut us out of our own deal. It turns out that traditional industries in Spain, such as taxi firms and hotels, had published campaigns to make sharing economy services (specifically Uber and Airbnb, their competitors) seem risky and cheap, which is something we had not been aware of before testing that specific market. We learned the hard way that it wouldn’t work there, but since the release in Barcelona was a simplified version of Spacebase, the losses were not as great as they could have been if we had skipped tests and research. Skipping sufficient market research and not testing the market could easily lead your startup to a big flop, so make sure you do your experimental homework before sinking all your time and energy into it.
Make Sure You Offer Value to the Right Side
You already know that your startup must offer value to be successful. While it’s true that sharing economy startups have two sides of the marketplace to worry about, buyer and seller, there isn’t as much work required here as founders may think. One side of the marketplace will not need you to add much value because the service will most likely offer a high value intrinsically. For example, Airbnb doesn’t need to spend massive amounts of money to entice apartment owners to use their site; the owners will list their apartment because they will obviously get money for doing so. Figuring out which side of the marketplace needs more value offered to be convinced is easy. It boils down to a simple question; which group do you find yourself wondering the most about, asking, “Why would they use us when they can…?”
Once you answer your question, focus your hard work on them. You can even begin gauging the market during your market tests. You may think it’ll be too hard to see what the market wants and needs from your company, but it can be done in a basic way. During the test release of your product, the easier side of the marketplace can be “faked,” or arranged to be offered without having come from organically driven consumers.
Let me explain the market tests we conducted back in our pre-launch days. We knew we wanted to make a sharing economy platform for venues but we didn’t know exactly who would use it in the beginning and in what way. We created a (very) basic version of our site and enlisted not only our office’s meeting room on the site but the venues of friends and colleagues. In this way, we “faked” the seller’s side of the market, although the product, the consumers and the bookings were real. We needed this test to gauge the usefulness of our service but also to get feedback from customers to find out how we could provide more value.
A grey area for offering value exists in the sharing economy. Some people with ideas think, “Matching the private buyers and sellers offers value in itself!” Unfortunately, founding a sharing economy startup isn’t that simple, and you must offer more value than the matchmaking. Matching up the sides of the market is the basis of any sharing economy startup, but if you don’t offer some kind of extra value, you won’t stand out against competition or be able to sustain loyal users. There are plenty of different ways to offer value to your users, but researching and solving your users’ problems is the key to attracting more users (and helping the existing ones grow).
At Spacebase, we offer reports on bookings and conversion rates to our venue providers as well as tips on how they can get their space rented out more. Meeting bookers have different needs than the providers do, so we offer value to them by providing detailed comparisons on prices, availability, map location and extras for the meeting venues they’re considering. Going above and beyond for your users is what will push you forward as the leader in your field.
Understand and Connect with Your Target Group
After you’ve seen that your startup has worked during your market tests, you can start to think about how to draw more customers to your business. Of course, you’ll need plenty of brainstorming time to consider your marketing strategy, but before you get ahead of yourself with your new advertising ideas, you need to understand your target group. You can spend lots of time and money trying to get a certain crowd to use your product but if you don’t understand the needs and challenges of the target group, they could very well come to your site, see that one crucial thing they’re used to is missing and leave. A mistake that I’ve seen some startups make is that they find their service easy to use, so they market themselves as easy to use, but fail when their target group doesn’t find them easy at all. You might find your service easy, but if your target group has difficulty and you aren’t offering support, your marketing was useless.
Of course, marketing research can help you figure out a lot of the buying habits of your target market. However, getting direct feedback is more effective because it not only gives you personal insight into new opportunities and features while simultaneously building a strong line of communication with your users. Researching your target market’s spending habits is helpful, but using surveys, polls and focus groups asking what your users spending priorities are can be even more useful, as it can provide a clear hierarchy of which features to invest in.
For example, our biggest target group is meeting planners, or in plainer terms, executive assistants and office managers. This group of professionals are the ones who we aim to drive to our site, but most often, they’re used to booking their meetings manually and offline. When booking meeting venues, the traditional habit is to call a few venues and ask about different aspects. Since our service is completely online, so we provide onboarding as well as customer service to help meeting planners figure out how to use our site. We also provide comparative suggestions for those who are looking for a pros and cons list. If you want to say that your service is easy, you have to take time to make sure you are easy and address your customer’s concerns.
Build Your Trustability
Trustability is the basis on which to build your business. In the sharing economy, the trustability of your startup is directly correlated to your success. Transparent customer reviews are a huge part of the sharing economy’s trustability, but they’re not the only part. In fact, it has become important to make sure this isn’t your only form of trustability, since Time magazine says they are less trustworthy than ever.
Instead of searching desperately for the next new thing to influence trustability, focus on the traditional basis of trust in any business: great customer service. While you’re starting out, be thankful for any early adopters who’ve decided to give your product a try. Show your gratitude by providing excellent customer service which should consist of offering help and information as they start and, more importantly, reacting as quickly as possible in the event of a mistake or unhappy transaction. Word of mouth travels fast, so work as hard as possible to make sure the comments about you are positive. Customer service also helps boost your trustability by making connecting with your company very simple. If customers are able to voice their concerns, questions and problems directly to a readily available representative of your company, they are less likely to view you as a shady, behind-the-scenes middleman.
You should also find out what your users’ specific worries about your trust factor are from feedback or market research. For example, the idea of booking an offsite meeting venue is relatively new and this new idea is quite different from the norm, in this case, hotel meeting rooms. You know what you’re getting when you book a hotel meeting room; it may be completely boring and stuffy, but at least you’re sure that you’ll be meeting in a safe, suitable and helpful venue. We’ve combatted the uncertainty of unusual offsite meeting rooms by adding venue scouts to our team who physically visit the venues on our platform to assure the usability and uniqueness of the venue. Find personal ways to assure your customers that you can be trusted; they’re sure to appreciate that more than the words of random, faceless quotes from review givers.
An additional way to assure your users is to charge a fair price for your service. Offering your services for free may seem like a good idea to entice traffic to your company, but it can give the impression that anyone can walk up and sign up to contribute to your sharing economy startup. Whether your startup is working P2P or B2B, your service will gain points in trustability if you have usage, sign-up or service fees. People don’t expect to get great things for free and are more likely to trust a business that doesn’t have low (or nonexistent) prices. A survey conducted by the McKinsey Quarterly shows that B2B companies were likely to perceive low prices as a brand weakness as opposed to a strength. It can be good to make clients pay for your product; not only does the price show that you are offering value but it also represents a wage that shows clients you’ll be working for them.