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Commercial first steps for your startup

Nova startup commercial strategy

Ian Dixon

Ian is a Business Growth Mentor at Nova, supporting startups with their commercial strategy.

Updated 29 July 22

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In this blog we set out some of the very first steps you need to make on your commercial journey. As a founder, you are responsible for knowing the problem, your target market, and the financial milestones you aspire to achieve along the way. If you're partnered with Nova you'll benefit from the support of our commercial team in the creation and execution of your commercial strategy.

The Nova Commercial Team

We are a key part of the Nova startup journey and work with founders from the pre-investment pipeline stage, right through to exit.

We are headed up by Luke MacFarlane, who is a seasoned tech sales leader, with great experience globally.

We have a number of different roles within the team as follows:

Internal Business Growth Mentors - Ian Dixon (myself) and Luke MacFarlane work with founders to create a commercially viable roadmap for the business.


Consultant Business Growth Mentors - We have some very experienced tech consultants who work with Nova to support businesses that are typically at a later stage in their journey. The CBGM will work with founders to develop, implement, and execute a concise sales strategy.


Customer Success Executives - The CSE team is headed up by Lyndsey Beauchamp, and the team works with founders to help manage the sales funnel. This includes awareness and interest, right through to conversion.

Our mission statement

"To guide, mentor, and up-skill startup founders in commercial thinking"

The whole purpose of the commercial team is to be a support, guide, and mentor to founders and businesses. The success of a business is dependent on sales and we work closely with founders throughout the Nova process.

Our commercial roadmap will seamlessly sit alongside product, marketing, and design roadmaps to ensure the best chance of success.

Where to start!

So you know the problem inside out, you have validated that your target audience will pay for a better or alternative solution, and you have established that the market size is big enough to explore commercially.

So where to begin? Let’s take a quick look at TAM / SAM / SOM.

Total Addressable Market

The entire revenue opportunity that exists within a market! 2 popular methods for calculating TAM:
1. Top-down - macroeconomic factors that define certain customers who use a product to solve the problem you are focusing on
2. Bottom-up - revolves around determining the local market size and then expanding this to a wider population.

Serviceable Addressable Market

Without monopoly control or unlimited financial resource, capturing 100% of the TAM is almost impossible.

SAM carves up the TAM into sub-markets that cater to different types of users. This can be defined by things like differences in quality, price, or functionality

Serviceable Obtainable Market

(How much of the SAM can we actually engage with?)

What resources do you have right now (remember you are a startup in the planning stage) and what are the competitive forces you need to consider?

Frameworks such as Porter's Five Forces can help to determine the competitive elements of your chosen sector, which in turn, will help you to estimate your obtainable market share.

Creating a basic revenue model

Now that we have a reasonable understanding of just how big our target (SOM) market is, and we know who our target audience is (for a deeper dive, take a look at persona development), we need to think about some basic economics.

 

Creating a very basic profit and loss forecast will help you to understand whether your business is attractive to investors.

 

Product

Year one

Year two

Year three

Product RRP £250

40 people buy it! £10,000

400 people buy it! £100,000

4000 people buy it! £1,000,000

Direct costs £100

£4,000

£40,000

£400,000

Indirect costs £50

£2,000

£20,000

£200,000

Net Profit

£4,000

£40,000

£400,000

 

This is a simple example of what a very basic P&L can look like. There is a ton of good learning online, and having a good working knowledge is key to commercial success.

The overall aim of a basic P&L is to get a view of your market opportunity and to put a stake in the ground in terms of sales estimates for the next three years. You may have noticed we said ‘estimates’ rather than ‘forecast’ - the reason for that is simple; honing your sales forecast is a lot more detailed and takes time (this is where your BGM works alongside you).

 

In summary

The Nova commercial team works right alongside founders to develop a believable and investible commercial roadmap.

 

Using the TAM / SAM / SOM  model will help you to gauge the size of your target market.

By creating a basic revenue model you will have an idea of what your sales opportunity looks like.

 

By having a commercial roadmap, and a validated serviceable obtainable market scope backed up with a basic revenue model, you are giving your start-up a great chance of succeeding.

 

It won’t be easy! All too often people get stuck down in the detail so much that they take their eye off the big picture. Working with the commercial team at Nova you will be able to reach down deep enough to know what is happening in the detail, without taking your eye off the end goal.

 

One of the best quotes we have heard is this:

Be loyal to your vision, not its execution.

 

If you have any questions about the commercial team at Nova and how they may be able to support you and your startup please let us know in the comments 👇 , or via this contact form

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