How to start your online marketplace
Introduction
Marketplaces have typically been capital intensive to start. They required significant upfront investment in platform development costs, marketing, support, and operational capital.
In this article, we will discuss the three main points of following the lean startup route: minimize the initial startup costs, maintain a minimal and sustainable monthly burn rate, and then thoroughly understand the business and the requirements of what you are building, along with the needed runway.
1) Minimize your Initial cost
with the availability, of existing platforms like Laraship, and APIs, the traditional product development lifecycle can be significantly reduced. No-code tools can be leveraged to build initial products and marketplace MVPs (Minimum Viable Platform) at a fraction of the budget required to build them from scratch.
We recommend focusing on the launch, user acquisition strategies, and marketing on unpaid channels. This will likely involve some research so you get to understand where the ideal user for your marketplace platform exists online
2) Reducing Your running cost
After launching with little to no costs, it’s very easy to take initial revenue generated and start spending with opportunities that might seem to have a high ROI. As a bootstrap marketplace though, it’s important to build as much revenue as possible, while keeping monthly expenses to a minimum.
It might be tempting to invest significant resources to acquire users through paid channels, improve a design element, launch a new feature that allows for more advanced functionality, or even scale the team. However, it’s important for bootstrap businesses, in particular, to keep track of your unit economics. You need to understand how to prioritize, roadmap, and always be conscious of your monthly expenses and burn rate.
Not only is revenue allocation for maximum ROI something that I prioritized with Studiotime, but something that other bootstrap founders will agree is critical.
3) Understand business requirements & continuity
One of the first steps in doing so would be defining your defensible value proposition. Think about the core value you provide, how you do so to both user groups, and how this correlates to be the best marketplace for your niche that you can be. With this understanding and mission, you can more easily identify your most important product, operational, scale, and other business requirements. It may seem trivial. But when you and your team have a clear, shared understanding of what your mission is, it will be much easier to prioritize work and turn down opportunities that would sidetrack your business.
Looking back at it now, it’s clear to see that it was a distraction. We spent considerable time and resources to develop, market, launch, support, and operate an opportunity that was not part of our core business. The investment required to build, launch, and then also kill off the integration of the sub-marketplace put us in a really bad position. We were operating almost in the red zone and had a very short runway.
Thankfully, we got back to our focused mission in time to recoup most of the lost costs.
Conclusion
At the end of the day, starting a marketplace is all about maintaining a low burn, generating revenue that surpasses your burn, and constantly increasing your runway so you can be in a better position as a revenue-generating business.
This is, of course, all easier said than done. but starting is an incredibly rewarding way to run a marketplace. It allows you to grow as you want. By not raising outside investment, you won’t end up being forced to chase growth and revenue metrics, expand into other markets to grow your market size, or other factors that venture-backed businesses deal with. Instead, you and your team remain in charge of where you want to go with your marketplace.
