Investing in seven figure software, tip #2

So you have an idea for creating your own seven figure software. Or you’d just like to know what comes next. Maybe you have a vague idea of what you’d like to create. Perhaps you’ve taken a few steps down the path of what may be involved to make the idea a reality. You might even have some requirements or specifications written down.

Wherever you’re at in the process of investing in seven figure software, thankfully you can avoid the perils of creating the specifications yourself and leave that to an expert at a later date.

Now, the most important thing you can do is to validate your investment. It’s an investment because software in general is expensive to create. Anything that is likely to be expensive should be treated with an investment mentality.

You have to ask yourself, what will we get out of this? What kind of return do we expect. And if you do this upfront, you have the unique opportunity to do this without any bias from what may be involved.

Every step you take down the path of effort, or what it’s going to take to make your idea a reality, you become that much more biased in the path you’ve laid out.

You’ll find it increasingly difficult to return to discussions of value and worth. Once you’ve prescribed a particular solution, you become attached. Other equally viable plans will be blindly dismissed. Cognitive dissonance sets in and the path itself will become the end of what you’re trying to accomplish. Success becomes defined in terms of walking the path. Regardless where it takes you.

So don’t let this happen. Instead, make sure the investment is worthwhile, upfront. And if it’s not, choose another or abandon the effort altogether.

This entails pursuing the return on your investment. Figuring out the potential margin of profit on your investment. ROI is simply what you will gain divided by what you will pay. The first part of that is what you will gain. Don’t bother trying to understand what you’ll pay until you know there’s enough potential gain.

Because if there’s not much to gain, why bother with how much you’ll have to pay to gain it?

If you’re idea is worth five thousand dollars, it’s not seven figure software. It doesn’t have to actually be seven figures ($1,000,000) to be worthwhile, but it has to be worth pursuing. Worthwhile means there’s room for significant margins. 5 to 1, 10 to 1, those are seven figure margins.

And there’s not much room for margin in five thousand dollars. So by diagnosing value upfront you can quickly identify and avoid marginal investments.

What is it worth? That’s something you have to ask yourself and those around you. Value is subjective. Here are some things you can consider:

  • What’s in it for our customers? How can we improve the work they do? How can we better serve them?
  • What’s in it for us?
  • What’s in it for me?
  • Why do we want to do this?
  • What impact will it have on morale?
  • What long term impact will it have?

And sometimes the best question to ask is how much money can we make? Money can force people to be honest about the value of their ideas. If everything is simply intangible, that’s often a sign that you haven’t thought enough about the value of a project. Or, it’s a sign that there isn’t much value. Seven figure software will have many intangible benefits, along with many tangible benefits. Quantify and qualify them.

Whatever you do to diagnose the value, you’re setting yourself up to understand what success will look like. And you’ll have a dollar figure along with a laundry list of reasons to prioritize what you’re going to do.

This understanding will make deciding to proceed a no brainier. You simply need to find a method that costs a fraction of the value. And because you know what’s valuable you’re free to find alternatives and pick the best option.

This process of understanding value is much less work than prescribing a solution. At this point, if there’s not enough value to pursue a solution, you can stop and move on to other investments.

If the investment has significant potential gain, you simply need to find a solution to make it happen. Be conservative with what you think you’ll gain and liberal in estimating cost. And so long as the margin is there, you can devise a solution as you go. Instead of worrying about the nuances upfront. All while remaining confident the end result will be lucrative.