So you want to create a new on-demand app-based service? Then read below!
After the exploding growth of Uber and AirBnB many investors are eager to fund the next booming on-demand business, and as of today the startups and apps are thriving on many different sectors of the service economy.
The Uber for X market has exploded, as there are a never ending list of Uber-style startup companies being launched with mobile apps. The Uber effect is real.
Now the question is, how does one go about creating their own Uber-style app? We answer that below.
The Uber Startup Company Process
You can find software developers who will whip out an app that basically clones the Uber model and adapts it to your particular niche. But in order to make an informed business plan and to profit from the network effect of a two-sided marketplace such as this, you should closely consider the following points:
- You must create your own business model: Of course, you have to respect all copyrights and intellectual property when creating your new on-demand venture, but also you must research your market in order to tailor-make a service adapted to your customer’s needs. Simply copying another business model won’t do: look at the failure of BlaBlaCar, one of Uber’s competitors. There are no one-size-fits-all solutions in on-demand business models, you must experiment and find the one that works for your particular venture.
- It is not only about having an app: Creating an app is the easy part, but the real business is the offline service you will provide and it implies adequate management and logistics, as well as providing smooth transactions between providers and users, supplying them with quality resources and keeping it all working in sync and constantly available, as in on-demand.
Take the case of Homejoy, which shut down with a lawsuit on worker misclassification: management could not specify whether their handymen and maids where actually contractors or workers. - Specialize and become the go-to solution for your niche: Any starting company must find its own territory and establish a solid customer base. Don’t try to be an all-around service provider for doing that would be more difficult to efficiently coordinate in the beginning. It is better to start out small and very specialized in the service you provide. For example: to create an on-demand window cleaning service and to strive for your brand to become the first people think of when they see their dirty windows. And be prepared to face competition, because if your business model is profitable there are sure to come many players to the field. That also means that you will have to battle for the loyalty of your customers: they could easily dump you for a competitor if they don’t like something about your service.
- Be prepared to face high operational costs: Mind that the cost to profitably run and scale up an on-demand business could easily get out of hand, and not because of the technology, but because of the way the business itself behaves. Many companies have failed because they expanded too quickly and could not keep up with the costs while expecting a higher customer flow that didn’t happen. An on-demand grocery delivery company called Good Eggs had to reduce its operation and lay off employees because of that. And Rivet & Sway could not keep up with mailing eyeglass frames for their customers to try out, which implied an unsustainable customer acquisition cost.
- Know when to grow your operation: too little scaling up could be fatal to the life of your on-demand business, because this kind of enterprises depends on a high volume of transactions with a low margin of profit. Bigger is definitely better, but to scale up is particularly difficult if the service requires to establish a physical presence near the customer. Take the case of Cherry, an on-demand car wash startup that briefly operated in the San Francisco Bay Area: they shut down because they could not cope with the logistic challenges of growing their service availability to other areas. In order to become sustainable and profitable your on-demand services startup must get repeated and frequent users and at the same time acquire new customers by expanding the territory.