How to Create a Minimum Viable Product and Save Your Budget

The main reason startups fail is a lack of understanding of market needs. Of course, there is no point in creating a product that nobody needs. But very often, a new product idea seems great only in your head (until you actually implement it).

That's why it's crucial to test the product to see if it meets people's needs.

But what do you do if your budget is limited and you can't afford to test every little piece of the product? Moreover, the second most common cause of startup failure is insufficient funding.

The best way out of this situation is to develop an MVP.

What Is an MVP?

Imagine you've come up with a brilliant business idea. It pleased everyone close to you, and they encouraged you to give it a try. But can you be sure they did so only because they didn't want to offend you or ruin your relationship? Before investing every last penny into developing a full-featured solution, you need to test your hypothesis on a broader, unbiased audience.

You can do this by creating a minimal version of the product with the core features that solve the main customer problem you intend to address. A minimal feature set speeds up time to market. However, even with a limited feature set, the product must still be “viable” – that is, it must work.

The primary goal of an MVP is to validate the core idea of the product, analyze user feedback, and use that data to build the full version. In the B2B world, experts say that an MVP isn’t truly an MVP until you can sell it. The image below perfectly illustrates the right approach to building an MVP.

Many successful companies prove the value of developing MVP products. For example, in 2006, Daniel Ek and Martin Lorentzon launched a small service with a single feature: streaming music. Today, their product Spotify is valued at 5 trillion rubles, has partnerships with major record labels, and boasts 50 million active users.

In 2008, when renting a hotel or accommodation while traveling was a major hassle, two enthusiasts found an unusual solution and decided to rent out their own apartment via fax. This was essentially an MVP too, with the core function being testing. The experiment showed that the product was in demand, and today Airbnb is one of the largest websites for short-term rental housing.

An MVP doesn't have to have fancy design that might distract users from understanding the product's value. However, the UI and UX should be intuitive and simple. We'll come back to this point later when we discuss MVP examples. For now, let's look at what building a Minimum Viable Product can offer a SaaS entrepreneur.

Benefits of an MVP

Strictly speaking, all benefits boil down to one phrase: “market feedback.” To be more specific, building an MVP helps you:

• Understand whether there’s a market for your idea
• Assess the product’s potential
• Gather information about consumers
• Identify the product’s weaknesses
• Attract investors for further funding
• Refine the product to meet market needs
• Reduce engineering time by narrowing the feature set
• Avoid unnecessary expenses

In short, a Minimum Viable Product is a cost-effective learning tool that helps you validate an idea and determine whether it’s worth investing in a full-featured, expanded version.

Common Myths About MVPs

Despite the simplicity of the MVP concept, several misconceptions surround it.

An MVP is a low-quality version of the product.
Such thinking can do you great harm. A viable version of your product should have a limited number of features – that’s true. But the quality should be as high as you can possibly deliver. The ultimate goal of an MVP is to attract early adopters, present your idea, and see whether the market accepts it. Low-quality products will not make a good impression by default, nullifying all your efforts. A number of failed products have already proven that MVP design matters. Today, the word “viable” is often replaced with “lovable” to emphasize the importance of creating a product that people genuinely enjoy using.

An MVP helps you get early users
On one hand, yes. Early users will be your first audience. However, an MVP is not a marketing strategy. It is more of a development method that allows developers to create better products based on customer feedback.

An MVP is a prototype
Not necessarily. It largely depends on the nature of your product. Landing pages, mockups, or demo videos of a non‑existent product can also work. The goal is to convey the essence of the product idea, and the form can be any of the following:

• Prototype
• Piecemeal MVP
• Wizard of Oz MVP
• Concierge MVP
• Landing page
• Demo video
• Product design

Types of MVPs

There are many different approaches to building an MVP; let's talk about the most popular ones.

The Flintstones MVP

Remember how in the popular cartoon "The Flintstones" the father created the illusion of driving a car (there was no fuel, he just ran inside the vehicle)? The Flintstones approach (also known as the Wizard of Oz MVP) involves simulating product features, even though those features are not technically implemented. The goal of the MVP is to test a hypothesis and prove the viability of the chosen business model.

Initially, this approach had many critics. Nick Swinmurn, the founder of the online shoe store Zappos, proved its validity. He created a website and posted photos of various shoe models. When Nick received the first orders, he went to a store, bought the needed pair, and shipped it to the customer. In this way, Swinmurn tested whether selling shoes online was viable, initially spending no money on warehouse rental or inventory – he simply simulated product availability. By 2015, Zappos' market value reached 200 billion rubles.

What Is a Concierge MVP?

This methodology is suitable for online services whose ultimate goal is to automate solving problems for a target audience. In the early stages, you deliver the service manually.

For example, suppose you want to offer a financial accounting service. To test whether this idea is in demand, you start by creating a few financial plans for clients manually in Excel. This way, you see whether people are willing to pay you and how much they are willing to spend. You can also test which features are most important to your audience and should be implemented first.

This model was used in the late 1990s by Chuck Templeton, founder of OpenTable, an online restaurant reservation service. Instead of immediately investing thousands of rubles in technical implementation, he manually booked tables at restaurants for other people. In this way, Chuck tested the viability of the idea, learned how much users were willing to pay, and studied his audience.

Piecemeal MVP

The piecemeal MVP method is used when you can test and implement an idea without developing unique software. To use this type of MVP, you assemble already existing services and tools and combine them into a single interface. This saves the money and time you would have spent developing your own technology.

An example here is Groupon, an online coupon provider. Initially, it was a WordPress site where all user interactions were handled via email. Only after receiving feedback and financial results did they develop social features, a full mailing system, automation, and finally the popular mobile app.

Single‑Feature MVP

This type of Minimum Viable Product is used when you have a product with a minimal set of features (often just one). We already mentioned Spotify, which used this type of MVP.

Releasing a product with a single feature lets your customers clearly understand what problem they can solve with your service. As a result, you clearly define your target audience, get feedback, and then begin MVP testing.

When and Why Should You Develop an MVP?

You should start developing a Minimum Viable Product at the initial stage of the product lifecycle. A product idea may seem great only in theory, so there's no need to take risks and invest large amounts in development. Building an MVP allows you to spend less while gathering all the necessary data to validate your idea.

After releasing the minimum shippable product, you'll determine demand and understand whether you are moving the project in the right direction.

But the most important thing in an MVP is collecting valuable information from early adopters. It is the end user who will tell you whether the project is implemented correctly. Use the collected data to plan future updates and prioritize which features to implement first.

How to Build an MVP

Now that we've covered some theoretical points, let's move on to the practical part – building an MVP. Designers.

To achieve a good result, break the work into stages of MVP creation, set goals for the team as a whole and tasks for each member individually. But first, make sure your team understands the common principles of working and building the product.

Preparation Stage: Defining the Basic Principles of MVP Creation

Hold a general meeting with the team that will be involved in MVP development. Make sure all team members understand what you are going to do and why. Discuss the vision of the MVP, bring everything together, and draw up the first rough plan for further work.

At the general meeting, discuss the following questions:

• How to spend minimum resources? Remember that you must create an MVP with a minimum of time, money, and effort. Figure out how to spend less while still effectively testing your business idea. As a rule, discussing this question helps choose the MVP functionality to implement at the initial stage of new product development.
• How to interact with users? One of the main goals of creating an MVP is to test hypotheses and determine whether the product is in demand and relevant. Collecting feedback from early users helps achieve this goal. To avoid missing important information, think about how you will interact with the target audience: reviews, surveys, direct interviews, etc.
• How to make the first sales of the product? The first sales will provide funds for further development and show whether anyone is interested in your product. You can also consider organizing a fundraiser (pre‑sale) on a crowdfunding platform like Kickstarter.
• How to promote the product? Plan an advertising campaign and the channels you will use. The main tool here is usually Google AdWords. Then choose social networks (Facebook, Instagram, etc.), create official pages there, and launch targeted advertising. Social networks are also great channels for collecting feedback.

Develop a selling landing page: describe the product, talk about its features and benefits for the customer, and give users a choice between a paid and a free version of the product.
At this team meeting, try to involve as many specialists as possible to examine the idea and test options from different perspectives.

Stage One: Defining the Problem the MVP Will Solve

Once you have defined the basic principles of the MVP, answer the question: “What problem does the product solve?”

Describe its value in a few sentences. This will be useful for you and your team, and later will help when creating the unique value proposition, landing page, and advertising campaign.

Stage Two: Defining the Target Audience

A common mistake among novice entrepreneurs is thinking that their product solves problems for a broad audience. Instead, you should focus on a specific target audience.

Create a user persona – a client who will definitely buy your product. Describe their gender, age, social status, income level, needs, habits, and even the devices they prefer to use. Determine what common problems they have and what they want to solve.

Don’t rush! It’s better to spend a few extra hours defining the target audience than to blow your entire ad budget with minimal conversion.

Creating a user persona gives you an understanding of whom you are going to sell the product to. This information will help when organizing the advertising campaign.

Stage Three: Researching Key Competitors

It's hard to develop a completely unique product or idea. Even if you haven't encountered a similar offer, that doesn't guarantee you have no competitors.

You need to spend a lot of time researching the market. You'll be lucky if the idea turns out to be truly unique.

If you manage to identify several competitors, do the following:

• Gather as much information as possible about the main competitors. Analyze the top three competitors: study their development history, check what products they offer, learn their unique value proposition, and assess whether you can offer something better.
• Study the competitive position of these companies in the market. Determine their strategies, sales volumes, and calculate profitability. This will help you understand how successful they are and what you can do to outperform them (and, importantly, how many resources you will need to spend).
• Find out how these companies present themselves. Look for information that competitors publish about their activities, study their official websites, presentations, annual reports, advertising campaigns, etc. This may give you new ideas for developing your product.
• Learn what other channels say about your competitors. Browse news, videos, reviews, interviews, ratings, etc., that feature information about competitors. This will help you better understand your chosen industry and learn more about the market situation.

Stage Four: Creating a User Journey Map

It is very important to develop an application that is convenient and easy to navigate. To understand whether your product provides a good user experience, test it yourself. If you have trouble using the service, the consumer definitely won't understand how your product can help them.

To avoid this problem, build a user journey map when creating the Minimum Viable Product. It will show what the user does when interacting with the product. You must understand what content, design, and interface the audience expects to see.

Also, don't forget to make edits to the user journey map after receiving feedback from early customers. Feedback will show what works well and what is inconvenient and should be changed. Based on this information, adjust the map so that end users get what they want.

Stage Five: Defining Features

At this stage, you need to determine the MVP functionality – in other words, plan the scope of the Minimum Viable Product.

First, identify a few core features without which the project cannot exist. This is the skeleton or the smallest usable version of the product.

Then think about what other features you want to include and set their priorities. Determine which features are essential and should be implemented right away, and which can be added later during project development.

It's better to prioritize features together with the team. Discussions and debates will lead to an optimal scope for the Minimum Viable Product.

Stage Six: Developing and Testing the MVP

You are almost there! You have a great idea, you've defined the tasks, goals, and scope – now it's time to develop the MVP and test it.

MVP testing is done in two stages. First, when the MVP is ready, have your team use the product for a few days. If everything is fine, give early users access to the product. Let them test it for 7–14 days.

Then collect feedback, statistics, behavioral analytics, and analyze the entire data set. You'll see which features need improvement, which functionality to remove, and which to add.

Testing the product will help you create an optimal first version that you can bring to market and continue to improve.

This was the last of the six stages of the Minimum Viable Product development process.

Conclusion

By going through these six stages, you'll end up with a solid Minimum Viable Product that can evolve into the first version of a full‑fledged project. Don't be afraid to make changes to the MVP development process. The sequence of steps outlined in this article is not a strict rule but merely an example you can use to create your own unique product.