Heard of “a business plan”?
It’s how you plan your business, right?
Well, the bad news is that “business plans never survive first contact with customers” – Steve Blank.
This means that you can plan all you like, but real customers with real money in their pockets will buy what they want to, not what you’re selling.
So you are going to create a “business model” instead.
A business model has some elements of a “business plan” and some elements of a “marketing plan” but it’s better because it starts with your customers. And their opinion is the only opinion that matters really.
4 Initial Questions You May Be Thinking Right Now:
Q: “What the heck is a ‘business model’?”
- A business model is simply an understanding of how a business works. How it adds value, how it makes money
- You can achieve that level of understanding by answering the 9 questions coming up soon.
Q: “Will doing this business model first help me win?”
- Yes. Because if you sit down and work on this right now you get the first version of this business model finished in a couple of hours, then you’ll know what to build in Version 1.0 of your product
- Then you can test Version 1.0 on real customers and use that feedback to build Version 2.0. If you have Version 3.0 and your competitors have Version 1.0, who will win? You will.
Q: “How long should it be?”
3-5 pages is about right
Q: “Do we write it once and forget it? Or, do we rewrite it several times?”
- It can (and must) change and evolve
- You might rewrite it once or twice or three times (or 10 times). It will keep improving every time you try and sell to real customers.
Let’s get started!
It’s as easy as answering the following 9 questions.
9 Questions To Get You Started When You’ve Got An Idea For A StartUp Business
1. “Who is our ideal customer?”
We’ve already got our product/service in mind, but we need to forget that for a moment because we need to think about our customers first. So our first question is “who is our ideal customer?”.
Describe them here using bullet points or a short paragraphs.
“Our ideal customer is…
2. “What problems do our ideal customers have?”
Customers will buy from us to solve a problem they have. What is that problem (or problems)? What is their pain?
List the top 1-3 problems they have.
2b How do they solve that problem without us at the moment? What are their alternatives until we’re ready to serve them?
3. “What’s the solution?”
For each problem we listed, we will outline a possible solutions here.
4. “What’s our sales pitch?”
Now we have a picture of our ideal customer, we have identified their problems, we’ve outlined a solution, now it’s time to craft our sales pitch.
Imagine we have just 30 seconds to turn a stranger into someone interested in buying from us. What would we say? What story would we tell? What are we offering? How are we different? What’s in it for them? If we’re offering something brand new we might need to use existing products to help people understand what it is we do. Eg “We are Flickr which is like YouTube for photos”
4b. “What headlines could use on our landing page?”
Now that you’ve got your sales pitch, write a shorter version of it that could be a headline on the landing page of your website. For example, if you want to capture their email address, what headline and bullet points are going to convince them they want what you’ve got?
Write several alternatives here.
5. “How do we get our message to our customers?”
What advertising will we do? Will we need to hire salespeople? How would they find customers? How will we build in viral elements to help our service spread to new customers? How will we incentivise our customers to get their friends/family to buy from us in a way that makes our product/service even better and more social?
6. “How will we make money?”
Will we charge per month? Per year? For life? Per use? Per user? Will we offer a “Freemium” version? A “Premium” version? Sell to corporates? Sell to the end user? Get sponsorship? Sell advertising space? Sell for $1.29 in the App store?
7. “What are our costs?”
What will it cost to stay in business? What are our “fixed” costs like building, salaries etc? What are our “variable” costs that increase as our sales increase? List them here and make guesses at the amounts. How much cash do we need to start for our start-up? How long will that cash last?
8. “What ‘key metrics’ will we use to measure success?”
What are the most importants numbers to us? Eg: How many subscribers we have? New users per month? Amount of data being processed per week? Web visitors? Web-visitor-to-Customer conversion rate?
9. “What’s our advantage?”
What is our “secret sauce”? What do we have that can’t be easily copied or bought? What will stop or slow down new competitors from taking customers from us?
Once you’ve gone through these questions for the first time, it’s time to start building version 1.0 of your product so you can get it infront of customers as quick as you can and get that feedback that you need.
Constantly revisit your answers to these questions and change your responses according to what real customers are telling you they will pay for.
Where did these questions come from?
These questions are based on the work of Ash Maurya who created a business model generator called “The Lean Canvas”. You can work through “The Lean Canvas” for free on his website http://leancanvas.com/. Ash Maurya’s model is actually an adaption of another model called “The Business Model Canvas” first created by Alex Osterwalder.