At a recent StartupWeekend type event I mentored at, I noticed that many people don’t know how to quickly test a business model. Plenty had an idea, but had no way of knowing what the next step is. All you need to ask is What? Who? Why? How? and then test every answer and update.
In one sentence, what problem are you solving? What is the pain point that you are relieving? Keep it super simple. It should describe what you do. “We do X and Y”.
Who has this problem? What do they look like? How big is the market? Are there different segments or groupings in this market? Can you find real stats on how big it is? Jot down a couple of types of customers and some details.
Why do these people need you to solve the problem? What other solutions are out there and why are you different? Will they pay big money for this problem to be solved? If it is such a big pain point, they’re going to be going to lengths to solve it already – what does that look like?
How do you solve this problem for those people? This is the description of what you do. (2-3 sentences max) Whats the process that you need to follow? Keep it tangible (what actual actions do you take?) and descriptive without using jargon and big words. Nobody likes big words.
The next step is to write down the following additional headings “Money“, “Problems” and “Competitors“. These are pretty self explanatory and under Money try and identify a few ways that you could charge. (packages, per users, monthly license, as well as what range you’d charge – $5pm or $500pm?) Problems are the things that jump out for you as hurdles or potential pitfalls that you’ll need to overcome, and Competitors are just that.
Remember that a competitor is not necessarily someone who does what you do, but someone who your customer would give money to instead of you.
The final step is to test those answers. Go and talk to the people in the Who section and ask them if they’d pay for the What. Use the Why and the How to persuade them. Get feedback, streamline your answers and ask more people. Google forms and Facebook polls are great, better yet call them or speak in person.
By this stage you should be well on your way to starting your business plan. If it’s part of a Startup Weekend type event, use these steps as the main slides in your presentation. Add a slide for potential money in (next 6 months or max 2 years) and add a slide of Spend (What you need money for to build the product and what you’ll spend it on. )
It’s all Leanstartup from here on out. Build a MVP and get people to use it. Ask people who have experience with your target demographic what they think. Test if you’re picking the best target market and if you have Product Market Fit. Then take all that info and put it into a leancanvas – the iterative online 1 page business plan. But thats another post…