Will my idea be a good business? (How Will I Know?)
It seems there are a million tools to write a business plan and yet few tools to help entrepreneurs vett out their business ideas/models.
Proof of concept, market validation, confirming monetization of your brilliant idea are the first steps in deciding if you should invest all your life savings or give up walking the family dog for a couple years.
My good friend Ted Stoakes is currently working on a book for entrepreneurs. I met Ted years ago at a business conference and ever since he’s been sharing his startup tool kit with me and helping me better understand early stage investing.
Just this past week we’ve been talking about startup proof of concept which is better defined as market validation. It’s the first steps in developing out business models. Answering the questions; will anyone buy and at what price?
Ted is emphatic that the key to success in answering the question, “is my business model a good one” is to validate the market for the product or service. We move past “go” once we have market validation and confirm the monetization model. No pretty plans or final form presentation quality spread sheets….early on.
In the early stages of business model evaluation we are not merely proving we can create the product or service we are also confirming someone -specific someones would want to buy our genius!
Are there confirmed clients? Have you gone to the end users, target and confirmed the product or service? Is the end user and target client helping you craft and confirm the product’s attributes? Are you birthing this business with the end user and distribution channel partners or are you assuming that once your masterpiece is done you will spring it on them?
Can you say dot.com crisis?
Will they buy? Will they buy the unique ingredients you’re planning on mixing up, just the way you have planned and is this thick value – value they can’t wait to purchase? If not, what do they want to buy from you? In the old days we pushed everything out to the client, today the client is on the startup team; they are the answer to will my business idea be a good business! They are research, development and go to market- please enlist them.
Is it monetizable? So you’ve developed an idea and it delivers value through it’s attributes and competitive elements- this leads to assumptions; financial, operational, marketing which leads to key numbers – do the numbers work? And how can you validate, prove, confirm your financial assumptions?
You know what they say about assumptions.
Yep. Be curious. Get in and really ask the questions. Try to validate and confirm every assumption…remember entrepreneurs; your baby is not beautiful! (YET)
Did you notice there is no mention of a business plan here. Business plans are not used to vett out business ideas it would be like pulling out dental floss for a cavity. Business models are a lot like bikes, they are vehicles to move us from here to there in business. We change them up as the journey demands.
First things first. Take your business model and confirm there’s a market that is ready, willing and able to purchase your masterpiece; all the ingredients, attributes you plan to differentiate your business with. Next run the numbers, if the client is willing to buy- at what price for what elements and is this scalable financially, is it doable?
Now proceed to developing out your market validated business model; problem, solution, product, opportunity, competitive landscape, go to market, team and financials and then later that beautiful business plan will manifest, or perhaps if you don’t need investors you will move right to a Go To MARKET plan.
First validate- then model. Onward
Knock and the door shall be opened…seek and you shall find!
Pam Hoelzle More about my work here