5 Steps to Lean Business Startup

The lean business start-up is about creating a sustainable business quickly with a minimal investment.  You want to find out quickly if your product or service is something that customers will pay for and if they will pay enough for you to make sufficient profit to survive and grow the business.

Lean Business Startup is also a scientific process.  This means it is objective, rational, and impartial.  Quite the opposite of most business start-ups. Typical entrepreneurs have a dream, a vision, and a passion for an idea that they will not give up on no matter how much adversity they encounter.  A scientist, by contrast, will form a hypothesis, devise an experiment to test it, and accept the results of the experiment even if it shows the hypothesis is wrong.

The hypothesis for every business start-up is that there is a market for the product or service that the business produces.  The experiment is to offer the product to the market and the results will be either that people will buy the product or they won’t.  If they don’t buy then the startup’s hypothesis is wrong and the business needs to come up with a new one based on the observations of the behavior of the market.

The sooner a business can receive experimental results, feedback from the market, the less time and money the business will spend building the wrong product and the sooner the business can be successful with the right one.

Lean business process flow

The Lean Business Process

The steps to lean business success are:

  1. Identify a Market Need
  2. Create an MVP – Minimum Viable Product
  3. Create an Offer
  4. If the offer is successful then think of a way to improve it and create a new MVP
  5. If the offer is not successful then re-evaluate the market need, MVP, and offer and create a new MVP

Identify a Market Need

If you are reading a blog on lean business startup then you probably already have a business idea that you  hope will be successful.  Ideally your market need is something that causes people pain that your product or service will help.  People don’t buy good ideas.  They buy solutions to they problems they face; things that will benefit them and make their lives better.

Create an MVP

A minimum viable product, or MVP is a way to determine if there really is a demand for your business idea.  Instead of spending months or years working on your product, perfecting every feature, not showing it to any potential customers until everything is just right, you cobble together the minimum product that a customer could find useful and then see if anyone will buy, or at least try it.

The reason for doing it this way is to eliminate waste.  You don’t want to waste a huge amount of effort on building the wrong product. I’m sure that you believe that your idea is going to generate millions of dollars in sales, however, until you actually have sales then your belief is an unproven hypothesis.  You need to do an experiment to prove your hypothesis.  If you create an MVP and people buy it then your hypothesis is correct.

Your business start-up idea may be an elaborate new invention with lots of great features that would require a large team of engineers and a huge investment to complete.  But for an MVP you only need to pick one key feature and figure out the most bare bones way to deliver it.

For example, my vision of dbEasy is to create a complete online application development platform that could be used by anyone from an Internet novice to a professional developer to quickly and easily create a powerful web database application that will run in any browser or mobile device.  But I have a bit of work to do before the whole product will be finished.  So my initial MVP is a simple online form.

Get Started with dbeasy

People can fill out their contact information and I will build a custom application for the cost of a packaged product.  This could mean that I would end up working for pennies per hour, but it would allow me to get paid a little while developing the platform and force me to focus on building what people want.

To create your MVP you need to think of what is the simplest thing that you could sell either right now or very soon with little effort to get it ready.  It should be the first step of your final business vision and something that meets a need of your target market.

Create an Offer

If you build a better mousetrap then the world will not you exist unless you find people with a mouse problem and convince them that your mousetrap is the best solution.  People can’t buy what they don’t know about.  People won’t buy something unless they feel they are getting a benefit worth the price and better than any other product they know about.

Along with your MVP you need to develop your USP – Unique Selling Proposition.  There is a lot of information on the USP.  I’ll cover it more in future posts but you can start with Google.

For Lean business you need to be able to get your USP in front of prospects quickly and cheaply.  For some items EBay or Craig’s List may be the way to go.  There may also be a group or user forum that will let you post your offer and link to your website.  If you have a small budget then Google AdWords is an excellent tool for test marketing.

Practice Continuous Improvement

The next box in the Lean Business Startup Process diagram asks the question, “Was it successful?”  To answer this you need two things:

  1. A definition of success
  2. A way to measure it

Depending on your MVP, the definition of success might be an actual sale.  Or perhaps getting people to sign up for a free trial would be a sufficient first step.  Then in the next iteration of your MVP you can ask for the sale.

Google Analytics will help you measure visitors to your website, where they came from, and how much time they spend in your site.  This will give you the size of your marketing funnel.  Your have prospects to whom you pitched your USP resulting in a certain number of visitors to your site.  Then you can figure the percentage of visitors that buy, or fill out form or whatever your goal was.  Now you start to know if you have a sustainable business.

If you think of a business as a series of experiments then you need to learn from each one and make adjustments before starting the next.  You can then continue to improve and add features through a series of additional profit experiments.

But what if your experiment fails? What if no one buys or tries your MVP?  Then you need to reevaluate your assumptions and come up with a new MVP to test.

Which brings you back to the start of the lean business process…

Advertisements

One comment

  1. […] This should help you brainstorm several ideas about how you could make money doing what you love and are great at.  You can pick what you think are the best ones and test each one using the Lean Business Process. […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s

%d bloggers like this: