Startup Mondays : Simple business planning frameworks
Some of the most important decisions in a startup are made before the first sale. Which customer should you target? What should you charge? What should you build first? How much cash can you afford to spend before the business needs to generate revenue?
Startup Mondays
Some of the most important decisions in a startup are made before the first sale. Which customer should you target? What should you charge? What should you build first? How much cash can you afford to spend before the business needs to generate revenue?
Founders can easily answer these questions in their heads and move on. The danger comes when those assumptions become expensive decisions without ever being tested. A simple planning framework gives you a way to put those assumptions on paper, challenge them and work out what needs to happen next.
Here are four frameworks worth adding to your planning process.
Pressure Test the Business Idea
Before thinking about your product, make sure you understand the problem. Who has it? How are they dealing with it now? How much does the problem cost them in time, money or lost business?
Then ask yourself a simple question: Would this customer actually pay for a better solution?
For example, if you want to build software for small retailers, do not stop at “retailers need better software.” Find out what is actually frustrating them. Is it tracking stock? Managing payments? Keeping customer records?
The clearer the problem, the easier it becomes to build something people will find useful.
Put Your Business on One Page
You do not need a long business plan to understand how your business works. The Business Model Canvas can help you put the important pieces on one page.
Write down who your customers are, what you are offering them, how you will reach them and how the business will make money. Then add your biggest costs and the people or businesses you depend on.
Seeing everything together can quickly expose a problem. You might have a great product but no clear way to reach customers. Or you may have customers but a pricing model that does not cover your costs.
Keep it simple. The purpose is to see how the pieces fit together.
Test Before You Spend
It is tempting to build the full product once you believe you have found a good idea. That can become an expensive mistake.
Instead, test the idea first.
If you think customers will pay for a service, speak to potential customers and try selling it. If you want to launch an app, start with a basic version and see how people use it. If you believe businesses will sign up for a new service, ask them to commit before spending heavily on development.
This is the thinking behind Build → Measure → Learn. Build something small, see what happens and use what you learn to decide what comes next.
Know Your Numbers
You do not need to be an accountant to understand whether your business makes financial sense.
Start with a few basic numbers. How much does it cost to run the business each month? How much does each customer bring in? How many customers do you need to cover your costs?
For example, if your business makes $50 from each customer but costs $40 to serve them, you have $10 left before other business expenses. That simple calculation tells you much more than a revenue target on its own.
Keep an eye on cash as well. A business can make sales and still run short of money if customers take too long to pay.
Founder’s Tip
Do not treat your business plan as a document you write once and forget. Your customers will teach you things you did not know when you started. Your costs may change. Your pricing may need to change. You may even discover that a different customer has a bigger need for what you are building.
Update your plan as you learn.
The best planning frameworks are simple enough to use when you are making real decisions. They should help you answer what are we doing, who are we doing it for, how will we make money and what do we need to test next?
Your Action Plan
Take 30 minutes this week and put your business on one page. Write down the problem you are solving, your target customer, what you are selling, how you will make money and your three biggest costs.
Then write down one thing you are assuming about the business that you have not tested.
Find a simple way to test it this week.
You do not need to predict everything your business will become. You just need a clearer idea of what to do next.
Read more about Startup Mondays HERE
