“Write a business plan!”
Countless times, I have said this on government platforms to large mass audiences, usually to a young generation, but not always. This is the standard response to people who go to the trouble of asking for help from government officials.
I always believed that a business plan was the key to starting a business until I attended Lean Startup Machine Jo'burg a few weeks ago. Over the course of two and a half days, a group of enterprising people came together over a weekend to test ideas and convert them into ready to launch businesses on Monday morning.
What is Lean Startup Machine? The biggest risk in starting a business is not being able to acquire customers. LSM is a 3-day workshop that teaches you how to build something customers want and run the right experiments to steer your business in the right direction. Is Lean Startup Machine a hackathon?
No Business Plan Needed
Not knowing anything about the Lean Startup Methodology my views of starting a business were radically shaken. We started on Friday evening by spit-balling ideas which are voted on by the group.
Everyone then joins a group and over the next 2 days, go through a process of testing the premise of the business idea, invalidating assumptions around that idea and most importantly, going out to test market demand.
At the end of the weekend you should know if this idea is a possible business or a waste of time. What I learnt is that
all businesses are simply and only an idea. An idea that is a solution to a problem someone has. People with problems buy solutions.
This is important realisation. If you don’t test the idea and the implicit assumptions around it in the market, then your business will go nowhere, even if you write the promised plan to go along with it.
A market is just a willing buyer and a willing seller. The seller identifies a problem and provides a solution to a person willing to pay for it, the buyer.
Included in the price, is the profit motive and the ability to create wealth and riches for the seller which changes lives. The whole of economic theory can be summarised by a Lean Startup adage,
"Not every solution has a problem, not every problem has a solution but for every person with a problem a business can be created.”
This is the most uncommon yet most basic and fundamental ideas - businesses need people with problems or they wouldn’t exist. The key for the business owner is to find the easiest, most efficient solution to distribute the solution whilst making a profit. No one can do this if the business premise and assumptions of the idea aren’t tested. Inevitably, once you start testing your premises and assumptions, you quickly realise that your original solution no longer has a problem.
Maybe even the identified problem isn’t what you thought it was! Enter the most important part of the Lean Startup Methodology, the pivot.
The pivot is where based on the facts and evidence from testing your ideas, a decision is taken to change direction. To give an idea of how massive the changes can be.
One team's idea started with audience participation in tv and movies and ended at an app, that identifies items and tells you where the cheapest place store to purchase them is.
That's quite a pivot but none of this is bad. As you go through the Lean Startup process you become aware of your market, take feedback seriously and identify areas for exploitation easily.
These are the keys to creating a successful business, not a business plan that has no real connection to reality.
Once, after leaving an imbizo, a young person walked up to me and handed me his 20+ page business plan. I literally jumped out of my skin! No one was actually supposed to take a politician seriously. What was I supposed to do with his business plan, I didn't know anything about business? I am not sure what happened to him or his business idea.
The beauty of Lean Startup methodology is you don't need another organisation such as a politician or a bank. These are obstacles between you and the market, and when you sell something, the key is to be as close as possible to those buying it.
The real reason why people who don't know how to start a business give the standard response of “write a business plan,” is because aspiring entrepreneurs don't test their ideas.
Testing ideas in the market, where your potential clients live and spend money is the only way to make sure your idea is a profitable business.
Lean Startup destroyed the myth of the business plan for me and it should for you as well.
It's the best thing that can happen for any inspiring entrepreneur.
Remember identify customer with a problem. Create a solution. Test your assumptions. Decide success criteria - basically.