Charlie Pool explains how to get your ideas in order
There’s a lot of talk of the ‘lean startup’ but this normally assumes you’ve actually started building something. There’s a whole stage before you’ve started building which is defining your idea. This stage is crucial and I propose taking a lean approach to planning.
Your goal is to find out as quickly as possible whether the idea is a good one before you waste too much time and money. The traditional thing to do is write a business plan but business plans take ages to write and there’s no way you’ll stick to it, so at this stage avoid writing one.
The reason people write business plans is because they force you to think about your idea from lots of angles. How can we do this without writing one? I would suggest doing 3 things:
- Google ‘what questions do VCs ask’ and compile a list of standard questions. Answer them as honestly as you possibly can
- Build a simple financial model
- Create a Facebook ad
VC questions
You do not need to write an essay when answering these questions, a one-liner will normally do, but the important thing is have an answer that you believe in – remember these are just for you.
I have my own list of questions gathered from learning the hard way: whenever I come across something I wish I had thought of before I’d started I write it down.
That’s essentially given me a diary of lessons learnt. Some of those I rephrased as questions, the most important of which are here – this is my list of questions I would ask myself before starting another business. They go a bit deeper than what a VC might ask because they are from the entrepreneurs perspective, so if these are applicable then maybe just answer these questions.
Financial model
This might sound intimidating if numbers aren’t your thing, but frankly you need to man up and face the reality that as an entrepreneur you need to be in control of your finances.
If you don’t know how to build a simple financial model then learn how to, it’s really not hard to build a basic model and it will be invaluable.
Good financial models are built upon a load of key assumptions, all of which should be inputs that are the drivers for the formulas – you should aim to have the model formula driven and have a ‘control panel’ of your key assumptions which you can easily change.
This approach will save you a lot of time and allow you to quickly test how effective the business model is. You don’t need to go into too much detail but basically work out what your costs will be and how much money you can realistically make. If your income exceeds your outgoings then carry on. If not then make yourself a cup of tea and have a rethink.
Facebook Ads
Go and create an ad on Facebook. It doesn’t even have to lead anywhere – what you’re doing is forcing yourself to think about so many of the questions you need to ask yourself:
- You have 1 line to to describe yourself in, thereby forcing you to think of what people will be interested in
- You have to have an image you think represents you and that will attract people to read your 1 liner
- You have to select your target audience with highly specific parameters
This will put things nicely in perspective for you. You know you have probably never once clicked on an ad on Facebook in your life, so you start to realise the enormity of the task ahead! Use Facebook’s analytics to see how people responded.
If it’s positive, your numbers stack up and you are clear in your mind what the business you are proposing will look like then move on to your next step of validation – market research.
image credit: wikimedia commons