Fall in love with the problem, not the solution: 6 questions all aspiring entrepreneurs need to answer.
If you are an experienced entrepreneur, stop reading and move on to something else. Much of this article is designed for the novice entrepreneur, with the thought in mind that if we can get more nascent entrepreneurs to think critically about some of the questions raised here, perhaps fewer businesses that are doomed to fail will ever be started.
There are few instances when 30% success rates are heralded, revered, and looked at in a positive light. One example is baseball. A batter that gets a base hit 30% of the time is an extremely good hitter. Another example is a business that makes it to the ten-year mark. The business failure data has remained stubbornly high with 23% failing within a year, 33% within two years, 50% within five years, and 70% of businesses fail within ten years.
Are there entrepreneurial lessons to be learned by the 30% that make it past the ten-year mark? The number one reason businesses fail is a lack of market need (a.k.a. solving a non-problem). We also know that misunderstanding finance generally, and cash flow specifically is the second greatest contributor to business failure. Both factors (market need, and lack of financial understanding), can be mitigated through entrepreneurship education. To help you along this road, I have developed this article to cover two broad topics. First, to provide some guiding principles to reflect upon when you get the entrepreneurial itch. Second, is a six-question model I use both in practice as an entrepreneur and as an entrepreneurship faculty member at Hillsborough Community College’s InLab@HCC to help mitigate business failure.
Below are some guiding principles to consider when thinking about starting a business. These are not original, they are not fool proof, and they are certainly not the way, but rather a way of thinking about acting on an idea. First some general ground rules. 1) People new to entrepreneurship tend to focus on the wrong things (money, fame, venture capital, a private island they can purchase, independence. retiring at 40 years old etc.), 2) Develop a mindset that ignores all those items and instead has a myopic focus on the customer, 3) Fall in love with the problem, not the solution, 4) Share your idea. People tend to over value their ideas and are reticent about sharing their ideas based upon the misguided notion that someone else will steal the brilliant idea. Let us just say that most ideas are bad, and even the ones that are good are difficult to execute upon. In the world of starting businesses, executing a business model is a far more valuable skill than coming up with ideas. Not sharing your idea does not make the idea a good one. It simply makes it more difficult for you to receive the much-needed feedback one needs to determine whether to move ahead with the idea.
Ten guiding principles, sort of
1) You are not the customer, 2) No customers, no business, 3) Everyone is not your customer, 4) Sales trump everything when starting a business — do not focus on the unimportant things, 5) Developing a realistic pathway to positive cash flow is critical prior to launching a business. Not sure what cash flow is? Stop reading any further and go learn about cash flow. 6) The business idea must be desirable (desired by others), feasible (something that you have the resources to create), and economically viable (sustainable financial model where cash inflows exceed cash out flows). 7) Cultivate a strong sense of empathy for others. Early on, spend 95% of your time speaking with and learning from prospective customers, and 5% thinking about how to build the solution and what features the product/service should include. 8) How much are you prepared to lose by starting the business? Saras Sarasvathy refers to this concept as affordable loss. Often, novice entrepreneurs get caught up in thinking about the success, the upside, who the business can be sold to for a financial windfall etc. In fact, Sarasvathy’s research on effectuation points to expert entrepreneurs thinking about none of these factors early on, but instead thinking about what they are willing to lose to get the business started. Thinking this way may cause you not start the business because the risk is too great, Alternatively, knowing your affordable loss can lead to opportunities to distribute the risk you unwilling to take onto others. 9) Know whether you are starting a high growth innovation driven enterprise (IDE) — hockey stick financials — or, if you are starting a small to medium sized enterprise (SME) — better known as a small business. This is important to know because there are vastly different financial requirements and risks associated with each. 10) Check your assumptions and ego at the door. The one thing all entrepreneurs would love to know before starting a business is whether market demand exists. Egos can get in the way here. People with an inflated sense of worth, or exaggerated optimism about their idea tend to skip some critically important steps, and instead assume customers will simply love their solution because it is so clever. The build it and they will come approach is a recipe for disaster.
Six questions you need to be able to answer before starting a business
Early on, you should be leveraging the wonderful startup tools that have been developed in recent decades like the business model canvas, and lean startup methodology. You have two primary jobs during the pre-launch days. 1) Work hard to kill the business idea each day. If you are unsuccessful, you are most likely onto a good business idea. If you are successful and you learn the business idea is flawed, you may discover a more important problem that needs to be solved, but if not, it is far better to cease working on a flawed business and avoid experiencing the financial pain that comes along with launching a business that has no market. Ideally, you want to prioritize the assumptions you have about your business idea in order of most to least critical. In other words, start with the most crucial business assumption you have, and try to disprove that assumption.
1) What is the problem you are trying to solve with your business?
a. If you cannot articulate the problem you think exists, stop working on your business.
b. If you can communicate the nature of the problem you think exists, then move on to question two.
2) Is there a cluster of other people — customer segment — (friends and family members are not a customer segment, so do not ask them) that agree with you that the problem you have identified, is indeed a problem?
a. If you cannot identify a group of customers that confirm that the problem you think exists, does exist, then stop working on the business.
b. If you can identify a customer segment that validates the problem, then move on to question three.
3) Does this group of customers think the problem is a painful one, and if so, how painful is this problem for that group of customers? Are you selling medicine or vitamins? It turns out that most consumers (B to C or B to B) are far less likely to pay for a solution to an inconvenience or annoyance. However, if the problem rises to a painful problem, consumers are far more likely to pay for some pain medication, i.e., your solution. TIP: When asking questions to measure how painful the problem is, try to stay clear of yes/no type questions. They can be very misleading.
a. If you cannot determine that the problem, you are attempting to solve is a painful one for your targeted customers then stop working on the business.
b. If you can measure (through surveys, interviews, and observation) that the problem is a painful one, move on to question four.
4) Are customers willing to pay for a solution to this painful problem? Depending on the nature of the problem your business is attempting to solve will greatly influence whether a customer is willing to pay for a solution. Even though a problem is a painful one, this does not guarantee that the customer is willing to pay for alleviation of the problem.
a. If you can determine that your customer segment(s) is unwilling to pay for a solution to the problem, stop working on the business.
b. If you can validate with data that customers are willing to pay for a solution to the painful problem you have identified, then move on to question five.
5) Are customers willing to pay for MY solution? This question is the first time in the process that you are introducing and overtly speaking about your idea. To answer this question will require you to “share” your idea. Often, we may discover that while a customer is willing to pay for a solution to a problem, they may not see value in your solution. If you can figure out what the customer does not like about your solution, you may be able to course correct. If what is desired by the customer is something you cannot produce, this should be a red flag to stop moving forward.
a. If you can determine that customers are unwilling to pay for your solution, and you are unable to modify your solution to satisfy customer desires, then stop working on the business.
b. If you can validate with data that customers are willing to pay for YOUR solution, move on to question six.
6) Can I build my product/service, and start my business? Most people with limited experience with business enterprising will start with a question one — identifying what they think is a problem — and then jump to question six — start trying to build the business. By skipping steps 2–5, you will have increased the chances that you are attempting to solve a non-problem, and not be able to know if your business concept is financially viable. In most cases, if you can affirmatively answer questions 1–5 with validated proof, you should be able to launch your business with confidence. In fact, if you can answer questions 1–5 and realize you lack financial resources to start your business, the fact that you have validated the problem, a pain point, a willingness to pay for your solution etc. will make gaining access to capital far easier.
Community colleges are one of the best places to inexpensively cycle through an applied and experiential entrepreneurship certificate/degree program that allows you to safely learn more about the steps mentioned above, and work through validating your business model. Community colleges are extremely diverse, so you are around people working on their business ideas that have distinctly different life experiences. It is this rich diversity, coupled with the open access culture of community colleges that provides an interdisciplinary and innovative pathway for leveling the playing field of opportunity for all. One organization that provides advocacy and resources about community college entrepreneurship education is the National Association for Community College Entrepreneurship (NACCE).
