Last month, we discussed the “pre-start-up” processes before starting a business. We reviewed our personal motivation for starting the business – we discovered our Why, made a list of our skills and resources, and explored where to find ideas for the business. We ended with a look at the market potential. 

This month, we go deeper into action planning using rapid, feedback loops to get the business off the ground quickly and with minimal risk.  

The steps I recommend (using a home start-up beeswax business to illustrate) requires answers to the following six questions:

1. What problem does your customer have? People who are allergic to petroleum skin products.

2. What solution are you selling to them to solve this? An organic lip balm made of beeswax.

3. Do you have the skills and resources to provide this product/service?  Yes, maybe you have beehives and you have experimented and developed a lip balm.

4. How are you going to sell it? You can sell at the local church market.

5. Do you have a unique selling point? Yes, locally made, organic, allergy-free lip balm.

6. What price should you charge? A standard lip balm costs R9.50 per tube. If you can make a superior organic, allergy-free version for less than R5, you can sell it at R10 per tube.

Action step: The next step is to book a place at the church market and get talking to potential clients. Do they use lip balm? Do they find it works for them, or does it make their lips even drier? Have they ever tried an organic, allergy-free lip balm? Would they like to buy their first sample and join your preferred customer list?  

This face-to-face customer experience fast-tracks learning for a very small cost [1]. It gives you the opportunity to speak directly to the customers, get their honest opinion about the product and test their willingness to buy your product for R10. It might even be the chance to ask them if they would pay more for a scented balm and where they would usually buy their lip balm? At the end of the day, we have invaluable feedback on the product, our sales pitch, our pricing and our go-to market strategy. This information is business start-up gold! 

The fabulous book Great by Choice by Jim Collins describes how highly successful, mature businesses consistently succeed against all the odds and even in really difficult and turbulent times (just like the one we are in right now) using this same strategy. Short trial runs to quickly and efficiently test and refine your product or service before launching a big campaign, is a skill to use throughout the business journey. 

In a start-up, minimal risk means risking what you can afford to lose. In my experience, people who invest more money than they can afford or impulsively resign their job with no other income stream often suffer a high fear of failure, which leads stress and unwise decisions. Throwing everything into the business and forcing its success works for the lucky few and is not personally recommended. 

The low-cost, low-risk model strategy I have used successfully starts small and rapidly goes into testing phase, learning and improving, building skills, knowledge and market understanding. The book the Lean Startup by Eric Ries explains how early experimenting can help you launch the business fast and at lower cost. This aligns with what the IT sector defines as the agile method in which progress is made in small little steps rather than one big bang. 

In summary, this simple method for finding answers to important questions will help you succeed. The Business Model Canvas (a one-page business plan) can also help. As some of the sections can be confusing, let’s summarise by saying that in our beeswax lip balm example we have answered:

• the value proposition: the customer problem we are trying to solve and the product to match,

  See Also

  

  Why young South Africans choose entrepreneurship

• the customer segment: namely who is our customer,

• customer relationships: how we are going to find them,

• identified key resources (beeswax, how to make a lip balm, where to buy a sample tube and find a church network),

• and have made progress towards understanding our cost structure,

• and tested if there could be a revenue stream from sales.

This is great progress and will get you where you need to be in double-quick time. How did you start your business? We would love to know what worked for you.

Next month: What happens once sales start coming in and whether to go it alone or have a business partner.

[1] Let’s add up our first outing costs: Beeswax R2 per tube, sample tube 50c each, handwritten labels 15c each (x 25 tubes = R66.25) , sundry costs such as telephone, data, car travel to the bazaar R250 and church bazaar R100 per stand = R416.25 in all