Guest Post from Andy Gold: 6 questions all aspiring entrepreneurs need to answer
Great advice here from Andy which should be shared with your students looking to start businesses. See if you can guess one of them before reading further.
Thanks to NGPF Fellow Andy Gold for contributing this post, which originally appeared on Medium. Andy teaches entrepeneurship at Hillsborough Community College, has started many businesses and even written a book, Community Colleges as Incubators of Innovation.
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).