With one in four new businesses failing in the first year, entrepreneurs undertaking a start-up must know what they are doing.
That is exactly what Bernhard Schroeder, Director of the Lavin Entrepreneurship Center at San Diego State University, aims to help with in ‘Fail Fast or Win Big’ by offering advice and wisdom gained from his own successful entrepreneurial career.
Fail Fast or Win Big: The Start-Up Plan for Starting Now
If you take the time to look at this practical read, you will learn:
- How the ‘Lean Model Framework’ works
- Why you should create a business model instead of a business plan
- How to use crowdfunding
- How to assemble these elements for entrepreneurial success
Here is a taster of some of the takeaways for me:
Moving fast gives you an advantage and a better chance of being successful.
The ‘traditional entrepreneur’s model’ is now obsolete: once you spot an opportunity, there is no time to write a traditional business plan.
Wow! Creating a business plan wastes time and does not create sales – as well as that a plan ages quickly.
Rather than writing a business plan, devise a business model. This model is your blueprint for your start-up and should identify your ‘revenue sources, customer base products and details of financing’.
Adopt the ‘Lean Model Framework’ to put your business model into action with ‘lean resources’, quick prototyping of a ‘minimally viable product’ and customer feedback.
The Lean Model Framework will help you decide quickly to ‘iterate, pivot or abandon your idea’.
We all know that customer feedback is crucial to your business, so make sure your get lots of it.
You will be working long and hard on your business so,’Love what you do; do what you love’.
What is the Lean Model Framework?
It has four essential components:
‘Lean resources’ – ‘Less is more’ Leverage everything you can to minimise costs.
Business model – A quality business model shows an understanding of the market, particularly your segment and the significant commercial trends shaping it. To gain this knowledge, talk to customers who buy the types of products you plan to sell. Learn about your potential industry by attending trade shows and other events. Visit the competition to see how they manage a similar business.
Rapid prototyping – Quickly test your idea with the group that counts the most – consumers. If you want to enter the ‘food-truck business’ to sell tacos, set up a ‘taco stand’ and see if people like your food. Become well informed before you make a substantial investment.
Customer truth – This is the alternative name and essential nature of customer feedback, which gives you the vital data you need to decide if you are going to ‘iterate, pivot or abandon your idea’.
Schroeder advocates surviving at the lowest possible expense while getting up to speed: make a prototype of a “minimally viable product” or service and test it with customers. You should rely on their feedback to adapt your prototype for the marketplace. If this real-world test suggests your product isn’t viable, move on to something more promising!
Creating a Blueprint for Your Business
Schroeder says that your business model is the blueprint for your enterprise and as such it must include:
Unique value proposition stating the singular way your product or service fixes a buyer’s problems.
Customer relationship feeling You need and want customers to react positively to your offering and feel good when they use it. Ask, “What kind of relationship do I want with my customers?”
Customer target segments – Many entrepreneurs initially try to sell to a broad market spectrum. Instead, focus on a specialised niche and then expand. Ask, “What is the size of the marketplace?”
Distribution channel strategies – What is the most efficient way to get your products or services to your customers? Should you move into the marketplace quickly (‘more distribution, lower gross margin, higher potential sales’) or slowly (‘direct sales, online sales, local retailers, higher gross margins’)? Ask, “Where are my customers?”
Start-up activities – Starting a new business is a huge undertaking. Numerous tasks clamour for your attention. Deciding where to focus can be a challenge. Consider the various segments of your business model, and plan from there. Ask, “What are [the] key things I need to do now?”
Start-up resources – Once you know the sequence of your start-up activities, apply resources to them. Your main goal is to manufacture your product or develop your service. Focus your capital on the most relevant tasks. Ask, “What resources do I need for distribution, developing customers and building revenue?”
Strategic and tactical partners – You will have three categories of partners: suppliers, manufacturers and distributors. Before you enter partnerships, discuss your options and opportunities with other entrepreneurs. Go to trade shows. Learn from the participants. Ask, “What key resources will I get from partners?”
Product or service costs – Use a spreadsheet to outline your direct costs – ‘materials, direct labour and manufacturing expenses’ – and indirect costs – ‘marketing, travel expenses, rent and labour other than direct labour.’ Determine if you have sufficient funds to start your enterprise. Ask, “How can I outsource or cut my costs?”
Selling and revenue sources – Entrepreneurs often find additional income sources that don’t always present themselves immediately. Seek out all possible income streams available. Ask, “Will my revenue produce a gross margin or profit to sustain my business model?”
Take the Next Step
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