Last week I found a business plan I once wrote, dating from 2009. I was 22 years old, studying Computer Science. And, I was seriously considering becoming an entrepreneur.
I remember downloading a business plan template from a local bank. I skipped most dull parts and went full monty in the technology and summary sections. It’s hilarious when I read back the plan, but it was a useful exercise back then.
This was the startup idea (translated from Dutch):
A company that sells software which is super dynamic and can be used to rapidly create new custom software platforms, specific to the needs of our clients.
Lucky for me I found a job that excited me more than chasing this ‘dream’. I now know this idea is incomplete and misleading.
This got me thinking. We all have half-assed startup ideas. Take a minute and try to think of the last business idea you had. I bet it only mentions the product or service you wanted to launch.
We think we’re done after we envision the solution to a problem. Wrong. So, let’s flesh out this subject. By the end of this article, you’ll be able to effectively structure startup ideas so they actually mean something.
The definition of a startup idea
We’ll begin with the definition. To me, an idea is an opinion, a belief or a gut feeling. In Lean context: it’s a hypothesis that is not yet substantiated by data or validated learnings.
A startup idea is a hypothesis about commercial activity.
The crux is in the ‘commercial activity’. This means supply and demand and of course it involves customers. Customers have a need for something otherwise they wouldn’t be buying. They need it in order to solve a problem, the product or service provides an advantage to reach a certain goal. And there we have it, the 4 ingredients I want to tell you about.
The 4 ingredients of a startup idea
A lot of people say that your idea is worth nothing. Now, I don’t entirely agree, your idea is worth something when written down properly. I use a formula based on the 500 startups elevator pitch. This formula touches the crucial points in our startup idea definition:
For example, Slack’s business idea would be: “We solve inefficient communication (problem) by making online collaboration simpler and more effective (advantage), to help teams (customers) accomplish hyper-productivity (goal).” I listed more examples at the end of this post.
I like the formula because it is short, it works really well for SaaS ideas, and it forces you to choose your words wisely. It’s like a business model canvas on steroids.
Now let’s have a closer look at the different ingredients of the formula.
#1: the problem
The no.1 reason startups fail is that there’s no market need. There would be a market need if you’re solving an itching problem for a customer segment. Until this reason drops in the ranking we have to keep emphasis on it. Think about it, what problem are you going to solve?
Your startups’ job will be delivering value to your customers. The value depends on how often your customers have the problem, and how bad they want it solved. The answer to these questions follows later when you start interviewing customers or experimenting with a solution.
By the way, Paul Graham wrote a great piece on how to get startup ideas for those already stuck at step #1.
#2: the advantage
The advantage is what your startup is going to do about the problem. It tells about what you’re going to change about the status quo.
Now don’t try to come up with an endless list of features and serve it as the advantage. Customers don’t care about your solution. They care about their problem:
- Features are facts about products or services; they add credibility and substance to your sales pitch.
- Benefits give customers a reason to buy because they explain how your product or service improves their lives.
A simple trick I found is to imagine the best solution ever possible. Then you translate the features of the solution into benefits by asking yourself ‘So what?’. Keep peeling the union by asking the question until you’re left with the true benefit.
#3: the customer
The customer is the person or organisation who will benefit from your solution. The customer often pays the bill, but there might be some edge cases: your customer uses your solution to solve a problem for their customer, like in B2B2C.
Also, the more specific you get, the better. For example, ‘parents with children under 18’ is better than ‘parents’ and ‘parents with children’. Note that you will learn more about your customer segment along the customer discovery journey (interviews, experiments etc). Update your idea statement when you have new information.
#4: the customers’ goal
Enter what the customer is trying to accomplish here. The customer is having a problem accomplishing a certain goal. Your solution will provide the customer with an advantage so that the customer can reach the goal with less friction. Otherwise, your solution is a bad one.
Wrapping it up
So now you know how to write down a startup idea. This is way harder than just coming up with a solution that says “we’re building an X for Y”. Now you really have to understand your customer, feel their pain and of course, feel their relief with your solution because now their goal is within reach.
Also, it’s ok if you don’t know if the problem is real and if your customer segment actually has the problem or a goal. The 4 ingredients are all assumptions ready to be validated by you. The Lean methodology, customer development in particular, will help you with that.
And a final note. Re-evaluate your startup idea every now and then. Don’t treat it like it is written in stone. Along the way you’ll learn and get new insights, so use that.
Bonus: Startup idea examples
Here are some examples using the startup idea formula:
- Buffer — We optimise social media posts appearance on followers’ timelines (problem) by providing a way to schedule social media posts (advantage), to help individuals and businesses (customer) accomplish higher engagement rates on social media (goal).
- Dropbox — we solve the problem you can’t find, share or access your files (problem) by providing secure cloud file storage and sync (advantage), to help online users (customer) to access their files everywhere, from every device (goal).
- Uber — We solve intransparency in the transportation sector (problem) by providing a platform to find a ride with transparent pricing in just a few clicks, (advantage), to help commuters (customer) to get from A to B (goal).
Now try to come up with some yourself. Try Airbnb and Paypal for example, it’s harder than it looks.
Thanks for reading! Please, hit the 👏 button if you enjoyed the post and make sure to follow me if you like to learn more about Customer Development, analytics and SaaS.
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