This is a map.
It’s not going to tell you how to do things but it’ll guide you through the journey of creating a business.
With it, you’ll see where you are, where you want to go, and the path to get there.
Let’s start from the beginning.
Stage 0: You
Why do you want to start a business? What kind of business would you like to start? What are you willing to sacrifice?
For a map to be useful, you need to know where you want to go, the main reason why, and what kind of journey you want to have.
Said differently, if you’re going to spend the next 10 years building your business, spend at least 10 days figuring out the reason why.
I’ve seen too many people waste months or years of work just to realize that they “hate worrying about what to do next”, “didn’t want to have employees that relied on them”, or “just wanted a part-time side hustle”.
So, before even considering to start a business, think about those 3 questions and only move on if you find strong reasons to do it.
Note : If you happen to realize that you don’t want to be an entrepreneur, that’s already a big success! Celebrate it and go make a better use of your time.
Stage 1: Explore
The first step is to come up with different business ideas, explore some of them and pick one or two you want to validate in Stage 2.
But what is a business idea?
At its core, it’s the relationship between these 4 components:
An Audience — a well-defined group of people
An Opportunity — something that can be improved (needs, desires, problems…)
Your Creation — the way in which you provide value to an audience. Usually a product/service that solves their problems, meets their needs, fulfils a desire…
The Business Model — how you make money
On their own they aren’t very useful but when linked together they form business ideas:
“I’m going to sell (business model) cold, homemade lemonade (creation) to people who walk by my street on hot summer days (audience) and want something to refresh them (opportunity).”
Once you have at least 50, you’ll see patterns of ideas you like, or a bunch of them will keep coming to you over and over again. Merge them, rank them, use what you’ve learned from Stage 0 to pick the one or two you’re most suited to start and move to the next stage.
Stage 2: Validate
So far, your business idea will be based on a combination of how you see the world, some data and your experience.
The problem with that is that most of the time, reality will behave different from what you thought it’d be:
The audience may not be as big as you thought
They don’t care about the opportunity as much as you do
Your creation doesn’t add enough value for them to change
People are not willing to pay what you thought they’d pay
That’s why you need to treat your business idea as a set of assumptions; something you believe to be true but that needs to be tested.
Now, if you think of the 4 components as the pillars of your business idea, validation is how much you can trust those pillars.
Validating a business idea, means therefore validating all 4 assumptions.
“But wait, how do I know when something is validated?”
Well, validation is not a checkbox, it’s more like a ladder or a gradient. You can have weak pillars, solid pillars, fortified pillars… You get the idea.
To make things simple and measurable though, I like to think about 4 levels of validation:
Guess — Something you think it’s true based on your experience
“I guess people like lemonade”
“I guess my lemonade is good”…
Data — You have some data to backup your guess
“Supermarkets sell 1 can of lemonade for every 10 bottles of water”
“The recipe I’ve chosen has good reviews”…
First hand experience — You’ve done some tests and have seen it with your own eyes
“I offered 30 neighbours a free drink and 75% of them chose lemonade”
“I brought 5 litres of lemonade to a family lunch and we ran out before getting to the deserts”…
Proof — You can generate proof that your assumption is right based on repeated experience. (At this point, your assumption has been fully validated)
“Last quarter I sold 1000 litres of lemonade vs 10 of cold water”
“After offering homemade lemonade and industrial lemonade during last quarter, 95% of people chose my recipe”…
Notice that in order to advance, you’ll need to do stuff rather than talk, think or google things.
Eventually, you’ll want all assumptions to be as solid as possible, but in the meantime, you should start by your weakest assumption.
Note : Most people spend most of their time trying to validate the easiest-to-validate assumption, but you should focus on the weakest instead.
After many tests and iterations, you’ll either be unable to validate all 4 key assumptions and therefore will need to pivot or pick a new business idea; or you’ll have first hand experience with all of them, which is a great time to move to Stage 3.
Stage 3: Build & Grow
At this point, you’ve added value to a bunch of people, they love it and demand is growing.
Don’t stop learning now!
Although your main focus should shift to building a way to deliver value at the scale you want and making sure your target audience knows about it, keep exploring nuances about the reasons people are buying from you. In turn, doing this will allow you to deliver more vale and grow faster.
While doing this, you’ll be able to generate proof for all 4 key assumptions and get your idea fully validated. Reward yourself by leveraging your learnings to help your audience while creating a profitable business at the same time. You deserve it!
At the same time you’ll probably need a legal structure around your business idea, so this is where it makes sense for most bootstrapped businesses to create one.
Is there a 4th stage?
Kinda.
Having launched a successful business is a massive achievement but it doesn’t mean that it’s time to relax and forget about it.
You can grow it, sell it, let it evolve naturally, move to another thing… There are so many options that it makes sense to stop for a second or two, reconnect with your goals, and decide.
In fact, your business may have its own identity by now, and you may need to think about its goals instead of yours.
At this stage it’s useless to map out all options, but for those of you who’ll want to grow your business or learn how to run it effectively, I’ll write about that in future posts.
Stay tuned and don’t get lost!