Big Problems for New Business (Part 1)

October 17, 2011

Cases, Customers

Delivering Bad News

This weekend I had to give a great friend some really bad news.  And it was tough to send that email.  Took me weeks to do it and hours to shape it – to make sure I wasn’t too harsh, too negative, dumping too much rain on the parade.  But he asked for my opinion, and I had to tell the truth – he had a terrible business plan.

To set the stage, my friend, “Bob”, has been working on this business for 2 years.  He was recruited by the inventor to help bring this new product to market.  He has an equity stake in the new company – sweat for stock.  And, he will be laid off by the end of the year.  Really.

Their LLC has ordered the first 25,000 units and they are one month away from launch- Nov 2011.  He even pulled the soft-launch to Facebook friends this week.

I just got all the documents at the end of September to review and comment.  It was a tough few weeks.

Across the full business plan, there were a myriad of issues, but I want to focus on some of the basics, first.  Since they don’t have these right, all the other stuff won’t matter.  And the basics discussed here are material to you if you have an operating business and are looking for, simply, more customers and more money coming from your business strategy.

To be fair, these guys are first time entrepreneurs and, more importantly, first time ‘product’ guys.  There might be a few readers that have tripped up on the same parts of a business strategy that Bob and his team did.  There are great lessons here.

I have broken this case summary into pieces for you, because each piece is a great lesson.  There is a take-way from every small chip in the strategy.

Who’s the Customer?

So, this was the shocker that let me know right away that I was not going to have a good summary for Bob.

As I dug in, as you might guess, I went for the market and customer descriptions within their plan.  In a similar situation, having never seen the product before and not knowing much about the industry, you might do the same before trying to assess the product.  So here is what I found.

    • The market is “fitness”.
    • The customers include: weight lifters, military staff, marathoners, sprinters, yoga students, physical therapy instructors, coaches . . . This is all listed on the home page.
    • The product has “so many uses”.

Do you feel it too?  Do you see it?  The target customer is much too broad.  There are many many sub-segments in this market.  A favorite quote I have used in this type of situation is: “Something for everyone is nothing for anyone”.  Trying to serve all segments will not deliver a valuable, tangible, desirable, emotional result for anyone.

I even went a level further in my notes, asking not just “which segment is the most attractive?” but added “who’s the actual purchaser?”  I couldn’t figure out who was going to buy this.  Would it be an individual athlete, self-training?  Or is this for coaches to use or give to their top athletes?

You might know exactly how this happened.  It’s the excitement of the product.  The internal discussions that tell you “Everyone can benefit from this!”  It’s the family circle saying “That is just great!  You guys will sell a ton!”  It’s the picture of the financially independent future just over the horizon.

But, without a clear customer, no value can be delivered, no money made, no independence.

This is a super tough starting point.

So What Can You Take Away?

Make sure your base is sound.  Take a few minutes to really analyze and describe (write this down) your customer – focus on excruciating detail.  Note things like age, actual annual income, family situation, business type (if B2B), gender. . . continue to hone in on the very specific person or business that you believe is your target customer.  When you can actually picture and describe a real person or a specific business?  That is a good sign.

<——- Over Here! Don’t forget to “Tweet”, “Share” or “Digg” this post. [hr]
, , , , , ,

No comments yet.

Leave a Reply