How to Start a New Business Using the Lean Startup Method (part 1 – target customer)

Launched in tech university entrepreneur programs in California, the Lean Startup Method is expanding to other universities across the United States. After studying the failures of tech startups, the main goal of the Lean Startup Method is to eliminate all time, energy and money spent on creating products or services that nobody wants to buy. This method is intended for startup businesses, but it can also apply to existing businesses that want to grow.

Proponents of the Lean Startup Method say that most startups fail from a lack of customers. If you don’t understand your customer, you don’t know what products or services to build, or what features to include. So the first steps of Lean Startups involve identifying the potential customer and what problems your company will help them solve, or what opportunities your company will help them take advantage of. And once you have an idea, you need to reach out to actual prospects and test whether they actually have those problems and opportunities, and will pay you to help them. Don’t let your product launch be the first test of customer acceptance the way so many tech failures have done.

So: no more theoretical business plans. Test and verify every one of your assumptions before you spend a lot of time or money creating a product or service that nobody wants.

Step 1 – Target Customer

Who are your potential customers? If they are consumers, what are their demographics and where are they located? If they are businesses, what industries are they in? What size is your target business? Where are they located? Who in the business makes the decision to buy?

What are their important problems (“pains”) or opportunities (“gains”)? Pains could be high cost, poor performance, or time spent to do something. Gains might be saving money, saving time, increasing income, or increasing status. The problem or opportunity has to be important enough to get the customer to take action and spend money.

How will the decision maker measure success – cost, product/service performance, speed performing a task, effort needed to perform a task, social visibility, or some other measure? How much of an improvement will you need to offer to get them to buy your product or service?

After you have answered these questions for yourself, go out and talk to members of your  target market and make sure they really have these problems or opportunities, and whether they will be willing to pay for them.

Armed with this information, you can develop your value proposition.

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