Defining a Minimum Viable Business
Many entrepreneurs have learned that their dreams and the hundreds of ideas that need to be executed to accomplish them are simply too big. This leads to a dramatic narrowing down process designed to help them enter the market with a product that can be developed quickly and that customers want to buy. Essentially, the goal is to define the minimum viable product to enter the market.
This does not mean giving up on the big dream and vision for creating a new future. Instead, it means taking a pragmatic systematic approach to making it happen. One benefit of this are lower costs to enter the market as a much smaller subset of the product/service are created. Another benefit is lower risk as the entrepreneur has a more focused project to manage. It also means having actual paying customers lead the future of the business to its rightful place, which takes a lot of guesswork out of the plan.
A minimum viable product is not a compromise of your dream or a way to diminish your creativity. In other words, it is not a prototype or a demo of the potential product. It is a method designed to get you to market faster, at the lowest cost and with a product that customers actually want to buy. This means it must be a high quality, complete, reliable product for the features and functions it performs. It also requires effective marketing, sales and support as any other product.
To arrive at the final minimum value product, you will assess the market demand, customer sales potential and the precise functionality in the product. However, many entrepreneurs leave out an important dimension to this assessment and that is economic or financial viability. You are creating a business, after all and if the business can’t produce a profit and a strong operating cash flow then it simply is not viable.
Even at this early stage of clarifying the product features and assessing whether customers will buy it, you must begin to understand whether this product/service idea will be financially viable. Consider a few key questions. What happens when you sell one of something? How much does the customer pay? What did it cost you to make or deliver? Is service or implementation work required ahead of product usage? When does the customer pay? When do we start to incur costs for this deal and how long does that continue?
Some of these questions may be difficult to answer early on, but the answers will help you to understand the importance of cash flow and profitability. You may even make significant changes in your assumptions about the way the business will go to market. Your vision is to build a highly profitable business by selling a lot of something valuable to customers. Don’t lose your focus on the vision or the goal of making a good profit as you plan your minimum viable product. Expand your thinking about your minimum value product to mean minimum value business.