Three questions you need to answer before starting a business
What is a Business? You may have different opinions and answers to this question. However, have you ever thought of what you need to consider before starting a business?
Instead of zooming the concept of business into a large scope, I’d prefer to introduce a business in the following definition.
A business is an isolated unit, which can create and deliver business value on its own.
You can have several business lines in your organization, which can create different business values for all the parties, including customers, end-users, and the organization itself. You can survive and make money in existing businesses. Everything just makes sense as it is. You have a well-functioned product; You have loyal customers; You have stable revenues.
However, nowadays, when facing fierce competition and numerous uncertainties along with black swans, things change fast.
As a project manager, you are pushed to add more functionalities to support more business; As a business director, you are asked to expand your business lines to make more revenue; As a CEO, you are expected to start new businesses to fulfil the shareholders.
No matter in what situation, when starting a new business, especially a zero-to-one business, you may always want to ask the question, does it make sense, then?
There are three questions you should want to answer before starting any business. After answering these three questions, you will be feeling better about it. At least, you feel safer to say it loud whether it makes sense or not.
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1 Is there value for your user in your new business?
This is the fundamental question of every business. What values do you create for your users? This question is barely neglected. Even without considering this question, most of the business people know we need to solve some real problems so that our products or services can be sold. Besides, in most scenarios, people have the initiative to start a new business because they believe they can create something different to solve something smartly. But if you want to think about this question thoroughly, there are three aspects you should consider to ensure the value does exist: User, Need, Scenario.
It resembles the user story in Scrum. As a (who), I want to have (what) so that I can do something(why). A user story simply explains the value of a request or a feature, which is similar to a business. You also need to define those three aspects of your new business. For example, a food delivery company wants to expand its business to the retailing industry, such as clothes. Then how to use User-Need-Scenario to consider their new business:
Firstly, whether there are people who want to order clothes online? From home after work? From office during lunch break? From on the way to a friend’s home?
Secondly, whether there are clothes sellers who want to sell their clothes online other than their existing e-commerce channels? Under lockdown situation? what if there is no corona any more, the need still solid?
If both answers are positive, then we can say OK. We are going to help both parties to connect and make the transaction happen on my platform. There is indeed value to my users.
HOWEVER, there is one common mistake people often make after analyzing the user value. They think there is value, so there will be a business for us. They always forget the second question I am about to introduce:
2 Can you ensure to keep delivering the value to your customers?
This is the question people usually ignore after thinking over the first question. They tend to believe whenever and wherever there is value, there is a business. In a way, it is correct, however, the business might not be for you. One of the most reasons is that you need to ensure that you can continuously and steadily deliver values to your customers. There are three aspects you should concern to secure the value delivery is a continuous process, which also is depended on what business you are doing.
Firstly, if you are in relative to a manufacturing business, one of your biggest concerns is to secure your production. Are you able to produce enough products for your customers? How long?
Secondly, if your products rely on a supply chain or distribution, you wouldn’t expect any of these channels to be obstructed. Are you able to keep your supply chains or distribution running smoothly?
Lastly, if you are in the digital service industry or your services are delivered in a digital format, the capability of sustainable creation and delivery would be highly expected from your end-users. For example, are you able to make daily videos if you want to be a vlogger? Are you able to keep providing creative content if you are a digital marketing agency?
Let’s look back at the case previously. The food delivery company finds the user value in connecting clothes sellers and buyers via their online platform. Can they ensure to keep delivering the value to their customers? For example, a couple of things you want to go through before you decide to start it.
- Can I provide a stable and secure online platform to sellers and buyers?
- Can I keep onboarding new sellers to my platform?
- Can I make sure sellers will keep updating their stocks and products?
- Can I keep user acquisition to my platform?
- Can I keep my users buying again? (customer retention)
- …
Of course, you can keep asking these questions and expand this question list over and over. But the core here is to understand whether you can have a solid value delivery process, if not, maybe you need to build it; If yes, then congratulations, you can continue to the last question.
3 Is this a scalable business?
After the first two questions, you feel you have everything in hand, however, the last question can decide how far your business reaches. Actually, this is the question every investor is interested in, and it is always asked in another way: how big is the market? However, a scalable business also refers to the alibility to scale the business even if the market might be huge. Like the previous two questions, there are three aspects you need to consider.
- Can you win the traffic fight? And how?
The traffic can refer to both offline and online traffic. What you are competing with is not only from your competitors but also from the outsiders of the industry. For example, in the previous case, the new business from this food delivery company will not only try to lure customers from other food delivery companies but also all the other online platforms, such as Amazon, Aliexpress, TikTok, Facebook, and even your clothes sellers themselves. Everyone is trying to get attention from their users, and everyone in this world only has 24 hours per day, so in a way, it is a fair fight:) But, it also means that the more time is spent on others, the less time will be spent on you.
2. Can you grow? And how?
The growth should not only include some financial figures, but also the approach to keep the growth in terms of business operation. You may obtain numerous customers at the beginning by having some campaigns, but you can’t rely on this. You also need to know how I can keep them and leverage the approaches to keep growing.
3. If you are doing B2B business, then the key question is can you win the deal?
In some specific contexts, there is value, there is the market and there is everything. But, there might be no chance for you to win any deals, especially in some B2B areas. You might need to consider more factors than the business itself, such as political risks.
To sum up, I introduce an approach by raising three questions for those who want to start a new business. Also, more details and aspects you need to look into are explained and interpreted. If you want to have a quick take away, the mindmap of the thinking flow is illustrated below:
How do you think of a business? Feel free to comment and share your thoughts! In my next article, I will explain how to leverage this method for different companies which are in different stages of their lifecycles.
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