What Problem Are You Solving?
What Problem Are You Solving?
Knowing why people will spend their money with you.
While the stages of business development (https://businesssuccesssecrets.com/2018/06/5-stages-of-business-development/) are important to understand the concept of making assumptions versus validating them is critical to your long-term business success. The real key to long term success comes from understanding the various components of your business as well as possible, and better than your competition: Problem Definition, Solution Definition, Opportunity/Market, Competitive Advantage, Business Model, Culture/People/Structure, and your Business/Financial Plan. Let’s discuss the Problem.
Every business exists for the exact same reason and purpose….to collect cash. It isn’t even good enough to generate revenue. If you never collect the cash and put more cash in the bank than you have to take out at the end of the day, you are in trouble. Every business survives on this basic premise, no matter of size, number of employees or number of investors. The question at the end of each day though really boils down to what are you doing to get people (your targeted clients) to take the cash out of their pockets and give it to you instead of someone else?
The only three reasons people do that are a) to give money to a charity/cause they support, b) purchase a collectible/asset they hope will gain in value and c) to solve a problem they have. OK, there is a fourth…give it to their kids/grandkids. Assuming you are not selling collectibles or other assets, even if you are a non-profit you need to understand what problem you are solving and why people take money out of their pocket to solve it. Don’t think of problem as something that is always bad, it’s something someone needs/wants that they cannot get without spending money…that is pretty much anything they are not producing themselves in some way. But the issue here is motive. If you don’t understand what really motivates people to select who/where they spend that cash then you don’t understand the problem you are solving and that, pun intended, is a problem!
The attributes of that problem that you need to define (document, test and validate your assumptions) are the following. Who exactly is affected by the problem and why? This is typically defined through some type of well thought out and verified problem statement. What are the direct and indirect costs to those people who have that problem? Costs do not need to be something they spend money on, they typically are not. Costs, for example, could be pain and scarring if I don’t go spend money to put some ointment on the burn I just got. In this case the problem includes actual pain, but also long-term scarring.
Your answers to these questions should be supported by actually talking to real customers whenever possible. If intellectual property stops you from getting into detail, you can still discuss the issues surrounding the problem/pain with the people who have it without discussing your solution in detail. Interviews, testimonials, talking groups, etc. are all great means of defining the problem you are trying to solve to the point where you fully understand it well enough to beat the competition in every way. Your own (and family/friends) experiences and assumptions are not sufficient evidence that the problem you have defined will generate cash flow.
One final aspect of the problem that many investors and banks like to also understand (which means documenting it) is the owners passion for solving the problem. If you have a personal story, or are connected to a personal story, tell it. If your passion is to make money and you see an opportunity, that is okay too, but outlining and understanding your true passion is 90% of what is needed for the drive to be successful. The more that is connected to the product/service the better, but there is no firm requirement for such a connection, passion is required nonetheless.
Your challenge this week is to determine if you really understand the Problem you are trying to solve in the market place and, if not already done, document it, test it, and validate it!
Mitchell Bolnick – The Excel Consulting Group
