When an entrepreneur starts telling me about their business I always try to tactfully ask a few qualifying questions like the following:
- What’s going well?
- What isn’t going well?
- Who’s your ideal customer?
- What vendors do you replace or is it a greenfield/unvended market?
- How long is the sales cycle?
That last question “How long is the sales cycle” starts to get at the maturity of the business as well as if it is a revenue generating company or a startup in search of a business model. Most are in search of a business model. The search for a business model is one of the most difficult parts, hence an area most entrepreneurs get stuck, and go out of business if they don’t break through. Note: I’m talking about innovative businesses and not replicative businesses.
Here are a few thoughts on the search for a business model:
- It takes time — if you do it under 12 months you’ve done an amazing job
- Expect several pivots/iterations as you collect more information
- Pick a small, fast-growing market if you want more room for error as a great market makes up for many mis-steps
- Don’t be too tied to your original thesis but do pay attention to the core of what you’re good at doing
- Pretend like you’re a detective and need to talk to as many people as will listen, but know that only once you’re paid for something will you start to get deeper insight
The search for a business model is filled with high highs and low lows. Know what you’re getting into and keep an open mind throughout.
What else? What other tips do you have during the search for a business model?