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Startup Planning Questions: Discovering your Business Model

by Larry Sharp

This is Part 2 of a two-part post, read Part 1.

What is the business model?

I have always found that plans are useless, but planning is indispensable.
– General Dwight Eisenhower

I am not a big fan of complex business plans in the early stages, but prefer to develop a business model typical of the lean start-up strategy.1 Don’t get me wrong – proper plans are necessary in time especially to qualify for a business loan or to record key research, but at an early stage I prefer modeling that is hypothesis driven. This mind-set should be intuitive to the entrepreneur and be at the heart of the consultant’s strategy.

Business founders should begin with a search for a business model which is driven by a hypothesis which can be tested in the marketplace of customer need. The model canvas contains a series of theories or good guesses which must be tested. These are sketches of how the company anticipates creating value for the customer.

The business founder then tests the hypotheses by asking potential users, purchasers, and partners for feedback. They may even float a mini-version of the product to the market and see if it ‘sells’. In this way the assumptions are tested and become a “minimum viable product” (MVP). If things do not materialize as anticipated, the startup then “pivots” and re-tests the hypothesis. As the product is changed or tweaked and refined it hopefully begins to sell.

The business model typically includes the value proposition (mentioned in Part 1), key partners, resources required, key activities, customer relationship components, cost structures,  and revenue streams. Startup terminology calls then for “agile development” whereby the product is brought iteratively and incrementally to market.2

Through all of this modeling, it is important to keep the missional component at the heart of the business. How can kingdom values be front and center? How can opportunities emerge for significant kingdom conversations? Will the business owner’s missional background, experience and vision by integrated together in the business?

A business startup we coached in East Asia was asked to present a missional model alongside his business model. The business model essentially centered around the building of fiberglass boats for a high-end market in another country. The integrated business/missional model included morning prayers, placing a Biblical proverb (without the reference) on the office door each week, and monthly camping trips to a remote island. All of these strategies opened up many spiritual conversations.

An important part of a lean start-up is some type of risk assessment both for the business side and the missional side. Ask the question, “What could go wrong?” As the answers emerge, then a mitigation plan can be put in place. For example, a successful entrepreneur in a country antagonistic to our faith, realized that he could have a Bible in his office for his own use, but he had to be very careful who he gave a Bible to as a gift. His risk analysis caused him to mitigate the risk of getting in trouble with the law by refusing to indiscriminately give out Bibles.

Next Steps

Plans fail for lack of counsel, but with many advisors they succeed.
– Proverbs 15:22

Before moving on to the next steps of planning and execution, I like to remind folks to ask themselves, “Am I the right person doing this in the right place, with the right product and the right plan?”

I am reminded of one of my first consulting trips years ago. I had a Fortune 500 executive with me and a young entrepreneur from Midwest USA. We were consulting with a couple in China who was proposing to partner with a Chinese national to start a for-profit school. In the beginning it seemed to be a good model. However after three days of consulting on-site with the three individuals, we recommended against the project. Why? It seemed like a necessary product and in the right place. A plan could be developed, but it didn’t have the right people to execute. Sometimes recommendations against a business are difficult to make, but without good counsel only disaster will ensue. The good news is that this couple recovered from our “bad news” and had several successful years teaching in a university in China.

All of this may be considered preliminary or “Part One”. It is hard work and necessary. But ahead are much needed steps such as full business plans to attract investors, clarification of objectives, the retaining of consultants and coaches, creation of an advisory board, skill training of management team and employees, marketing studies, development of an operations plan, financial planning, supply chain management, continued research, understanding of the competition, and a prayer support team.

All of this is hard work indeed but with good counsel, God’s help, and a determined focused effort on the part of the business leader, there will be optimum potential for achieving the desired results.

Larry Sharp is the Founder and current Director of Strategic Training and Partnerships of a Business for Transformation (BAM, B4t) consulting firm, International Business and Education Consultants (www.ibecventures.com). Larry served 21 years in Brazil and then 20 years as Crossworld VP of Operations and as Vice President of Business Partnerships. He is currently a VP Emeritus and consultant with Crossworld. Since 2007 he has devoted energies toward Business as Mission (BAM) and currently is a consultant on BAM and education themes. Larry travels within North America speaking and teaching in conferences, colleges and churches on themes related to Business As Mission (BAM, B4t) and missions.  His travels abroad relate to BAM, crisis preparation and management, and team building. 

 

1 – Reis, Eric. The Lean Startup. Crown Publishing Group, New York, NY. 2011.

2 – Blank, Steve. Why the Lean Start-up Changes Everything in Harvard Business Review, May 2013, p. 65-72.