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Four Questions that every Entrepreneur must Answer

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If you are planning a new product or a new business then you will probably need to get some approvals.  You might need to raise some finance.  In either case you have to convince some sceptical decision makers.  Here are four key questions that they will want you to answer:

  1. Problem.  What is the problem that your idea will solve?  If real people do not have a pain point which is worth alleviating then your new business idea is a non-starter.  The bigger the pain the better.
  2. Premise.  What is the fundamental idea?  How exactly (but concisely) will it work?  How is it better and different from whatever else is out there?
  3. Promise.  How will customers react?  What benefits will they derive from using your product?
  4. Proof. What evidence do you have for these assertions? What tests have you carried out to validate your assumptions?

Let’s suppose that Travis Kalanick was asked these questions in 2009 when he was planning the launch of his new business idea, Uber.  His answers might have been:

  1. Problem.  What is the problem that your idea will solve?  People are frustrated because there are not enough taxis in most cities and they are overpriced for the service you receive.  Many people want a convenient ride but are put off by a long wait for a taxi and a high fare.
  2. Premise.  What is the fundamental idea?  We will harness the capacity of all the thousands of casual drivers who want to earn some extra money by giving someone a paid ride. We will use a mobile phone app to quickly connect someone who wants a ride with someone who will provide it.  They will rate each other so that people can see who is a good driver or a good passenger.
  3. Promise.  How will customers react?  Our promise is a much faster, more convenient and more affordable service which customers will love.  They will be delighted to have control at the touch of a phone.
  4. Proof. What evidence do you have for these assertions? We have tested the ideas with various groups in four cities and found that customers really like the idea and the app.  We have over 100 potential drivers lined up and ready to start.

Of course there are lots of other questions to answer.  How profitable will it be?  What legal issues are there? How long will it be before your make a profit?  And so on.  But the four questions above provide the key elements for your business plan.  People do not want to know how clever your idea is.  They want to know how it will solve a real problem.  Focus on the problem, the premise, the promise and the proof.

Based on an idea in The Beermat Entrepreneur by Mike Southon and Chris West.

 

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