The Disciplined entrepreneur24 steps to help make your venture successful

Six themes of the 24 steps

Six themes of the 24 steps

Who is your customer? What can you do for your customer?

How does your customer acquire your

product?

How do you make money off your

product?

How do you design and build your product?

How do you scale your business?

1. Market Segmentation

!

2. Select a beachhead market

!3. Build an end user

profile

!

4. Calculate the Total Addressable Market Size (TAM) for the Beachhead market

!5. Profile the Persona for the beachhead

market

!

9. Identify your next ten customers

6. Full Life Cycle use case

!7. High-level product

specification

!

8. Quantify the Value Proposition

!10. Define your core

!11. Chart your

Competitive Position

12. Determine the Customerss Decision Making Unit (DMU)

!13. Map the process to

acquire a paying customer

!18. Map the sales

process to acquire a customer

15. Design a Business Model

!16. Set your pricing

framework

!

17. Calculate the Lifetime Value of an acquired customer

(LTV)

!

19. Calculate the Cost of Customer

Acquisition (COCA)

20. Identify key assumption

!21. Test key assumption

!22. Define the

Minimum Viable Business Product

(MVBP)

!

23. Show that the dogs will eat the dog food

14. Calculate the total addressable market size for follow-on markets

!24. Develop a product

plan

Market segmentation

paying customer

focus

market opportunity

specific customer

avoid the china syndrome

create a new market that you will dominate

brainstorm

identify potential industries

narrow

primary market research

6 questions to help you decide which market is compelling

6 questions

1. Are you passionate about the market? Is it congruent with your personal values? Will you be able to show success in a timeframe that is acceptable

to your founders?2. How confident are you that you can

deliver the full solution for this market?

3. How strong is your value proposition, which is the additional value your product would provide

to customers? Is it very strong compared to what the customers do today?

4. Is the target customer willing and able to pay for your solution if it has a

compelling value proposition?

5. Is the market good from a competitive standpoint? Are you truly bringing something new and different to the market, or is there entrenched competition that can block you?

How do you stand out from what the customer sees as alternatives, real or

perceived?

6. Will wining this market lead to attractive follow-on market opportunities, where you can either expand to new markets with minor modification to your product, or you can sell additional products to the customers in this market?

Organize your research

End user: who specifically would be using your product? They are your champion, the person you need on board

so that your product is successfully adopted. You have narrowed down your end user some already, but as you do primary market research you may find the category can be

very segmented.

Application: what would the end user be using your product for? what is the task that would be dramatically improved by your new venture?

Benefits: what is the actual value that the end user would gain from using your product? not future or

function, but value.

Lead customers: who are the most influential customers?

Market characteristics: what about this market would help or hinder the

adoption of new technology?

Size of market: roughly how many potential customers exists if you achieve 100% market

penetration?

Competition: who, if anyone, is making similar products - real or

perceived? From customer perspective

Needs: What else does your customer need in order to get the full solution, to get full functionality from your

product?

Market segment template

Industry Entertainment Design etc etc etc

End user

Application

Benefits

Lead customer

Market Characteristics

Partners/players

Size of market

Competition

Platform

Needs

Select a beachhead market

you are not looking for the perfectmarket stay away from large markets

first market will be learning experience

multiple path to success

get started doing, rather than get stuck analyzing

6 criteria to determine the best market opportunity

6 criterias + 1

1. Is the target customer well funded?

2. Is the target customer readily accessible to your sales force?

3. Does the target customer have a compelling reason to buy?

4. Can you today, with the help of partners, deliver a whole product?

5. Is there entrenched competition that could block you?

6. If you win this segment, can you leverage it to additional segments?

7. Is the market consistent with the values, passion and goals of the founding team?

Build an end user profile

gender

income range

geographic location

what motivates them?

what do they fear most?

who is their hero?

where do they go for vacation? for dinner?

before work?

what newspapers do they read?websites? what

TV shows do they watch?

what is the general reason they are buying this product? savings?

image? peer pressure?

what makes them special and identifiable?

tell their story

Calculate TAM for beachhead market

TAM is the amount of annual revenue, expressed in dollars/euro per year, that your business would earn if you achieved 100% market share in your beachhead

market.

first calculate how many end users exist that fit your

End User profile

determine how much annual revenue an individual end user

is worth

bottom-up analysis

top down analysis

multiplying the revenue per end user by the number of end users will give you the TAM.

Profile de persona

involve team members

prepare a fact sheet about your persona

use a real name

identify facts about your persona

interview a persona that is your persona

should become a touch point

in case of two sided markets to end up with two personas

Persona fact sheet

Persona:

Environment

Personal information

Career context

Information sources

Purchasing criteria in prioritized order

Other noteworthy items

Full life cycle use case

should be visual

should explain how the Persona determined that their existing needs were not met by existing products, and how the Persona would find out about your

product

Essential elements of Full life cycle

1. How the end user determine they have a need and/or opportunity to do

something different2. Finding out about

your product

3. Analyzing your product

4. Acquiring your product

5. Installing your product

6. Using your product (in detail)

7. Determining the value gotten from

your product

8. Paying for your product

9. Getting support for your product

10. Buying more product and/or

spreading awareness about your product.

High-level product specification

describe features of your product

explain how those features translate into function

benefits for you customer

be very specific

Quantify the Value proposition

What value do I get out of your product?

get the priority for your Persona

dont make it complicated

keep it simpleset up a simple comparison of the as-is state today and then compare this to the

possible state that you are confident will exist when the

customer is using your solution.

Identify your next ten customers

list ten potential customers aside from your Persona include pertinent information

each of this customers should be similar to each other and the Persona

important to have homogeneity in your list

contact them and present your product

if you get validation try to get a letter of intent

present your product in inquiry mode not

advocacy/sales mode

if somebody disagrees dont worry, unless there

is major disconnect

Define your core

you need to figure out something that you do that will make you better than anyone else at producing a solution for your customers.

the core is not what benefits you deliver to the

customerthe core is something that allows you to deliver those benefits more effectively than any other

competitoryou are looking at a single thing

first mover advantage is not a corecore is different than competitive position

Chart your competitive position

The Competitive Position is where you take your core and translate it into something that produces real value for the customer and they will care

deeply about

customers usually make purchasing decisions on

comparative basis

this helps you to see how much better you are

How to define your competitive position

take the top two priorities of your persona

start with assumptions that these two priorities are all that matter

create a simple graph as follows:

1. Divide both the x-axis and y-axis into two halves

2. On the x-axis, write the number one priority of your Persona

3. On the half of the x-axis closer to the origin, write the bad state of this priority (e.g. if the

priority is reliability then write low here)

4. On the other half of the x-axis, write the good state of this priority (e.g. high for reliability)

5. On the y-axis, place the number two priority of your Persona. Write the bad state on the half of the y-axis closer to the origin, and the good state on the other half of the y-axis.

6. Plot you business on the graph, along with your competitors (current and future). Also include the customers do nothing or status quo option.

Determine the Customers DMU

you need to identify all the people involved decision to acquire the

product for the end userprimary roles:

advocate

primary economic buyer

additional roles:

primary and secondary influencers

veto power

purchasing department

Map the Process to acquire a paying customer

Start with your Full Life Cycle Use Case, the following is important:

How the customer determines they have a need and/or opportunity to

move away from their status quo and do something different

Finding out about your product

Analyzing your product

Acquiring your product

Installing your product

Paying for your product

For each step in the process, include:

Who is the key player?

What is their influence on the

process?

What is their authority (amount

and type)

How long will it take to complete this step? (Be diligent to have at least 80% certain on each step. Make conservative estimates.

What are the inputs and outputs of this step?

Calculate the Total Addressable Market Size for Follow-on Markets

there are two ways of extending your market:

by selling new products to your existing clients - upselling

sell the same products to additional markets

identify some follow-on markets

Design a business model

a business model is not pricing

free is not a business model

Key factors:

Customer: What will the customer be willing to do?

Your Value Capture: How do you capture some of the value the customer gains from your product, and at what magnitude?

Competition: What are they doing?

Distribution: How do you make sure your distribution channel has the right

incentives to sell your product?

Some generalize categories of BM

One time upfront charge plus maintenance

cost plushourly rates

subscription or leasing model

licensing

consumables

upsell with high margin products

advertising

reselling the data collected

usage based

cell phone plan

parking meter or penalty chargesmicro transactions

shared savings

franchise

operating and maintenance

Set your pricing framework

basic Pricing concepts:

cost dont matter - based on the

value the customer gets from your product

use DMU and process to acquire a paying customer to identify key

price points

understand the price of the customers alternatives

different types of customers will pay different pricebe flexible with pricing for early

testers and lighthouse customers

it is always easier to drop the price than to raise the

price

Calculate the Lifetime Value of an Acquired Customer (LTV)

Key inputs to consider:

1. One time revenue stream, if any.

2. Recurring revenues streams, if

any.

3. Additional revenue

opportunities

4. Gross margin for each of your

revenue streams

5. Retention rate

6. Life of product

7. Next product purchase rate

8. Cost of capital rate for your

business

you will calculate it for a 5 year time span

its a tool not a strategy

usually is used to define marketing strategy

Map sales process to acquire a customer

entrepreneurs are inherently optimistic

they fail to take into account:

all the sales and marketing costs

long, drawn-out sales cycles that cost a lot of

money

all potential customers who did not buy their

products

sales process changes over time

How to map your sales process

develop a short term, medium term and long term sales strategy

Key questions that your sales process should address:

How will the target customer learn that there is a solution to a problem they have, or learn there is

an opportunity they did not previously know about?

Once target customer knows about your business, how will you handle the education process that allows them to make a well-informed analysis

about whether to purchase your product?

How do you make the sale?

How do you collect the money?

Calculate the Cost of Customer Acquisition (COCA)

typically COCA exceeds the Lifetime value of an acquired

customer

in a sustainable business COCA continually decreases until is less than

the LTV

How not to calculate COCA

COCA(t) =Total marketing and Sales expanses (t) - Install base support expense

Number of New Customers (t)

How to reduce COCA

1. While very powerful, use direct sales judiciously as it is very expensive

2. Automate as much as possible

3.Improve conversion rates in sales

4. Decrease the cost of leads/improve quality of leads

5. Speed through the sales funnel

6. Choose your business model with COCA in mind

7. Word of mouth

8. Stay focused on the target market

Identify key assumptions

go through each step of the process and find areas in which you have

made logical conclusions Have you identified your Personas priorities?

will your customer find the value proposition attractive? will the customer take the

time and effort to integrate your product into their

workflow?

Test key assumptions

There are no excuses to not test these key assumptions

To test the interest of the lighthouse and linchpin customers, go talk to them and see if they will do any of the following:

prepay for your solution (best)

put down a deposit (good)

provide a letter of intent (ok)

agree to a pilot (acceptable)

express a strong interest in purchasing if certain conditions are met (not too reassuring but may be acceptable

!

Define the Minimum Viable Business Product

Three conditions of a MVBP

Customer gets value out of use of the product

customer pays for the product

the product is sufficient to start the customer feedback loop, where the customer can help you iterate toward and increasingly better product

Show that the Dogs will eat the dog food

Develop a product plan

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