What is the Lean Start Up Method of Bootstrapping Your Business?
The Lean Start Up method is a way of testing your ideas on your potential customers without spending your hard earned savings starting a business with a product or service that no one is willing to pay for.
Lean Startup Principles
1) Ideate (create idea)
This can be anything, a new technology, new app, new restaurant venture, new fitness club, new on-line magazine, new take-out foods.
2) Build a minimum viable product
This means don’t spend millions on trying to make your product perfect. Make a product that shows the innovation (think iphone). If you are a complete startup you can test your idea through a crowdfunding campaign. If your campaign doesn’t catch fire, then invent something else and try again.
If you don’t want to use crowdfunding to test your products/service, you can use business networking, websites or market surveys to test your ideas.
Sometimes this means making two different versions to test with your potential customers called A/B testing.
If you are thinking of starting a new healthy takeout food service, for example, why not put up an online ordering website and offer these healthy foods for home delivery? Spread the word via social media. If successful then you can rent space to open your new take-out restaurant.
3) Measure Effectiveness
This is where you learn from your experiments, testing them with your potential customers. This can be in the form of A/B testing. Take the healthy food take-out service experiment. You can test all your recipes because you can change your menu items very quickly on your website. Kill the slow moving choices and increase the range of the fast selling items. Maybe bison stew isn’t being ordered very much, but the delicious chicken kale casserole recipe sells out every week. Who knew that kale would be the next vegetable sensation? It has been around forever, but thanks to publicity about its antioxidant values, it is appearing in recipes, everywhere.
Once you have tested your product and your customer base, now you can open your healthy food take-out restaurant.
Even existing businesses can test new products this way.
Picture you are Subway. At the beginning you only had one choice of buns, and only cold cuts. Your business became stagnant and the choices boring.
Year two you experimented by giving customers the choice of 6 different buns and 6 different types of subs. By testing these out with existing customers, you would easily find out the most popular types of bread and which toppings sell the best.
Year Three you introduce hot choices, meatballs, chicken, pulled pork etc. You get the idea. You are continually A/B testing. You discontinue the items that are not selling well and experiment in creating line extensions of the ones that are popular.
Can you measure the results? Did your target customers like your product choices? Did they like product A better than product B? What did you learn from looking over the testing. Are you ready to launch your business? If your target customers just aren’t into your ideas, then it’s time to re-evaluate.
Okay now you have completed the Lean Startup Loop of
Build – Measure – Learn
What’s next for your Business?
If your experimental products are gaining traction, now you can start your business plan and then launch your entrepreneurial idea and get your products/services to market.
If your experimental products are a flop, don’t give up. Start over and design something else and go through the Lean Startup Loop again.
Should your business go in a different direction? Sometimes existing businesses start out with one idea, fail to gain traction and through the process decide to pivot their business in a completely different direction. Take Groupon as an example. It started out as an activist platform called The Point. After receiving almost no interest, the Company founders started a WordPress blog with a coupon promotion for a pizza restaurant in the lobby of their building. Three years later it grew into a billion dollar business. Now that’s a complete pivot.
For in depth understanding of this methodology, The Lean Startup by Eric Ries is a great read. “I make all our managers read The Lean Startup.” —Jeffery Immelt, CEO, General Electric
XL Consulting Group is passionate about collaborating with entrepreneurs to build successful companies by planning, developing strategies and brands. For a free consultation, don’t be shy, contact us now and let’s get started.