Monday, December 14, 2009

Business plan by answering 6 questions... So easy that a cave man could do it

Creating a business plan could be as simple as answering the following 6 questions: Why, What, Who, How, When and Where on your idea. Try this once.. it has worked for me!

1) Why - Why do I need this product? Can people live without it? Is there a real problem that I m solving? Is it a necessity or a want? We define the problem here. If you can't answer this question, then go find a problem first.

2) What - Whats the product? Here we go into product management. This is where we define the solution (or the product).

3) Who - This is the selling part. Who is my customer? Who is my user? The users and the customers may not be the one and the same. For example, in google, an average Joe is the user. The local business down the street who advertises on google is the customer.

As part of this question, try to find out your competition also.. Some people say that they don't have any competition.. Hell no! Everybody has competition. Even the mighty google has competition. Sometimes the competition may not be direct but it could be a substitute competition. Say for example, when someone invented the email, what was the competition at that time? Paper mail, phone, fax, radio, etc.. To find about competition, research.. research.. research.. Use our mighty Google as much as possible.

Once you understand your competition, you should have a pretty good idea about your product and the market.

4) How - How is the product going to be built? How will the solution be implemented? This is the second phase of product management. This would answer questions like: Can I build the product myself? What kind of resources do I need to build the product?, etc..

Now as a part of answering this question, its time for some math. Do a income statement and a cash flow statement for your product. Don't worry its very simple. Just Open Excel and calculate the Cost (cost of building the product and selling it, if any) and Revenue (for example, it could be as simple as: # customers x price paid by each customer). Now Revenue - Cost = profit. Do this for a year or 2 years or till you break even and start making profit (if you don't start making profit from Day 1.. If you sell your product first before building it, you should have profits right from day 1). Be very honest when you do your finances.

5) When - This is very crucial because answering this question plays an important role in product execution. Can I build the product in my lifetime? I want to invent the next search engine which is much better than google.. Can I do it? If we understand our strengths (if you don't know your strengths yet, I suggest you go to http://www.strengthsfinder.com and take the Strengths Finder 2.0 test.. it will help you understand your strengths much better), and know the constraints and resources (could be money, time, people, skills, etc..), then the answer to this should be straight forward. How long its going to take to build my product? This is the step where you work your product timelines.

6) Where - This is not a very important question, although understanding the answer to this question helps us plan well. Where do I get my product built? Can I do it locally or do I have to hire someone from a different state or do I have to get some help overseas? These are all the questions that would get answered here.

Now you have a business plan for your product ready by just asking Why, What, Who, How, When and Where.

The next time you have the Big idea, ask these questions.

1 comment:

  1. I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

    Lucy

    http://dataentryjob-s.com

    ReplyDelete