Entrepreneur 5 P.M. to 9 A.M.: Launching a Profitable Start-Up without Quitting Your Job by Miriyala Kanth & Sunder Reethika

Author:Miriyala, Kanth & Sunder, Reethika [Miriyala, Kanth]
Language: eng
Format: epub
ISBN: 9788129133335
Publisher: Rupa & Co
Published: 2003-12-31T22:00:00+00:00

16

Experimenting with and Testing Unknown Parameters

The process of converting unknowns to knowns by ‘making assumptions and testing’ is essential for nearly every start-up. Several chapters will now be devoted to exploring it further.

As we learned earlier—and as seen in the preceding table—there are six key parameters that you need to know or find out. Who are the target customers for your product or service? Target segment is one parameter. How to reach your target segment is another. Next, what is the problem these people have, for which they have no good solution?

The solution to the problem, including how to develop it, is the fourth parameter. The fifth is the approach for converting your target segment into paying customers. Finally, you need to know or learn what price the customer would be willing to pay and whether you can control the cost to be profitable at that price.

All of these parameters are important because they all are necessary pieces of the ‘formula’ for a successful business. At the start it’s typical for some to be known and others unknown, so you have to develop some sort of prototype and interact with what you think is your target segment to start learning about the unknowns. You keep iterating and co-creating with customers until you have nailed down the whole set of parameters pretty firmly, and the pieces fit together to make a workable whole. There will be more twists and turns ahead, but now the basics are in place well enough that you can move forward to new levels, at a higher rate.

In the language of Zero to Launch, we would say you have reached point B, true launch. In his Lean Startup Methodology, Eric Ries would say that you have arrived at your MVP: minimum viable product. Marc Andreessen simply calls this point the product/market fit.

After point B you can scale your company, grow your client base, grow your revenues and profitability and build your organization. Then you can exit by selling the company or going public, or you can keep your business running while you make positive cash flow from it.

Here are two examples of applying the six-parameter framework to an actual start-up situation. First, let us say you are a biomedical innovator. Your goal is to find a treatment for a specific type of cancer, which has resisted every treatment tried so far. That is a known problem for a known target segment, patients suffering from this cancer. How you would reach them is also known—through doctors and related channels that deal with treating cancer—and similarly, the approach runs through the same route. Price is elastic enough that you can probably set it based on cost and desired profit margin, unless the cost is so high as to be prohibitive.

The huge unknown is the solution, i.e., an effective treatment. If a satisfactory solution is found, from a business angle it’s almost guaranteed to be a success.

For a second example let’s choose something quite different, the email backup idea. Target

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