Lean Startup: The 3 main steps to build a lean startup

After building 6 weekly ,lean startups in a row I wanted to sum up my experiences and share it with you. What are the best ways to find new business ideas, to execute them and finally to validate them? I don’t know for sure, but at least I got some good ideas icon smile Lean Startup: The 3 main steps to build a lean startup

Hey, why there isn’t a new, weekly startup

Uuuh, yeah that’s a good question. Here’s the answer:

Last week I were asked to do a management consulting project for a big international company and, well, I couldn’t resist.

The good part is: By doing this I will have some additional money I could invest into The Weekly Startup. I want to use the money for an e-learning course, I would like to offer at The Weekly Startup. Are you interested? Then just write me an email and I will set you on the list icon wink Lean Startup: The 3 main steps to build a lean startup

The bad part of the story is: I won’t be able to write about a new, lean startup every week – probably it will be now every two weeks. I am really working hard on this one. Trust me.

What I have learned so far: How to build a lean startup in a week

Instead of presenting you a new startup this week, I decided to sum up the learnings from The Weekly Startup I had so far. Originally this is the idea of The Weekly Startup: To crack the DNA of entrepreneurship and to find the best possible way to launch a startup.

So, here we go!

Shall I launch a startup or a lean startup?

What’s the difference between a startup and a lean startup? That’s simple: Doing a startup is cool, doing a lean startup is crappy.

When you tell people that you are doing a startup, most of them think of glamorous investor meetings, cool parties and all this funny stuff from the movie “The Social Network”.

startup vs lean startup Lean Startup: The 3 main steps to build a lean startup

When you tell people that your are doing a lean startup, then the first reaction of the people is: “Ha? What are you doing?”. Then you tell them, that you handed out flyers at the university, built a website for online-marketing in a day and tried to connect lonely moms and they start to look at you with a mix of compassion and disbelief.

I always feel like the 6 year old boy, who tells its parents, that he wants to be a superhero or the president of the world. It’s like “Ooooh, that’s sweet! And now go and play with your imaginary friends.”

So, if you are this kind of person who needs admiration of other people, than you shouldn’t launch a lean startup.

But for all of you who don’t care about what others think: Go for a lean startup!

Here is why:

  • It produces results: Startups produce visions, lean startups produce results. Producing results is great, because it gives you a strong indication if your idea is great or if it just sucks.
  • It’s fast: Lean startups are much faster than “normal” startups. The great thing about this is, that you don’t waste to much time on bad ideas.
  • It’s cheap: Most startups need big investments – lean startups just need some bucks. I have seen many startups (some of them were my own) who used most of their time to find investors instead of starting their businesses. That won’t happen to a lean startup.

The 3 main parts of a lean startup

I will structure this article by following the 3 main parts of a lean startup: Finding a new business idea, execute a business idea and finally validate a business idea.

3 main steps lean startup Lean Startup: The 3 main steps to build a lean startup

Let’s get into the details.

Finding new business ideas

The hard part is not to find a new business ideas, the hard part is to find a good one.

Generate new business ideas

There are many ways to generate new business ideas. You can use mind-maps, the ABC-Tool, SCAMPER or thousands of others techniques.

What works best for me is finding business ideas by thinking about problems I or friends of mine have.

The problem is, that it is quite hard to identify problems, when you are not used to it. That’s because we tend to forget our problems or we are using workaround solutions to solve them. Therefore I am using a technique which I call the 10-ideas-per-day tool (you can find this tool and 9 other tools in my Top 10 Tools for Business Idea Generation). Here is how it works:

  1. I set myself a timer which goes off every hour
  2. When the timer goes off I stop my current work and ask myself what really annoyed me within the last hour
  3. I write down the things that annoyed me and write a quick solution next to it

By doing this I generate 10 ideas per day, 300 ideas per month, 2650 ideas per year. That’s the critical mass you need.

Picking the right one

This is where the real work starts. Picking the right business idea is one of the most crucial parts for your lean startup.

Sometimes a business idea sounds great and really everyone you tell about it, loves it. Then you launch it and nobody buys it. Why’s that?

The reason is: The problem you solve is not important enough to your customers.

When I started my startup Checkout +1 I was very confident that many people would use it. The idea of the startup was to reduce waiting time in waiting lines. Sounds great! Everyone will love it! I will be the hero of the supermarket!

Really?

How often were you waiting in a waiting line and thinking about ways to reduce your waiting time? How often did you google a solution? How often did you check the App store to find an app which could help you?

Probably your answer is: Zero times!

And that’s the reason why actually no one used my Checkout +1 service.

So, how do you find out, if your business idea solves a problem, that is big enough? By using the idea potential matrix.

business idea potential matrix Lean Startup: The 3 main steps to build a lean startup

This matrix helps me to identify if an idea has enough potential to make some serious money. If my solution helps a lot of people (= Degree of people looking actively for a solution) and my solution solves the problem better than the existing solutions on the market (= Degree of existing solutions solving the problem), than I am onto something great.

It’s important that people are actively searching for a solution. if you have to point people to a problem, then the problem is usually not big enough.

So much for the business idea topic – now let’s get to something much more important: The execution of a business idea.

Execute a business idea

They say: Everyone can have great ideas, but just a few are capable to execute them. Therefore the business execution part is really crucial for your business. Here is what I have learned so far from my experiences with The Weekly Startup.

Set yourself tough deadlines

The most important tip I give to everyone who starts a lean startup is this: Set yourself tough deadlines.

This has two implications:

  1. A tough deadline helps you to focus on the really important things of your business (see ‘Focus, Focus, Focus’)
  2. A deadline helps you to decide if you want to continue your business or stop it after a certain amount of time. Without deadlines people tend to work too long on dead projects. Don’t ride a dead horse.

Focus, Focus, Focus

When you have tough deadlines, you have to focus on the most important parts of your business. Don’t think about things, which could increase revenue by 5%, think about things which increase it by 500%.

Don’t build things when you don’t need to

When you have to focus, you shouldn’t build things, when you don’t need to. Do you really need a website to start your business? Do you really need an app to make your first sell? Think about it.

Entrepreneurs sometimes tend to hide in their rooms building stuff, instead of earning money.

Get out and go where the problem is

Don’t hide in your room! Get out and go where the problem is. Talk to people and try to identify their real problems. It sounds like an horrible part, but actually it’s the fun part.

Sell first

Did you talk to your potential customers? Did you identified a problem? Then try to sell them your solution. Even when your solution is not finished, start selling. You can still build it afterwards. Do the Kickstarter approach.

Make money with the problem solution, not with extra service

Sell first, but don’t sell the wrong things! Many entrepreneurs tend to sell extra service instead of the solution to the problem. When people don’t buy your core product, then don’t try to pimp it with an extra service. This won’t work.

If your core product does not work, then try another solution for the customer’s problem. But don’t stop at selling the extra services.

I wrap these actions up in what I call ‘The circle of execution’ (yeah, sounds like a classical James Bond movie):

circle of execution lean startup Lean Startup: The 3 main steps to build a lean startup

 

Okay, enough on execution. Let’s get to the next part: Validation.

Validate a business idea

Finding new business ideas and execute them is the fun part, but business validation sucks. Why? Because sometimes you have to kill your business idea.

What does validation mean?

Validation means that you have to check if your business idea is worth spending your time and money on it. This has one very serious implication: When your business idea isn’t worth it, you have to stop your business. No excuses. You have to stop it.

Do the basic math before you start your startup

Before you focus on a lean startup you have to know how much money it must earn.

Sit down, take a pen and write down all your monthly costs. Add a 20% extra for unexpected costs. This is the minimum your business has to earn.

If you get the feeling that your lean startup won’t make this number, then don’t even start it.

How to validate a business idea?

The best way to validate a business idea is by setting goals for it. When your idea does not achieve its goals, the validation failed and you have to stop it.

For example: Let’s say you set a goal to make a revenue of 100 Dollars within two weeks. When you just make 20 Dollars you really should stop your idea.

Normally I am starting with a very small goal at the beginning (like 1 customer in week one) and then I start to increase the goal very fast (20 customers in week 4). It look like a hockey-stick (probably you will know this one from VC talk).

validation goals Lean Startup: The 3 main steps to build a lean startup

 

Be honest to yourself

Sometimes it’s really hard to be honest to yourself. It’s hard to acknowledge to oneself a failure. But trust me: When your idea sucks it won’t get better by waiting. This will just cost you time and money. Therefore stop the idea when it does not make enough money.

Sum it up!

All right, these are the main learnings from my first six lean startups. I summarized it in the 3 main steps for a lean startup.

3 main steps lean startup how to Lean Startup: The 3 main steps to build a lean startup

 

I hope this chart and the blog post are helpful for you.

If you want to get 10 tools for business idea generation and my next weekly startup in your inbox, then do not hesitate to sign up for my newsletter.

And as always: Please feel free to comment in the section below. I would love to hear your feedback!

Cheers

~ Chris

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11 Responses to Lean Startup: The 3 main steps to build a lean startup
  1. Alex Reply

    Hey Chris,

    Nice article, thanks for sharing!

    What about ideas such as:
    - making a free saas and later try to find a business model
    - making some open source software that will get attention of community and possible customers

    Does it always have to be something that involves money from the start?

    Also, people say you should go out there and validate the idea before doing it, but isn’t it possible that people won’t know they want it until it exists?

    Also, what if a idea is good but had very bad promotion so not enough people tested it?

    Regards,
    Alex.

    • chris Reply

      Hey Alex,

      I don’t think that it always have to be something that involves money from the start. But it really helps to find out if people are really willing to pay for it later on. I know businesses which started with a free version and tried for years to find a way to make money with it, but never found a solution. They literally lost years.

      Concerning your second point: That’s the big task of a startup: To find ways to build the idea very fast, so that at least some people (=early adopters) could try it out. But you are right: Sometimes it is extremely difficult to make this happen.

      Concerning your last point: Yeah, this is really a problem, which I don’t know yet how to solve it…sorry.

      Cheers
      ~ Chris

      • Kyle Szives Reply

        It’s really tough not to start asking for money right away.

        I’ve experienced startups that didn’t ask for money right away and then later on implementing payment features becomes a little more difficult when your ‘customer’ base.

        If you’re not the development side of the startup and you’re not making money, it get’s also difficult to pay your developers.

        Equity doesn’t mean much if no money is coming in.

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  4. Tim Reply

    When are you going to continue this blog? I like this fresh style of trial and error. Thanks, Tim

    • chris Reply

      I will continue the blog end of August/ September. I am really, really looking forward to start up again! :)

  5. Tim Reply

    Any Update on the startup of this website? THX

    • chris Reply

      Hi Tim,

      I will be back with TWS from November this year. Then I will provide more inforamtion.

      Cheers
      ~ Chris

  6. Jeffrey Godbout Reply

    Great breakdown and very clear. Thank you! I found this extremely helpful and quickly clarifying an idea a friend and I have been working.

    Good Luck with your next venture!

    Cheers,

    Jeffrey Godbout

    • chris Reply

      Thank you Jeffrey for your feedback! Happy you liked the post and that it was helpful for you.

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