The traditional business plan has many virtues; and the common thinking is that by prompting the new entrepreneur to initially consider all the components of a successful business operation, from the legal structure to the marketing plan to financial projections, etc., the venture has a higher likelihood of success.
But going the route of a traditional business plan to launch a venture also has its critiques. Common complaints are that business plans are often based on unproven assumptions, the process is time consuming and often, the traditional plan isn't nearly as customer-focused as is needed to set someone up to be truly competitive from the start. A completed business plan may also instill a false sense of confidence in the entrepreneur and in certain cases, may lead to the founder(s) over-investing in an unproven and untested business model. Over-investing may especially be prevalent in brick and mortar or main street businesses, as these ventures usually require significant upfront investments in equipment, insurance policies, and physical space.
I often apply the old adage, "How are you going to get "there" if you don't know where you're going?" when speaking to business owners on the virtues of planning a business. But the traditional business plan isn't the only way to think through a business model.
In the SBA's Office of Entrepreneurial Development, we've been closely watching the rise of an alternative method to launching a business venture using a collection of processes and terms known as lean start-up methodology. So what is "lean" and why do we think this approach has the potential to empower more main street business?
True to its name, lean is rooted in minimizing costly inputs and time consuming planning processes. Lean turns the business planning process on end and starts from a customer-centric standpoint. And while lean methods have gained much popularity among tech startups, many of the principles have huge potential for business owners in other sectors besides tech.
A few of the hallmarks of lean methods are listed below:
- The Business Model Canvas - The business model canvas is a template for visualizing and analyzing a business model and evaluating whether fundamental change is necessary. It is often presented as a more focused, efficient alternative to a traditional business plan. Among other things, it forces firms to outline their cost structure, opportunities, key assets, and threats. Perhaps most critically, it requires that they develop a deep understanding of who their potential customer is.
- The "Minimum Viable Product" (MVP) - An MVP is a sort of pilot product: a version of a new product which allows the team to test its assumptions about market interest and demand with minimal upfront investment.
- Customer Interviews and Pivoting - The lean firm should be in a constant state of reevaluating its offerings to ensure that they meet the needs of the marketplace. This involves extensive customer interviews before and after the launch of a product or service. The firm should be oriented towards quickly adapting its product lines and business models, and it must be willing to quickly pivot if market research shows change is necessary.
Recently, the SBA launched the Lean for Main Street Training Challenge as a way to expose businesses outside of the high-tech sector to lean methodology. Through this initiative, members of the SBA's resource partner network (Small Business Development Centers, Women's Business Centers, SCORE Chapters and Veterans Business Outreach Centers) are competing for the chance to adapt National Science Foundation's highly regarded Innovation Corps (I-Corps) Program to the needs of small businesses across America.
We'll be announcing the winning partners in a few weeks and once they adapt the I-Corps curriculum, they will pilot modified lean training programs in their respective areas. Our goal is to make quality lean training resources available to all of our SBA partners as yet another tool to help America's small businesses excel.
ByTameka Montgomery, SBA Official