Come On, Man! What Is Your Business?
I'm a pretty firm believer in developing a business model as soon as possible when starting a company. When I say business model, I essentially mean, how you intend on making money. Before the late 1990's the idea of starting a business that was simply "cool" or "fun" was not even in the lexicon of any business professional worth his or her salt. That all changed when the internet came along and pretty much anything with a ".com" in the name counted as a business model. Of course that backfired.
There seems to be a trend of "cool" businesses with little or no thought of a business model emerging once again. There is talk of a bubble, or in some circles, certainty about it. But that's not exactly what I want to talk about.
My feeling is that there is a bit of a hybrid approach to creating a business today. I think there is something important and significant about building a great product before understanding what exactly the business model is. At the same time, having no thought about what a realistic business model would be from day one is very shortsighted. The challenge is balancing the two; but I don't actually think it's that hard.
I love Suster's post about finding a "basecamp" as he calls it. What he's talking about is getting to a place where you have a good product and a viable business model proven. It means you've found something that has real potential and you have very strong evidence that you can make a go at it. That's basecamp, but how the business looks at basecamp is more than likely very different than what it looks like at the summit or beyond. My observation is this is where entrepreneurs struggle. They try too hard to think through what the business model looks like at the summit rather than thinking about what the business model could look like today, given limited resources and information.
So my opinion is that it's important to take a stab at a business model very early on. Give it your best shot; go with the gut, after all, so much of your success is driven by gut. If your gut is rarely right, then you're probably not going to be a very good entrepreneur anyway. Don't let your need to build the perfect product, or even a half baked product stop you from thinking about how you're going to make money in the short term. It's totally fine that it may change. But I say it's important not just because it's a good discipline to start thinking about it early as you're more likely to lose sight of this aspect once you get deep into product creation. That's true also, but I think it's important because it should drive many of the decisions you make about what to build and more importantly when you build it.
Prioritization of the product roadmap is of paramount importance in an early startup. You have limited resources and time and your greatest asset is agility and flexibility, so don't throw it away. You need to prioritize the features that support the business model as it stands today. I can't say how many times I've seen this breakdown for young entrepreneurs. Sure, you may make a mistake on the business model or what basecamp looks like, and that sucks. But you can pretty much be certain you won't be right about what summit looks like so don't build for that now, it's a waste of time and energy.
Jeff Solomon is co-founder and Chief Evangelist at Leads360, a Los Angeles-based developer of sales lead management software. Solomon is also a frequent blogger, contributing his views on the industry and other topics at The Complex System (www.thecomplexsystem.com), where this article was originally posted.