Build a Path to Your Customers
It is often said that if you build a better mousetrap, the mice will beat a path to your door. In our experience, however, a compelling "mousetrap" will fail without a sustained, smart strategy to reach customers.
For start-ups, the challenge is different. A start-up's goal is to learn and iterate before you run out of resources, so in the early stages you must pursue any channel that will get you in front of customers quickly and inexpensively. You must also identify channels that will scale quickly.
The leadership team at Avondale has been discussing a potential new venture around private equity (PE) investing. We want to help investors dissatisfied with the traditional private equity model link up with businesses that want to grow but require capital and management transformation.
We set a goal of writing down this business model in 20 minutes, because we do not want to waste time on something that absorbs resources but creates no value. In his book Running Lean, Ash Maurya suggests we quickly articulate our business model so that we can debate it amongst ourselves, agree on a path forward, then quickly test and iterate it with limited investment.
Now we must answer the question: Which channels will we use to reach our customers?
Lean Business Model: Channels
Recall that we have two customer segments we want to pursue:
- Investors with large chunks of investable cash who have not seen satisfactory results from the current PE paradigm.
- Businesses with attractive growth opportunities that are constrained by capital and/or human resource limitations and recognize the need for transformation.
Our goal is to connect investors to businesses, so we need channels through which we can reach both segments. As a starting point, we want to choose channels where we can learn if our business model has merit (i.e., is distinctive and attractive). Therefore, we have chosen channels where we can engage in a conversation with professionals who spend a lot of time with investors and/or business owners:
|Investors looking for PE alternatives||
|Businesses needing transformation||
Though we may pursue other channels later, these will help us in our goal of improving our business model toward one that works.
In the next article in this series, we will discuss the revenue streams and cost structure we will incur to pursue this business model.
How have you utilized your channels to iterate and improve your business model? Please let us know your thoughts at firstname.lastname@example.org.
KARL STARK AND BILL STEWART | Columnist | Co-founders, Avondale
Karl Stark and Bill Stewart are managing directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself and is a two-time Inc. 500 honoree.