Edited excerpt from A Lean Alternative to a Business Plan: Documenting Your Product/Market Fit Hypotheses by Sachin Rekhi:
The most efficient way to operate during the earliest phases of a startup lies in between a formal business plan and unstructured iteration. The process I’ve used involves documenting your initial product-market fit hypotheses, and systematically validating, iterating on and updating them.
1. Target Audience. Who is the target audience is for your product or service? Be as specific as possible. Name the “core” audience to whom your product is best suited, as opposed to the “total addressable market” for folks who might get value out of it. In B2B products, specify both the end users of the product and the business decision makers who have the budget.
2. Problem You’re Solving. What specific problem or pain point does your solution solve for? There is no substitute in product development for developing an incredibly strong understanding of the problem space of your target audience.
3. Value Propositions. Value propositions shouldn’t be the features that you are building, but the “promise of value” that you are giving your customer. This should be phrased in the customer’s terms in how it will address the problem you’re solving as well as improve their lives or business.
4. Strategic Differentiation. What unique assets or capabilities will your solution have or take advantage of to make it a superior offering?
5. Competition. Who is the competition and how are they doing in addressing their customer needs? For nascent markets its important to take a very broad view of competition, including alternatives and substitutes to your solution.
6. Customer Acquisition Strategy. What are the primary ways you expect to drive awareness, interest, desire, and adoption of your solution? As you iterate, developing a more detailed understanding of your acquisition strategy involves understanding the cost of acquisition of customers for each of your primary acquisition channels.
7. Monetization Strategy. How will you generate revenue from your product or service? A more detailed understanding would cover price points and an understanding of willingness to pay in the market, often based on understanding the value you are creating for the customer or based on comps to existing solutions in the market.
8. Key Performance Indicators (KPIs). Document the key performance indicators which you plan to use to gauge how well you’re business is doing. Defining these are early as possible is critical. I like to have a suite of acquisition, engagement, monetization, and customer satisfaction metrics.
(1) Compare this to the template in Clarifying your strategy using a simple template.
(2) Note also how this can provide clarity for marketing and PR. See: Questions to answer before you talk to a journalist.