You don’t have a business until you have a paying customer. So it’s time to build a minimum viable business product that proves customers will actually buy the product.
What is Minimum Viable Business Product (MVBP)
MVBP is the minimum viable product version that allows a team to collect the maximum amount of validated learning from the customer with the least amount of effort to achieve the ultimate goal of product-market fit.
Three Conditions of MVBP
The following three conditions must be satisfied in order to qualify as an MVBP.
- The customer gets value out of the product
- The customer pays for the product
- The product is sufficient to start the customer feedback loop to help iterate and improve the product to achieve product-market fit.
Development of the MVBP is a balancing act between simplicity and sufficiency. Einstein stated that “everything should be made as simple as possible but not simpler.” Stop thinking about “what else to add in,” and consider subtracting features to simplify the customer buy, install, and use process. It should be noted that the “B” in MVBP equates to income generation ($), a component missing in the typical MVP concept of Lean Startup.
Some Types of MVBPs
- Wizard of Oz – Everything appears real to the customer, but it’s manual on the back end. When you first ordered shoes from Zappos, they went out and bought the shoes after you ordered them and then mailed them to you.
- Concierge – Delivering a service manually to the customer. Groupon went and acquired coupons from the retailers and then promoted them to people.
- Kickstarter – Customers pay to finance the production of your product. The value gained and feedback loop is delayed until delivery but they are paying for the product up front.
- Prototype – A first draft prototype is built and launched to provide an experience of the product in its minimum viable form.
Design and Build MVBP
When designing and building an MVBP think through the key resources required like people, funding, production, and a website. What key relationships and partnerships are needed to deliver your solution? How will you do marketing? In the early days, you need fanatical users and you will probably need to recruit them by direct contact. Remember the three requirements of an MVBP. 1) Does it add value? 2) Will they pay? 3) Will it start the feedback loop?
Most Critical Assumptions
At this point, MVBP success is based on multiple assumptions made during previous research about product development and selection of the business model and pricing framework. It’s time to test these assumptions to ensure they don’t derail your plans. Identify as many critical assumptions as you can and determine a method to test each one to validate or invalidate the accuracy of your understanding.
For example, to test the accuracy of your gross margin (average selling price – cost of goods) you can send a Request for Quote (RFQ) to the manufacturer or component supplier. To validate the end users pain points and your value proposition alignment, go out and interview another 20-30 people in your target market. If a successful roll out is dependent on key partners and relationships, acquire a commitment letter. Prioritize assumptions of greatest risk including the most costly and the longest lead-time.
Your Top Priority in Stage 1
Your top priority in Stage 1 of the startup is to find a sufficient number of paying customers you don’t know that will enable you to create a sustainable business. Most entrepreneurs are overly optimistic about how easy they think it will be to find paying customers beyond family and friends. This focus will continue as you gain customer intimacy and continue to iterate your product until you have product-market fit.
Bringing it all Together
With a customer centric, market driven approach, you can conduct sufficient research to gain confidence in the viability, profitability, and sustainability of your business before spending any money. Once you’ve validated that your solution addresses the customer’s top pain point(s) and sense of urgency, and you have a viable business model and pricing framework, it’s time to build your minimum viable business product. The MVBP is a balance of simplicity and sufficiently and validates your customers will actually pay for your solution.
Founder and CEO, Leadership Institute For Entrepreneurs