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Fail Fast or Win Big

The Start-Up Plan for Starting Now


Bernhard Schroeder
Copyright 2015 AMACOM, a division of American Management Association
208 pages
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Rating Take-Aways

8
9 Applicability Moving fast gives entrepreneurs an advantage and a better chance to succeed.
8 Innovation Todays market pace makes the traditional entrepreneurs model obsolete. Once you
8 Style spot an opportunity, you dont have time to write a business plan.

Creating a business plan wastes time and doesnt spur sales, and a plan ages quickly.
Instead, develop a business model. This blueprint for your start-up should identify your
Focus revenue sources, customer base, products and details of financing.

Use the LeanModel Framework to put your business model into action with lean
Leadership & Management resources, quick prototyping of a minimally viable product and customer feedback.
Strategy
Sales & Marketing
The framework helps you decide quickly to iterate, pivot or abandon your idea.
Finance Customer feedback or customer truth is crucial to your business.
Human Resources
IT, Production & Logistics Crowdfunding is the process of raising capital online from a large number of investors.
Career & Self-Development
Todays promising business arenas include the pet industry, cloud services, big data,
Small Business wearable devices, remote monitoring, healthy fast food and 3D printing.
Economics & Politics
Industries
Love what you do; do what you love.
Global Business
Concepts & Trends

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Relevance
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What You Will Learn
In this summary, you will learn:r1) How the LeanModel Framework works, 2) Why you should create a business
model instead of a business plan, 3) How to use crowdfunding and 4) How to assemble these elements for
entrepreneurial success.
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Review
One of four new businesses fails in the first year, so entrepreneurs undertaking a start-up must know what they
are doing. Bernhard Schroeder, the acclaimed director of the Lavin Entrepreneurship Center at San Diego State
University, offers advice and wisdom gained from his entrepreneurial success. Schroeder was a senior partner at the
marketing agency CKS | Partners, which sold for more than $300 million. His firm planned the business strategy for
Amazon. Though perhaps somewhat optimistic about crowdfunding, his advice is useful and direct. It is accessible
and almost always very comprehensible, though he occasionally offers impenetrable statements like, Customers are
not always right, but they are never wrong. Seasoned salespeople will intuitively understand what he means, though
beginners could be a bit baffled at first. getAbstract recommends Schroeders solid, wide-ranging and applicable
advice to all aspiring entrepreneurs and to those leading entrepreneurial ventures within established firms.
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Summary
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Sunglasses, Cables and Bracelets
In 2011, as part of San Diego State Universitys Entrepreneur Day activities, two students
contracted for the offshore manufacture of 300 pairs of sunglasses in the colleges colors.
They paid $3 per pair and sold out their stock for $20 each. The students applied their
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If you want to sell a profits toward a campaign at Indiegogo, an Internet crowdfunding site, to raise capital for
product, just make it. their own sunglasses firm. Today, the company operates in six countries with sales of more
If you want to sell a
service, just deliver it. than $750,000.
If you want to create
a company, just create
one. Adam, an entrepreneur in the commodity products business, launched his firm by
getabstract charging $3,000 on his credit card to buy Chinese-manufactured HDMI cables for resale.
Today, he manages a $3-million-a-year online business from his condo. He sells more than
100 different products for an average gross margin of 60%. Adam doesnt pay for or manage
his own website. He piggybacks onto other firms online platforms and uses web companies
for shipping and operations. He limits his costs by having student interns handle day-to-
day tasks.

Two new college graduates took a surfing vacation in Costa Rica where they bought
getabstract bracelets from a beach vendor. They liked the bracelets and bought 1,000 more, which they
Its the marketplace
that matters most. You
quickly sold when they returned home. Seeing the business potential, they contacted the
can have an amazing vendor, bought more bracelets and sold those. Working from their apartment, the partners
idea, but if there developed a website for the bracelets and marketed them to local stores. The more contacts
is no clear market
opportunity, it might they made, the more items they sold. They recruited student interns to assist with their now
as well be worthless. multi-million-dollar enterprise.
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The LeanModel Framework


This is an ideal time for entrepreneurs. If you move fast, you can score big. The LeanModel
Framework provides a successful plan for being first out of the gate. Focus on developing

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a solid business model not a business plan, which wastes time, deflects sales and can
actually hurt new companies. A business model sets out the design for the successful
operation of a business, identifying revenue sources, customer base, products and details
of financing.
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In the next few
years, you will see Many successful entrepreneurs have applied the LeanModel Framework to start their
hundreds of investment
firms rushing to offer businesses, often beginning in a garage, basement or dormitory. Such simplicity enables
crowdfunding equity agile entrepreneurs to move quickly and overtake large, slow-moving firms. Speed is
platforms.
getabstract crucial. Slow entrepreneurs fail. Today, speed to market is the new normal.

The LeanModel Framework has four essential components:

1. Lean resources Less is more. Leverage everything you can to minimize costs.
2. Business model A quality business model shows an understanding of the market,
particularly your segment and the significant commercial trends shaping it. To gain this
knowledge, talk to customers who buy the types of products you plan to sell. Learn about
your potential industry by attending trade shows and other events. Visit the competition
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It takes lots of hard to see how they manage a similar business.
work to make your new 3. Rapid prototyping Quickly test your idea with the group that counts the most
business successful. It
does nottake lots of consumers. If you want to enter the food-truck business to sell tacos, set up a taco
money. stand and see if people like your food. Become well informed before you make a
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substantial investment.
4. Customer truth This is the alternative name and essential nature of customer
feedback, which gives you the vital data you need to decide if you are going to iterate,
pivot or abandon your idea.

To survive at the lowest possible expense while getting up to speed, make a prototype of
a minimally viable product or service and test it with customers. Rely on their feedback
to adapt your prototype for the marketplace. If this real-world test suggests your product
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It is...easy for an isnt viable, move on to something more promising. Entrepreneurs never fear failure: They
entrepreneur to launch learn from it. Most serial entrepreneurs undergo failures. They know setbacks are part of
a crowdfunding
campaign and raise
the territory.
thousands, if not
millions, of dollars in a Creating a Blueprint for Your Business
relatively short time.
getabstract Your business model is the blueprint for your enterprise. It must include:

Unique value proposition This states the singular way your product or service fixes
a buyers problems. To identify it, ask, What value will my product or service deliver
to the consumer?
Customer relationship feeling You want customers to react positively to your
offering and feel good when they use it. Ask, What kind of relationship do I want with
my customers?
getabstract Customer target segments Many entrepreneurs initially try to sell to a broad market
You cant spend
months writing a spectrum. Instead, focus on a specialized niche and then expand. Ask, What is the size
complex business plan of the marketplace?
that will be out of date
before your idea ever Distribution channel strategies What is the most efficient way to get your products
comes to market. or services to your customers? Should you move into the marketplace quickly (more
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distribution, lower gross margin, higher potential sales) or slowly (direct sales, online
sales, local retailers, higher gross margins)? Ask, Where are my customers?
Start-up activities Starting a new business is a huge undertaking. Numerous tasks
clamor for your attention. Figuring out where to focus can be a challenge. Consider the

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various segments of your business model, and plan from there. Ask, What are [the] key
things I need to do now?
Start-up resources Once you know the sequence of your start-up activities, apply
getabstract resources to them. Your main goal is to manufacture your product or develop your
Realizing exactly service. Focus your capital on the most relevant tasks. Ask, What resources do I need
what is working and
not workingcould for distribution, developing customers and building revenue?
likely be the most Strategic and tactical partners Youll have three categories of partners: suppliers,
strategic decisions
an entrepreneur can manufacturers and distributors. Before you enter partnerships, discuss your options and
make. opportunities with other entrepreneurs. Go to trade shows. Learn from the participants.
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Ask, What key resources will I get from partners?
Product or service costs Use a spreadsheet to outline your direct costs materials,
direct labor and manufacturing expenses and indirect costs marketing, travel
expenses, rent and labor other than direct labor. Determine if you have sufficient funds
to start your enterprise. Ask, How can I outsource or cut my costs?
Selling and revenue sources Entrepreneurs often find additional income sources
that dont always present themselves immediately. Seek out all possible income streams
available. Ask, Will my revenue produce a gross margin or profit to sustain my
getabstract business model?
There is nothing like
talking to customers to
get insights. Lean Resources
getabstract As you consider the resources you need and how to acquire them, note that Harvard
Business Schools entrepreneurship expert Howard Stevenson defines entrepreneurship as
the pursuit of opportunity without regard to resources currently controlled. Successful
entrepreneurs learn to leverage everything. They often use cloud-based Software as a
Service tools to set up their websites, at almost no cost. Big Commerce, Shopify and
similar cloud-based tools enable you to create e-commerce websites quickly, easily and
inexpensively for around $35 monthly in targeted markets.

For other inexpensive resources, use Amazon to test-sell products, and work with 3D
getabstract printers to create inexpensive prototypes. Leverage social networks to promote your goods
Make sure you are
testing your product and services.
in the right place, at
the right time and with
the right potential
Rapid Prototyping
customers. Efficiently check the viability of a product or service by testing it, gathering customer
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feedback for your benefit and quickly making the necessary adjustments. Testing and speed
is the essence of rapid prototyping, based on the need to get something to market quickly.
You must beat your competition to the marketplace. Dont wait. Fail fast or win big. You
lead; they follow.

getabstract Customer Feedback


If you are listening Businesses must make their customers happy. Pay attention to your consumers truth, and
to your customers,
you will improve learn everything you can about their likes and wants. Spend time with your customers in
your product and their environment, not in the setting of a focus group. Observe how and where people
service, based on their
collective feedback.
buy and use your offerings. When you learn what your customers care about, surpass their
If you ignore their expectations. Delight them. Provide excellent service. Stay flexible and innovative, so you
feedback, you wont dont end up in the marketplace graveyards alongside Blockbuster, Blackberry, Borders,
have to worry about
improving your A&P food stores, Nokia, Kodak, Tower Records and Circuit City.
products or services
because you wont have
any sales. Crowdfunding
getabstract Entrepreneurs no longer have to rely on the financial assistance of their banks, families
and friends. Today, they can tap a variety of crowdfunding sources to seek the money they

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need to operate. With crowdfunding, hundreds or thousands of independent people crowd
together to fund a project. Crowdfunders operate according to three different models:

1. Reward Investors earn special rewards, based on a discount, freebie,


product preorder, or the like. Reward-based sites include Kickstarter, RocketHub
getabstract and Indiegogo.
You can create quite 2. Debt Investors realize interest returns on their money, as seen with Zidisha, Lending
a valuable company
by listening to the Club and Index Ventures.
marketplace and doing 3. Equity Investors receive equity positions in the start-ups they fund. This is the
something just a little
bit better, in your own, strategy of Micro Ventures, OurCrowd and Circle Up.
unique way.
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New Ideas
To find inspiration for a great new entrepreneurial idea, develop expertise in an area
that intrigues you even if its selling bracelets from Costa Rica. Use your hard-earned
knowledge to create a relevant, innovative product or service. Pay attention to significant
trends. Associate with people of different backgrounds to learn new perspectives, which
might spark fresh ideas. Focus on your designated industry, and search for a problem
you can solve with a new product or service. Promising commercial opportunities are
everywhere. Identify and exploit them.
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You dont learn to Entrepreneurship is a Mentality
walk by following rules.
You learn by doing and As an entrepreneur, you can choose exactly how you will make your living. Dont leash
falling over. (Virgin yourself to some firm, and end up forced to do what it says, and to do it when and how
Group founder Richard
Branson) youre told. As Thomas McElroy, one of the founders of Volcom, an action sports company,
getabstract put it, entrepreneurship gives people the opportunity to design [their] luck. Entrepreneurs
work from a nurturing mind-set that says: Love what you do; do what you love.

To succeed, you need viable skills, imagination, enthusiasm and a few good people to
help you. You also need a great idea. You must be ready to work harder than youve
ever worked before. Entrepreneurs have self-confidence; theyre good communicators and
good listeners with the ability to stay cool under pressure. If that describes you, dont delay.
Plan your new product or service and make a prototype you can test. Take concrete steps
to discover if you have a concept that will be commercially attractive.
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Move fast and break Believe in yourself and your innovative offering. If things dont work out, be ready to pivot
things. Unless you are
breaking stuff, you to something else. Discard your initial idea, and move onto your next one. Let experience
are not moving fast become your teacher. Nothing else matches it.
enough.
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A number of promising areas are ripe for new business ideas, including the pet industry,
cloud services, big data, wearable devices, remote monitoring, smartphone platforms,
mobile applications, social causes, healthy fast food, rental/sharing, 3D printing and e-
commerce niches. The time has never been better for an agile, move-fast approach. The
tools you need to get started are all available, many for free. Handle your idea correctly and
you can be operating your new business within 90 days.
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About the Author
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Bernhard Schroeder, a director at the Lavin Entrepreneurship Center at San Diego State University, was a senior
partner at CKS | Partners.

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