The bulk of our work at The Value Builder System is helping entrepreneurs with between $1 million and $20 million in annual sales build their value, but occasionally I get asked for feedback from a would-be entrepreneur with a new business idea.
These requests usually follow a similar pattern: someone has an idea for a business and has been working tirelessly on their plan. My advice is almost always the same: stop fiddling with your business plan and go start selling your idea to prospects.
Finding a customer for what you want to do is the purest form of entrepreneurship. A business plan is something bank managers tell you to write because they have never actually started a business. It’s easy to sit behind a spreadsheet running endless scenarios, what’s hard is actually asking someone to buy. People who have actually built something know your business plan is fictional until you get a few customers to bite.
ShapeUp Does a 180
Recently I had the chance to interview Rajiv Kumar the co-founder of ShapeUp, for my podcast, Built To Sell Radio. Kumar and his partner Brad Weinberg started ShapeUp in medical school and provide a great illustration of how dramatically a business model changes when you stop planning and start doing.
Kumar and Weinberg were studying the effects of obesity on the human body and decided to launch a not-for-profit to organize local challenges to get people to live more healthy lifestyles. The partners built a website where people could track their challenges and then decided to switch and become a for-profit company. They raised $300,000 from friends and family in return for a 20% stake in ShapeUp.
Soon after they launched, Kumar and Weinberg started to get calls from companies that wanted to sponsor their employees to subscribe to ShapeUp. Kumar and Weinberg realized employers were struggling with increasing health care costs and ShapeUp could improve the health of a company’s employees and by extension reduce their health care costs.
Kumar and Weinberg quickly changed their business model and started targeting large Fortune 500 employers. They offered to deploy their solution within a company so employees could challenge each other to lose weight and get fit.
How Richard Branson Bought ShapeUp
Emboldened with a new business strategy, Kumar and Weinberg transitioned their company from a desktop application to a mobile interface and attracted CVS, the pharmacy with hundreds of thousands of workers, to their platform. With CVS as client, they started to attract other blue chip employers.
In the space of just 10 years, ShapeUp went from a not-for-profit serving consumers to a business-to-business Software as a Service (SaaS) company with a valuation—according to our research at The Value Builder System—north of $100 million.
Earlier this year, ShapeUp crested $20 million in annual sales and was acquired by their biggest competitor, Richard Branson-backed Virgin Pulse.
If Kumar and Weinberg had continued to toil over spreadsheets in their college dorm room, running scenarios on a direct-to-consumer model, they would have never received the market reaction they needed. By going to market, even with a rudimentary idea, they got the feedback that employers—not consumers—should be their main target.
Once you have a back-of-the-napkin idea of what you want to do, put away your business plan and go ask someone to buy it.