Two of the more important questions you'll answer in your business plan are:
- What problem does your business solve?
- How does your business solve it?
These questions are so important, LivePlan includes them in both the Pitch and Plan documents.
If these question seem daunting, that's okay - many entrepreneurs feel this way. This article will give you some good starting points for figuring out your answers.
Note: If you're finding the character limits in the Pitch too restrictive, you may want to use the Plan tab instead, where there are no character limits.
Why are the problem and solution so important?
It's one thing to offer a product or service, but to attract investment or loan funding, you'll also need to prove that there's an existing need in the real world for what you plan to sell. You'll need to show that there are specific kinds of customers (whether they're consumers or other businesses) who'll buy your product or service.
Below are some steps to finding your problem and solution.
Step One: Who's your target customer?
The better you understand who will buy your product or service and why, the easier it will be to describe the problem your business solves.
To arrive at your target customer, we recommend working out a customer persona, which is a very specific, detailed description of the customer you're most likely to attract. You'll want to understand this person in detail, including their average age and income, where they're located, and why they need what you sell.
If you've never made a customer persona before, this article will help: How a Buyer (or User) Persona Can Improve Your Business
Some businesses will have more than one customer persona, but it's best to keep to a small number. There's no business where "everyone" is a target customer, and being too general won't help you figure out what problem you're solving.
Step Two: Why do they buy what you sell?
When you have one or more specific, fleshed-out customer personas, then you have the tools to understand why customers buy your product or service. An example we like to use is a local coffee shop. This type of business sells coffee, which is a product you might not think solves a problem. But consider these customer personas for that coffee shop:
- Students of a nearby college, who need a place to study late at night
- Local freelance workers, who need a location for meetings during business days
- Weekend shoppers, who need to take a break and recharge
Each of these customers is coming to the coffee shop for a different reason. The product (coffee and atmosphere) solves a different problem for each customer.
Step Three: How are you solving their problem?
Once you understand what your customer's problem is, then you can describe how your product or service will meet that need - or, solve that problem. Let's look at our coffee shop example again, and see how it solves those customer problems:
- The coffee shop solves the college students' problem by staying open until midnight and offering plenty of seating.
- It solves the local freelance workers' problem by offering large tables for meeting space, and keeping the music volume low during business hours for easier conversation.
- This business also solves the weekend shoppers' problem by being located near a busy shopping district, and offering drink specials and snacks on weekends.
Here are a couple of other good reads on this subject, from our resource website Bplans: