Who cares about a value proposition, I just want to open a business.
The value proposition is the reason your business exists. The right value proposition can make you, and the wrong one will break you.
Welcome to our three-part, Business Planning blog series. In this series, I’m going to dive into some of the topics we explore in the Venture Validation Program. Before we get started, you may be wondering what the heck is the Venture Validation Program? It’s our 13-week business planning course that will transform your idea into a blueprint for launching your business.
So! The value proposition. The value proposition is arguably the single most important concept we explore in our course. The value proposition is the reason your business exists. The right value proposition can make you, and the wrong one will break you. Let’s dive in.
What is a value proposition? A value proposition defined as simply as possible, is the unique value that your business will provide to customers. The value proposition is how customers choose what products and services are best suited for their wants and needs.
Let’s go over a couple examples. McDonalds. Everyone is familiar with McDonalds. With little speculation you can assume that their value proposition is fast food that tastes delicious. Where a local restaurant, like the Ale House, would have a very different value proposition. You could speculate that the Ale House’s value proposition is focused on delivering the consumer a top-notch dining experience, with carefully prepared foods sourced with local ingredients.
Although these are very different value propositions, they are both good. Both value propositions address a need in the market. McDonalds’ quick, and greasy value proposition attracts consumers that need a quick bite, where, Ale House’s value proposition attracts a different consumer and fills a different need in the market. Understanding what your target market wants and needs is essential for establishing the right business model and getting off to the right start.
Why is the value proposition so important?
The value proposition is what distinguishes your business from your competitors. When you’re starting a business, you’re going to want a value proposition that is unique. It would be suicide to open a coffee shop that sells, quick, cheap coffee, because we all know where to get that already. As a new business, you need to identify an opportunity to provide new and unique value.
Developing a value proposition can be challenging. I often see entrepreneurs in the early days of planning their businesses struggle with this concept. Many first-time entrepreneurs will be naïve to what they can deliver. They will think they can be the quickest, with the best quality, and the cheapest. The reality is that you simply won’t be able to be the quickest, the best, or the cheapest. You will need to make compromises in certain areas to excel in others.
Let’s look at another example. If you sell bed sheets, you won’t be able to use the finest linens and offer the cheapest price. It’s a nice idea, but the cost of producing bed sheets with the finest linen prevents you from offering the cheapest price. However, what most people learn that this is okay! If your target market wants the finest linen, they aren’t expecting it to come cheaply. For most new businesses we’d recommend competing on value rather than price. When you start you won’t have any economies of scale, you’ll be strapped for cash, and a bigger company will almost certainly beat you in a price war. However, you do stand a fighting chance if you’re able to provide unique value to the market.
In our 13-week course, we devote 4 weeks to finding your value proposition. As participants learn, the value proposition is constantly evolving, but before worrying about other aspects of your business you should determine if you have a value proposition customers want. We challenge our participants to find the first version of their value proposition. How do we accomplish this? Simple. We talk to our customers. Everyone in the program shows up with an idea, so it’s time to start evolving your idea into a business. That starts with talking to customers. We do this to find social, functional, and emotional problems or desires that they are looking for a solution for. This gives us insight into what our customers want. Using this information, we can then start to refine our product or service to create a unique value proposition that our customers are sure to love.
Finding a value proposition customers want, a value, and a need is critical to launching a successful business. What do you think? What local businesses do you think offer an exceptionally unique value proposition?
For more information on VVP, how to join, or what other learning is involved, contact Dakota@EDGSJ.com or check our website, https://edgsj.com/en/entrepreneur-development#starting-a-business