The Business Concept Statement

June 28, 2016

 

The value of a concept statement cannot be overstated.  No concept, no successful venture!  This is not only true for start-ups, but maybe even more so for going concerns.  Companies that understand where they are going will be able to better identify the islands of risk that could turn  into major concerns.  RiskPoint Zone has added a new feature in eRiskPoints that helps clients develop and maintain their concept statement.

 

A concept statement must address certain specific questions.  Once those questions are answered you must be able to express those answers in a concise and interesting document called a concept statement.  These are the concept questions:

 

  • What is the problem your product or service will solve for your customers?

  • What is your solution for the problem?   

  • What is the target market?

  • Is the target market large enough to support the venture?

  • Is the venture financially viable?
     

The next step to convert the answers to these questions into a paragraph that people will actually read.  The questions are only meant to help get the information together so you can write the statement.

A venture concept statement helps you focus on exactly what your venture is. It should be no more than half a page to a page long, single spaced. A good venture concept statement must not only tell the readers exactly what the venture is, but after reading it they must want to learn more.  You will probably rewrite your concept statement several times before you get it exactly right. It is this process that makes the concept statement so valuable.

 

 To turn an idea into a venture concept, the product or service related to the idea must solve a problem by providing a unique benefit for customers.  A venture concept statement explains that problem and the benefit in writing, and how the venture will deliver it to a customer. The concept must be attractive enough that users will seek it out.  It must disclose the targeted market and how big it is.  The concept statement must identify the competitive advantage of the product or service and what will set it apart from other solutions.  Finally, it must address the potential profitability of the product or service.  The best way to do this is to address its potential gross margin.  If it doesn’t have a gross margin of at least 50%, the odds of success are minimal.

 

An example:

An entrepreneur has an idea for a new mouse trap.  It is very unique in that it is a robot that will attract and catch the rodents using a flute-like sound, undetectable to humans.  This technology is patented. Once the mouse is captured ROBOTrap will dispose of it in a sanitary way.  After that it will cleanse itself to eliminate the spreading of disease to humans who come in contact with it.  It can work 24 hours a day and run for a month on a set of batteries. The entrepreneur has developed a working prototype and has named the product ROBOTrap.  The entrepreneur wants to start a business and sell this new mouse trap worldwide.  Here is the first attempt at a venture concept statement.

 

ROBOTrap delivers revolutionary solution to  a problem that has existed ever since man and rodents have shared their environment.  Humans can’t stand mice because they are dirty, and can contaminate a living environment.  They can get through the smallest spaces to find food, and they are a little spooky. 

 

The current methods for catching mice used by our competitors are conventional traps, poisons, or cats.  Each of the methods have a downside and have had limited success in solving rodent infestation problems.  This is especially true for locations where there are large numbers of mice, such as near farms or open fields.  These large populations of rodents bring with them a very unhealthy environment.  It is these locations throughout the world that ROBOTrap is targeting because it solves the  problem in a convenient sanitary way.  People living in these locations will pay the $200 price for the ROBOTrap because of the convenience, health benefits, and the time savings ROBOTrap delivers.  ROBOTrap owners will never have to dispose of another mouse.  ROBOTrap is low maintenance and inexpensive to operate as a set of batteries will last a month. 

 

ROBOTrap works by emitting a flute-like sound undetectable to humans.   This technology is patented.    ROBOTraps can be manufactured for $90 per unit, once they can be produced in quantity.  This provides a margin that will allow the company to become extremely profitable once it passes its break even point.

 

 

 

The point of this example is not whether the ROBOTrap is feasible, or if it works.  It is made up to illustrate what a concept statement might look like.   The benefits of this process and the resulting concept statement are many.  It will…

  • Help you get your mind around what your business will be

  • Be the initial look at venture feasibility

  • Be used as an elevator pitch

  • Be part of a website or other marketing documents

  • Be the introduction to a formal business plan, if one is needed



So what does a business concept statement have to to with risk discovery and resolution?  A concept statement will tend to keep a business owner focused on the concept of the company. Focus always allows for an early identification of islands of risk. If an owner decides to change the concept it will be done in an organized way which leads to risk reduction.

 

 

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