Mainstreet Businesses -- Kelli Soll and Global Service Partnerships

I have been remiss in keeping my blog up to date. This blog re-posts articles I write for the Business Insider at the Idaho Statesman.

Here's the May, 2014 article about Venture College entrepreneur Kelli Soll, and her business Global Service Partnerships

Not everyone wants to start and build a business with investors, high growth and an exit. Some prefer to simply work for themselves.  We call these businesses Main Street or Lifestyle businesses.  Lean startup principles apply to starting a Main Street business as well as to scalable businesses attractive to angel investors.

Venture College entrepreneur Kelli Soll, a partner in Global Service Partnerships (GSP) is an example of the application of lean startup principles to a Main Street business. Kelli and her partner had a vision that they could somehow create a business in Idaho that would deliver value to people here and at the same time attack a literacy problem in Belize.  They wanted to create a profit making social venture that would enable them to earn a living while impacting this social problem in Belize.  How do you do that?

They began by proposing service learning trips to high school students.  Kelli interviewed 90 high school students and educators.  She learned they would love to go to Belize, but there was a problem.  High school students don’t have the money to go. So she had to pivot.  That is she had to find a customer for whom such a trip would provide value and who could and would pay.

She spent 50 hours talking with parents. She learned they might be willing to pay to send their children to Belize, but only if she could assure the parents their children would be safe.  Pivot number two.  She needed to redefine her relationship with her customers. This wasn’t just a commercial transaction; she needed to develop a very personal relationship with her customers to gain their confidence.

Armed with this information, Kelli developed a “minimum viable product” or an MVP.  An MVP has just enough features to see if the customer will in fact pay.  She spent $20 to print brochures.  Note, this was her first cash investment.  She invited those she had previously interviewed to meetings where she gave them her flyer that said she would be taking people to Belize in March 2014 and the fee would be $3000.  Fifteen grandparents, parents, senior citizens and four teenagers signed up to go.  Wow! That was $45,000 of presold revenue.  Kelli’s total investment to date, other than her time, had been $20.

Based upon this assurance that she had paying customers, Kelli then (and only then) went to Belize to set up the partners and activities such a trip requires.  The end of the story is the trip happened, Belizean children’s lives were changed, and fifteen Americans had an amazing experience.  Kelli has now presold two more trips.  That will result in a total of $135,000 of revenue in her six months of operations.  You can learn more about GSP at www.globalservicepartners.org.

The lesson is that she did not first make a significant investment and build a product.  She talked with potential customers and kept talking and changing her plan until she nailed down the customer segment, the value she would create, and a revenue stream.  Only then did she begin spending money on her product—the opposite of most entrepreneurs. 

Test your business model with a minimum viable product

Stanford Professor Steve Blank says “a startup is a temporary organization in search of a repeatable, scalable, profitable business model” (steveblank.com). You may recall from my last column that he believes an initial business plan is a series of unproven assumptions, and that the entrepreneur’s initial task is to test those assumptions quickly and cheaply.

He sees this happening in two stages:  (1) customer interviews and (2) bringing minimum viable products to the market place.  Both are designed to gain feedback from those who might purchase the product or service. 

In the first stage the entrepreneur interviews people who may be able to give feedback on the assumptions such as potential customers, suppliers, and channel partners.  As data is collected from the interviews, the assumptions are refined until the entrepreneur believes she has validated all the assumptions in the business model.

In the second stage the entrepreneur further tests the business model by offering the market place an actual product or service, but the minimum (the “minimum viable product”) necessary to find out if the market will pay for the product and how the customers will use it.  In other words, it is a mistake to try to bring a full-featured product to the market before learning what features the market values.  And the best way to learn this is to bring out a modest model.

Steve Jobs was a master at this.  Think back to the first iPod, iPhone, or iPad and the iterations since they were released.  These early versions had just enough features to learn if the market were interested. Then Apple could watch how the products were used, and modify them accordingly.

We use this approach at Venture College.  For all fall the student-entrepreneurs have been out interviewing prospective customers.  As they gained insight from potential customers they modified their assumptions about their business model—in some cases radically.

Several of the entrepreneurs in our first cohort are beginning to bring modest products or services to the market, still in a test mode.  For example, one of our entrepreneurs has a passion for teaching financial responsibility to teenagers. Through her interviews she learned that teenagers want to know how to afford to move out of home when they are ready to go to college.  But teenagers don’t have the funds to pay for such knowledge. 

Further interviews with the parents of teenagers, led her to the insight the parents are also interested in how their children can successfully move out of home when the time is right, and at least some parents are willing to pay for this information.

So now she is creating her service, a seminar to teach financial responsibility to teenagers.  Initially she is producing a low-cost brochure that sets forth the content of her seminar. The brochure is the minimum viable product. She will use the brochure to try to obtain paying customers for her seminar.  Should sufficient customers sign up, she will then proceed to develop the seminar itself.

In the local angel community there is wide acceptance of the notion that an early stage company is an experiment in search of a repeatable, scalable and profitable business model.  The local angels often fund companies just as they are ready to bring the initial version of their product or service (the minimum viable product) to the market. 

This allows us to invest modest amounts and give the company an opportunity to refine its business model.  Once the business model is proven, the risk is reduced and it is generally easier for the company to then raise substantial capital to execute its business model.

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Learned is the past-president of the Boise Angel Alliance and the Director of Venture College at Boise State. This column was originally published in the Idaho Statesman's Business Insider on December 17, 2013. Learned writes monthly on angel investing and startups for the Business Insider.  Columns are subsequently published in this blog. You can reach him through kelearned@msn.com.