Does Your Business Pass The PIS$ Test?

Does your business pass the PIS$ test? This was the question posed by an entrepreneur from MACRI (i.e. Malaysian Association of Creativity & Innovation) at the recent barcampKL when sharing about Malaysia’s Cradle Investment Programme.

So what is the PIS$ test? PIS$ is an acronym for the 4 key criteria used in evaluating a business.

P – The PROBLEM

The first question to ask when evaluating your business is,

What problem am I solving?

Don’t go and chase an idea. Start by looking for problems that people have. If a sufficient number of people have the problem then there is possibly a higher chance of making money by solving it for them.

Let’s look at a problem faced by the population of Botswana – the lack of access to electricity. Because of this lack, there is a problem in the recharging of mobile phone batteries.

I – The IDEA

The next questions to ask, after identifying the problem a group of potential customers face,

Do I actually have an idea on how to solve the problem?
Is my idea a good one to solve this particular problem?

In the case of the problem faced by the mobile phone users in Botswana, an entrepreneur could have generated two ideas:

1. Sell a power generator to mobile phone users so that the users will have a way of recharging their batteries.
2. Sell battery recharging services.

Generation and evaluation of ideas are important sub-steps. Evan Williams shares, in a blog post, how he evaluates his own ideas.

S – The SOLUTION

After evaluating your business’s idea to solve the problem, it is time to look at the solution implemented.

For the example used, let’s say an entrepreneur decides on selling battery recharging services instead of power generating products. How will this service be offered?

Is the solution to establish a stationary store where potential customers come and drop off their phone for recharging?
Do you establish kiosks throughout an area where customers can self-service to recharge their phones.
Do you provide a on-site phone battery recharging service.

For example, some entrepreneurs in Africa drive around in their cars to areas where their potential customers are and then use car batteries to provide battery recharging services.

Some questions that can be asked here,

Do I have the resources to implement my solution?
What are the channels of distributing my product or service?
Have I developed an appropriate execution plan?
Does the physical landscape (i.e. geography) and existing infrastructure aid or hinder the implementation of my solution?

$ – The MONEY

The last criteria your business must meet is whether it can generate sufficient revenue to sustain the business, if not produce profits. Important to this criteria is the question,

How will I make money?

Will you be generating revenue by selling a product? Charging for the service on a per-usage basis? Selling memberships?

If you are developing a web-based company, this post by Louis Gray on ’10 Business Models To Monetize Web Applications’ will be of interest to you.

Feedback & Fine-tuning

Assessing the solution your business is executing can help provide greater clarity on the idea and better insight into the actual problems faced by potential customers.

Using the example of the population in Botswana who do not have access to electricity, let’s look at how this feedback could possibly work.

1. Problem – People do not have access to electricity.
2. Idea – Provide a means for people to generate their own electricity.
3. Solution – Develop a low-cost, easily portable device that people can use to generate their own electricity.

While evaluating the solution, the entrepreneur might realize that even at a low price, most of the potential customers might not be able to afford owning their own generators. Besides, these potential customers do not actually need constant, daily access to power.

The entrepreneur will then ask himself why there is no need for constant and easy access to power. The entrepreneur may then realize that people need electricity not to power appliances directly but to recharge batteries.

1. The Problem is now – People do not have a means to recharge their batteries.
2. Idea – Provide a service to recharge batteries for people.
3. Solution – Establish a store where people can drop their batteries off for recharging.

While evaluating the solution, the entrepreneur may realize that transportation is not easily available to potential customers thus making it hard for them to reach his store. Customers may also be reluctant to make two trips – one to leave the battery for recharging and one for collection.

The idea is now fine-tuned.

1. The Problem is now – People do not have a means to recharge their batteries.
2. Idea – Provide a MOBILE service to recharge batteries for people.
3. Solution – Drive a car to where potential customers live and use car batteries to do the recharging.

Finally …

It is important to constantly remind oneself that while an idea might be cool and interesting, businesses are not just built based on ideas existing in isolation from the practicalities of the real world. A framework like PIS$ can be useful in evaluating your business and help fine-tune it.

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Thanks to James Chen of MACRI for sharing this methodology of assessing a business.

Header photo courtesy of selmanpinarli.

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