Every great company started by solving an important problem. The more effectively you articulate a problem, the more valuable your solution will be. This is why your business plan needs to have a problem statement.
A common mistake businesses make is that they do not give the problem as much importance as the solution. Instead, most business owners get excited about the solution — but in doing so, they tend to forget to explain why the problem is important.
A well-articulated problem gives your solution more value. It makes your entire plan 10x more effective.
This article takes a look at what a problem statement is. It also includes problem statement examples, how to write an effective problem statement for your business, and more.
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What is a problem statement?
Ultimately, most business owners want their company’s products or services to solve a problem for their core customers.
That means your problem statement is the heart of your concept. It is the very thing that gets people interested in you and your business. Eventually, it becomes the focal point.
Put simply, a problem statement defines a problem and identifies what a solution would look like. But to build a good case for the problem is to not just state the problem. You should also build an engaging story around that problem — one that people can relate to.
Purpose of a problem statement
Problem statements are important to businesses, individuals, and other entities because they help keep the entire team focused on solutions. Problem statements are also important for these reasons:
- First, they allows you to identify and explain the problem in a concise but detailed way. This gives the reader a comprehensive view of what's going on. You can identify who the problem impacts, what the impacts are, where the problem occurs, and why and when it needs to be fixed.
- They clarify what the expected outcomes are. When you establish what the desired situation looks like, it helps give an overarching idea about the entire project. The proposed solution, scope, and goals of the solution are all made clear through the problem statement.
- They act as a guide, helping you navigate your business and can help your team remain focused. You'll find that you'll come back to your problem statement from time to time to ensure the solution has been implemented and that it does indeed solve the initial problem.
A great problem statement will help to ensure that all objectives of your business are being met.
Examples of problem statements in business
There are tons of successful examples of problem statements from various companies. Let's take Netflix for example. They solved the problem of having to go to the video store to rent movies.
Netflix originally eliminated the need to go to the video store by delivering movies in an envelope to your mailbox. This allowed people to keep the movies for as long as they'd like.
At that time, the use case for Netflix was something like this:
"Going to the video store is a pain. People don't like traveling back and forth just to rent a movie and they hate paying late fees even more."
A simple interpretation of Netflix's problem statement would be:
Problem: "Going to the video store requires fighting traffic, wandering the aisles,, and waiting in long lines just to get a single movie."
Solution: "Netflix allows anyone to enjoy thousands of titles streamed directly to their home or delivered to their mailbox."
As you can see in just two sentences, you have given a potential investor an easy problem/solution statement. This example of what Netflix's problem statement would have looked like is simple, yet it gets straight to the point.
A good problem statement will solely focus on the problem. This allows the audience to build a powerful case for the problem and accept the solution you are trying to provide.
Another example problem statement is from Facebook. Harvard had its very own version of Facebook when Mark Zuckerberg was a student. Zuckerberg's frustration was that "he could only search and look at people's information on the university's version of Facebook and not perform any sort of social interactions like liking, commenting, etc."
This was when he came up with the idea to create a new platform. He hoped to create something new that allowed users to search for people according to their interests. Users would also be able to create an online network of friends and study groups.
Facebook’s problem statement would have probably said something like:
“A lack of social interaction among a group of people who share common interests/attributes is a waste of time. People cannot create strong connections without interacting with each other.”
A simple interpretation of Facebook’s problem statement would be:
Problem: Connecting with others and being able to comment or like their posts, etc., can have an adverse effect on making strong connections with like-minded people.
Solution: Facebook allows you to connect, create strong connections and interact with people with similar interests.
Key elements of a good problem statement
There are certain key elements to a good problem statement. These include:
Ideal situation
Your problem statement should outline what the ideal situation would be if there wasn't a problem that needed your attention. This is where you will identify the goals and the scope of the project. This section needs to give a clear understanding of what the ideal scenario will be once the issue is resolved and what your business can do to solve the issue.
Reality
Moving on, your problem statement should concisely describe what the current reality is for your business. Here, you will identify the problem, state why it's a problem, and identify who the problem is affecting. Moreover, this section will also describe when and where the problem was identified. All in all, this section is basically a scenario analysis.
Consequences
At this stage, your problem statement needs to identify the consequences of the problem. It should outline how people affected by the problem are being impacted and quantify how much the problem is impacting them. Some common consequences may include the loss of time, money, resources, competitive advantage, productivity, and efficiency.
Proposal
This section of your problem statement may include a few possible solutions to the problem. It is important to not identify a specific solution. The purpose of this section is to guide the business team on how to research, investigate and resolve the problem.
How to write a problem statement
When writing a great problem statement, there are a few things to keep in mind. Here are some tips to follow when writing a problem statement for your business:
Describe the ideal situation you aim to achieve
To get started, try to provide some context that will make it easier to understand the problem. Begin by explaining how the particular process should work. Before mentioning the problem, try to describe how the process would function if the current problem didn't exist. Be sure to keep the end-user in mind.
Let's say you have an idea of how to increase efficiency in a process to maximize the best use of resources. You can start describing a theoretical situation whereby the system is far more efficient and work towards your proposal from there. Just keep in mind who, what, where, and why so that you can stay on point.
Choose the biggest problem to solve
Oftentimes, you may find that your products or services can solve multiple problems. However, when defining your problem statement, focus on the biggest problem you can solve.
If you are going to be pitching to investors, keep in mind that they won't be able to remember all of the problems. They're most likely to remember your products/services that can solve their biggest problem.
Consider audience's needs
Be sure to review reports and talk to your employees to fully understand the scope of the problem. Their problem-solving skills can come in handy.
Take into consideration the needs and experiences of your audience when writing problem statements. People will relate to you and your problem statement if they have experienced something similar.
Furthermore, the vision for your product or service should be the same as well. The more your target audience relates to your story, the better they'll understand and connect with it.
Provide facts about the problem
Most business problem statements are backed by surveys or statistics. Your business's problem statement can include references to internal or external reports, staffing reports, statistics, customer demographics, national trends, etc. Of course, what you include depends on the problem you're solving.
Try to avoid adding excess numbers and irrelevant information. Ensure that you only include key statistics and solid data that highlight the severity of the problem.
Explain the benefits of your proposed solution
At this point in your problem statement, you've described the ideal situation where the problem doesn't exist. You've also pointed out the problem, explained what the consequences are if they're not fixed, and proposed solutions.
It is now time to explain the benefits of your solution. Focus on the efficiency and the financial impact of your solutions. Talk about the financial costs your solution will decrease and how your solution can free up revenue streams. You can also address the intangible benefits of your solution like increased client satisfaction.
If you need help solving business problems of your own, or you want to step up your marketing efforts, contact the team at Scorpion. We have helped thousands of home services, legal, franchise, and other small business professionals grow their businesses.
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