Lesson 15: Self Assessment - Leand Canvas

Self-Assessment – Lean Canvas Analysis: Create an Entrepreneurial-Friendly Business Plan 

Lean Method to Create an Entrepreneurial-friendly Business Plan 

As an entrepreneur, you need to be able to quickly formulate potential business models, product introductions, campaign plans and more. You need to capture your brainstorming, present your ideas in a visual way, and avoid waste of time and money. An effective business tool that helps you accomplish this feat is Lean Canvas.

It’s a visual guide in a one-page format, constructed in blocks (as shown below) to guide you through the steps of developing a core plan. While a full, strategic business plan is still something you should do and we encourage you to do it in the medium-to-long term, you likely need to act fast and jump on opportunities, so this is where Lean Canvas comes in handy. Besides its simplicity and clean, organized format, what makes Lean Canvas stand out is that it’s actionable.

Lean Canvas is an adaptation of Business Model Canvas by Alexander Osterwalder. Ash Maurya used it to create Lean Canvas in the spirit of “lean start-ups.” Lean Canvas is much more entrepreneurial-focused than the traditional Business Model Canvas.

Lean Canvas primarily focuses on problems and solutions, supported by metrics — all in order to arrive at a competitive advantage. It helps you deconstruct and organize your ideas for your business. It forces you to get your points down succinctly to the essence of what you are trying to do as an entrepreneur.

The following are explanations of the nine key components of the Lean Canvas:

Problem
List out the one to three problems that your target customers have. The whole reason for you to start a business is to deliver a product or service that solves a consumer problem they care about. Without clarity about what problem your business solves, you will struggle to find your place in the market. This up-front work will make your life easier.

Unique Value Proposition
How might the customer describe the unique characteristics of the problem going away for them? What value does a reality without that problem represent for them? What’s the High-Level Concept for this UVP? It can be easier to communicate what you do in the early stages of your start-up from the perspective of: “We do X for Y.” What makes your company’s product or service different and unique in the marketplace?  A value proposition makes a promise you will offer unique value to the customer.

Solution
You need to frame your solutions from the point-of-view of the customer. How might your customer segments talk about the solution you intend to offer? You may not know the exact, perfect solution yet, and there is usually more than one solution to solve a problem anyway. This block is meant to be an iterative process. You can put down your initial thoughts. Could there be weaknesses in your proposed solution? Identify them and strategize around them.  What could undermine this solution?  Keep iterating.  Be clear on how it would solve the problem(s) that you spelled out in the first block.

Customer Segment
Jot down what market segment your target customers are in. Are they in a vertical market, such as healthcare or finance or education or public sector or non-profit? Are they enterprise customers or small business owners? Or are they a service provider themselves? Define your customer segment.

Channels
This section is about how you get your offer or product to market, about how you activate the customer segments, grab their attention, teach them about your product, and about the mechanisms will you use to do this and get them to get their wallets out. Essentially, what are the inbound and outbound paths to your customers? The key point in this block is that you will need to identify your sales channels and your marketing channels.

Revenue Streams & Cost Structure
Once you know how you will go to market, you need to think about your revenue streams. The big question here is: how will you make money? Pricing definitely comes into play, but you also need to figure out whether you are aiming for one-time revenue, such as the sale of a widget, or if you are seeking recurring revenue, such as a monthly subscription to a service that delivers “widgets,” physically or digitally.

Let’s say you are launching a subscription-based business.  The revenue comes from subscribers paying a monthly fee. This example model breaks down the subscribers into those who churn out and new subscribers. The new subscriber value further models the various channels where new customers come into the business and breaks down the acquisition of subscribers via Facebook and Google, which breaks down further into conversion rates for SEO on Google and Facebook Ad spend necessary to reach your target audience and engage them. This is the revenue equation; there will be a similar equation that accounts for the costs to acquire and serve customers. It will cost you money to make money. Take a few minutes to sketch out your costs and revenue streams.

Costs include monthly operational costs; cost of the website or landing page; cost of market research; personnel costs; office space cost, and so much more. Once you have all your costs, compare it with your projected revenue stream (based on reality / market research), so you can figure out how much money you will spend before you reach a break-even point and then a profit.

Key Metrics
One of the hard truths for almost every start-up is that you probably will not turn a profit in your first year. Even the most successful businesses in the world had the same experience, so don’t lose heart. What those businesses most likely did, rather than get hung up on profit as a key metric, was to look at some of the leading performance indicators that showed growth. What are the measures that will help you know whether or not you will make money in year one?

You will need to identify and decide upon the metrics that you will use to monitor your company’s business performance. Metrics will help you run a sound business. For example, you will track revenue and costs, but you may also want to track customer satisfaction, inventory turnover, cash flow and subscription sign-up rate.

Unfair Advantage
What do you have (or can get) that would give you such an advantage that it would be difficult for a competitor to copy you?  This could be an amazing leadership team who know how to execute. It could be a singular talent that is head and shoulders above the rest. It could be an existing customer or partner who will really benefit your business in ways you could not even buy. It could be the support of a major investor. And if you don’t have it, this exercise will motivate you to go find it – something or someone who will give your entrepreneurial venture an unfair (or uncommon) advantage.

Now, it’s your turn to do the Lean Canvas for your company to better understand where you stand.

Lean Canvas Example: Tesla – LeanCanvasTesla.pdf