Business Plan! “You need a Business PLAN”, they say. And a quick search on the Internet will bring up lots of useful templates with sections like: team, vision, strategy, mission, objectives, marketing plan, financials, cash flow, balance sheet, forecasts etc…pages after pages that you are expected to fill out for your business. All these sections are indeed important topics to think about and your banker will love to read them all. The problem is that as soon as you are done writing everything down, a lot has changed in your business already, unless of course your business exists only on paper.
To the rescue came the book Business Model Generation by Osterwalder & Pigneur, with a much simpler and dynamic business model canvas that actually helps you, the entrepreneur, to ask the right questions about your business.
And this is what it looks like.
You may want to check out the source link below for a downloadable version.
Expert Level: …just getting started
So now that with the canvas we have basically reduced your workload from weeks and weeks to just a few days, let’s simplify even further. Because even with the canvas, in the very beginning of your idea, it is still difficult to fill all the boxes because you need to make many assumptions that remain what they are, assumptions.
Unless the market proves you right and with this I mean, customers are using and paying for your product/service, you are only making educated guesses. Any market validation, using our Balloonary tool or another method for that matter, is hence superior to filling out boxes and making complicated assumptions. Get your idea out and test the market !
Don’t get me wrong, I really like the canvas, because it forces you to think about your business, and it allows you to make changes fast and adapt as you go. If you have nothing else to structure your business around, especially in the beginning when customer feedback is scarce, stick to the canvas and consult and update it regularly with the business input and experience you get. Start formulating your idea on paper, and for that the business model canvas is a great, simple tool.
Here are my top 5 boxes of the Business Model Canvas that you need to fill out when you are just starting out:
1. Key Activities
What are the main things you actually need to do operationally to run your particular business?
2. Value Proposition
What’s in it for the customer? What value do you offer your customer?
3. Customer Segment
If you had to describe your customer, which words would you choose?
4. Revenue Streams
How do you make money? For what, at what time, and how much are you getting paid for your service or product?
5. Cost Structure
Not so easy in the beginning, but very important to think about! What will be your predictable fixed and variable costs? Fixed is e.g. rent, variable costs go e.g. up the more products you sell.
Cash flow is king in most businesses, because you will need to pay some bills every month and you need to make sure that you have enough money in your account to pay them in due time, not only at the end of the year. And do not forget to put money aside to account for VAT if applicable and the taxman. As common sense as this sounds, many businesses have failed because they never looked at monthly cash flow.
Expert Level: …just getting started, but pimped!
There is also an alternative canvas that makes some of the boxes of the original model above a little more intuitive when you are getting started with your business idea. Simply swap the boxes as follows:
· Key Partners becomes Problem
What are the top 3 problems your customers are facing?
· Key Activities becomes Solution
What are the top 3 features of your product/service that solve the problems of the customer?
· Key Resources becomes Key Metrics
Identify two or three numbers/metrics that you can easily collect, consult daily in an automated fashion (via a notification in Slack or via an email report) and that are easily interpreted to tell you if you are growing. This can go from daily number of visits, number of sign-ups, number of calls or inquiries, sales in either quantity or currency aso… Pick metrics that will allow you to, in the beginning, get a feeling of if you are on track and if your business and marketing actions are showing effect on growth. You can always move to full-on analytics when you get more data.
One of the very first tasks you are recommended to do when you are thinking about starting a business is to write-up a business plan. However, this can be a daunting task when it is the first business you are creating. There are just so many questions you do not have answers to and even if you try to answer all the sections of a business plan template, many will be based on assumptions that are, at the beginning, difficult to verify. Nonetheless, the mental exercise, to think about the various dimensions of your business idea, is a crucial one.
The post introduces the original Business Model Canvas and offers very simple tweaks that you can make to the original model.
This adjusted business model canvas is particularly easy to use, especially when you are just starting out, because it focuses on key elements of your business idea that you must think about in order to give your business idea some structure that you can execute upon.