Updated 12 February 20
A lot of people fall victim to writing a business plan which goes on for pages and pages. But this is a great way of making sure it’s never read by anyone and it’s rarely referred to!
Luckily, there’s an alternative. And it’s smaller and smarter.
The Lean Canvas is a 1-page ‘living’ business plan you can continually update. It was originally developed by Ash Maurya, founder of the Lean Stack, after he adapted Alex Osterwalder’s Business Model Canvas. The aim was to replace long complex business plans with a single page business model.
You might think there’s no way you could fit your business model on just one page, but it’s easily achievable. “The Lean Canvas is great because it forces you to focus and be concise”, explains Luke (one of our Startup Consultants), “when you only have a page to explain your business, everything on it should be critical”.
Let’s take a look at a few of the key benefits:
It’s quick: Instead of taking weeks to write a business plan, you can map out multiple business models in one afternoon.
It’s concise: You’re forced to focus on the true essence of your product. Draw out the benefits and highlight your hypothesis.
It’s effective: Whether you’re pitching to investors or keeping you team up to date, the Lean Canvas allows you to effectively document and communicate your progress. People are more inclined to read it compared to a lengthy document and it’s much easier to amend.
At Nova, the Lean Canvas is the main tool we use to define and track business models with our founders. There’s debate about the order you should fill it out, but we suggest the following:
List your target customers and users
Your customers and users might be the same group of people or they could be different. If they’re two separate groups, you should fill out one Lean Canvas for each. Your customer segments drive the answers for the rest of the canvas, so it’s important to know who they are.
If we take Facebook as an example, their users were originally college students, whereas today their customers are advertisers.
List the characteristics of your ideal customers
You need to know who is your first, ten and one thousand customers are. Be as niche as possible and really drill down into what personalities or attributes define your ideal customer. This will help you design your solution with their needs in mind and enable their adoption of the product.
List the top 3 problems your business aims to solve
Rank your problems in priority order. These are your big assumptions, so make sure you validate them by talking to your target users.
For Uber, this would look like:
List how your problems are being solved today
Make sure you don’t just list direct competitors. For example, Netflix's biggest competitor wasn’t Hulu or Amazon Prime Video, it was a bottle of wine and having friends round for dinner. Look at how people are already solving the problem, not just companies doing similar things as you.
Outline a possible solution for each problem
How do you plan to solve each problem? Keep it high level and remember that this is your assumed solution! Don’t get it confused with a product spec. You’ll need to create prototypes and test them with users before you build any kind of product.
Unique Value Proposition:
A single, clear, compelling message that states why you are different and worth paying attention to
This is possibly one of the hardest sections to fill out on the Lean Canvas, but it’s absolutely critical. Your UVP helps you stand out from the competition and captures your potential customer attention. For example, Facebook’s user UVP is ‘connect online with your friends when you’re not together’, whereas, their customer UVP is ‘reach your target audience at a fraction of the cost’.
List your path to customers (inbound or outbound)
Define the way you plan to reach your customers. Pick the channels they’re active on and focus on 1-3 to test their effectiveness. Almost all startups begin with direct sales, so start small and don’t forget to take advantage of your personal networks.
Revenue Streams & Cost Structure:
List your sources of revenue and fixed/variable costs
How will you make money? How much will it cost you? If you don’t have any real data, it’s okay to use fermi estimates here.
List the key numbers that tell you how your business is doing
Key metrics should highlight your ambition so you know where you’re headed. These could include product focused metrics like utilisation of a specific feature, or business metrics which cover things like growth, traction or retention.
Something that cannot be easily bought or copied
Your unfair advantage could be domain knowledge/IP, access to a unique individual via your user panel, access to a huge data set or simply being a well-known brand.
Ready to put your business idea into practice?