in Informative, Productive, Stories

Business Canvas, Business Plan and Business Model

If you don’t want to squander your hard-earned money on poor business ideas or vague-thought models, then you need to read and understand following three terms:

  1. Business Canvas – To understand your business
  2. Business Plan – To formulate your business
  3. Business Model – To evaluate your business

Lets see each of them in detailed manner:

Business Canvas

I remember the time when I have founded my own company AgriEra- Education Technology Platform for Agricultural Students, I got selection into Eureka- Asia’s largest B-Plan Competition in IIT Bombay where I have attended workshop and  they have a full lecture on Business Canvas and Javelin Board.

Now you might be thinking what the heck are these things. The answer is straight; it is “Strategic Documentation of your Business Structure”.  Lets see how Javelin Board look like and then we will talk on how to fill it.

The Validation Board  or Javelin Board is a great tool to help entrepreneurs stay focused on taking action while implementing the Lean Startup process.

— Eric Ries, Author of The Lean Startup

 

In startup there is nothing called as “Gut-Feeling”. As market will never work on your feelings instead on your product and its performance, hence in that case you need to fill up the Javelin Board. It helps you to track your progress and figure out what are the things that will really help in growing your business. For example, when Youtube started, it started as online dating site as they had this theory in mind:

Hypothesis/ Customer Problem: According to Founder Steve Chen – “We thought dating would be the obvious choice” for customer.

Solution: The idea was for single people to make videos introducing themselves and saying what they were looking for.

After 5 days of putting Youtube online,  no one had uploaded a single video, so Chen and the other co-founders reconsidered and evolved to re-evaluate their hypothesis and customer problem. So, when process like this, goes to number of loops- of  forming hypothesis, creating solution and customer-response, then technically it is called as Experimentation Stages and you need to document all these process in something called as Javelin/ Experimentation/ Validation Board. (More Details)

 

Lets understand what is Business Canvas too in brief. According to Wikipedia, Business Model Canvas is strategic management and startup template for developing new or documenting existing business models. It is a visual chart with elements describing a firm’s or product’s value proposition, infrastructure, customers, and finances. Now, lets analyze Business-Canvas of Facebook below:

  • Key Partner : List out those people who will help you or ESSENTIAL in making your business successful.
  • Key-Activities : List out those things here which you must do to make business model work. Like Facebook is Internet thing, so they mandatory need to make web-platform and data-center to store the data.
  • Key Resources : List out those important things which are needed to run your business like physical resources (e.g. buildings, vehicles, etc.), intellectual resources (e.g. brands, partnerships etc.), human resources (e.g. employees), and financial resources (e.g. cash, credit etc.).
  • Value Proposition: List thing which you are offering to Customer by accumulating key-partner, key-activities and key-resources.
  • Relationship: List out things which you think that it will help you to maintain relationship with customer like:  Will you call them on phone eg. personal relations or will you keep automated-chatbox for interaction.
  • Channels: Channels describe how a company communicates with and reaches its Customer Segments to deliver their Value Proposition. For Example – To make your value-proposition/service/product to reach customer, will you create company’s interface (web/mobile).
  • Customer Segment: It is simply your target audience for whom you are making value. Who are the stake-holders of your business.
  • Cost-Structure: The Cost Structure describes all costs incurred to operate a business model, for example in creating and delivering value, maintaining Customer Relationships, and generating revenue. Cost structures can be divided into fixed costs, variable costs, economies of scale, and economies of scope. (Definition by SSWM)
  • Revenue Stream: List out those things on how your company is going to earn money from stakeholders.

 

Business Plan

Whenever I meet any amateur-level Entrepreneur, he/she is just worried on how to make Business-Plan, so as to pitch it to the Investor and hence, keep occupying  me through many repetitive and associated terminologies. So, this part of article is whole script of “What to Include in B-Plan” for B-Plan competition or Investor.

  • Slide 1 – Elevator Pitch : The name ‘elevator pitch’ reflects the idea that it should be possible to deliver idea of your business in the time span of an elevator ride. Generally, when you will interact with unknown-investor, they will ask you to pitch your ideas, and this “2-3 line summary detailing your customer-segment, business-idea, revenue-generation and finance required” is called as an Elevator Pitch.
  • Slide 2 – Momentum and Traction – Traction is an evidence that your product or service has been accepted well in your customer-segment. It can any derived metrics such as download-rate, Page-View, number of Unique Customer etc.
  • Slide 3 – Market Opportunity- Its compilations of statistics you have related to market.
    1. What is your market? Include geographic descriptions, target demographics, and company profiles (if you’re B2B). In short: Who are your customers?
    2. What segment of your market will you focus on?
    3. What is the size of your intended market?
    4. Why do customers need and why will they be willing to purchase your products and services?
    5. Is your market likely to grow? How much? Why?
  • Slide 4 – Problem and Current Solution- This slide will contain the exact problem you are willing to solve and detailing on how your solution is helpful.
  • Slide 5 – Product or Service- This slide mentions detail on your product/service with every associated elements of it. (Of course, which are easy to understand by least techy guy of world called as Investor.)
  • Slide 6 – Business Model-  A revenue generating stream is called as Business Model. It is extremely thoughtful process on how you are going to generate money from whatever business you are doing.  In the current business environment, there are generally 4 type of business models which include direct sales, franchise, freemium and subscription models.
  • Slide 7 – Market Approach and Strategy This slide is all about your marketing strategy on how you will get word to customer about the goods and services you offer. It is also called as “Go to Market Strategy”
  • Slide 8 – Financials-  Your financial plan should include three key financial statements: the income statement, the balance sheet and the cash flow statement. Here is just a small tip- When I was selected for Incubation in B-Plan Competition organised by MSME, I got appreciation for Financials and I have every thing learnt from Investopedia Website. So do attain a look !
  • Slide 9 – Competitors- Remain assure that you are not the one who found some problem and wanted to provide with hottest solution in market. Lot many people have thought about it already, so in this slide you need to figure about who are your competitors and how same/different they are from your product.
  • Slide 10 – Investment Need- You have enough time spent on telling everything about your business, so just include numbers in lakh/crores you want to start your business and then you can wrap-up discussion by just saying “ThankYou, I hope to get you as my Investor.”

Now, Lets practice and fill-up all the above slide by practicing a B-Plan preparation lecture (My favorite in Internet !!) by William Ackman, Activist Investor and Hedge-Fund Manager here.  In this powerful lecture, Ackman navigates the complex landscape of how businesses work and how to make smart investments following a simple business model we can all relate to: a lemonade stand. From balance sheets and growth assumptions to the difference between debt and equity, by the end of the hour you will have a working vocabulary of financial terms.

Comments

comments