Creating a Business Plan, the Canvas

Startups always begin with a vision of a product or a service with a set of features. Following the ideation process – tackled in the section From ideation to form a Lean Startup and Raise Capital – comes a series of hypotheses regarding many dimensions entrepreneurs should consider such as:

Who are the customers/users?
What is the distribution channel?
How do we price and position the product?
How do we create demand?
Who are our partners?
Where/how do we build the product?
What’s our pricing strategy?
How do we finance the company?
etc.

The answers found will not however be fixed facts, but rather hypotheses that will need to quickly be tested through the iteration process described in the section Developping an Entrepreneurial Mindset. Getting the right answers to all those questions can be daunting since they are all interrelated. If one element of the business plan - which encompasses all of those questions - was to be wrong, most chances are that other areas of the business plan should be evolved accordingly.

Nothing is certain in this world and this is even more so the case for entrepreneurship. It is very hard to predict how customers will react to a product and there are countless other potential challenges that entrepreneurs may face along the way. To keep track of all the changes that will regularly occur in the startup's business plan, entrepreneurs can use one of many tools, the Business Plan Canvas.

Strategyzer, The Business Model Canvas

http://businessmodelgeneration.com/canvas/bmc?_ga=1.102813248.1987000193.1429307428

The Business Plan Canvas is a map that will allow entrepreneurs to answer multiple questions and compute valuable information related to every topic comprised in a business plan. The added value of this tool resides in the fact that it allows the entrepreneur to think about the interrelation between all components of his/her startup’s perfect business model. However, as just mentioned, an answer is just a hypothesis, and the best way to validate a hypothesis is to test it. If it does not prove right, entrepreneurs will need to go back to the Business Plan Canvas and make new hypotheses using feedback. Hereafter is a short video from Strategyzer presenting how the Business Model Canvas works.

Moreover, the Business Plan Canvas will allow the user to keep track of all past decisions as insights for what did not work, and in what context. A hypothesis may not work with certain assumptions from other areas, but could work with others. For example, if a pricing strategy does not align with the startup's target customer, this could mean that the entrepreneur either needs to change its pricing strategy, its target customer, or both. Keeping all data visible will be crucial for brainstorming while entrepreneurs iterate and try to test new combinations of hypotheses to get the right recipe.

In order to do so, every time a new information is listed on the board, the date should be put right before. If the validation process came back positive, the entrepreneur should circle the information (on a board) or color it green (on a computer). If it did not work, the entrepreneur should bar the hypothesis gently enough so that the assumption can still be read (on a board), or color it red (on a computer).

While working on their Business Plan Canvas, entrepreneurs' will also need to create a Business Plan to present to investors or any other relevant party. Inspired by, and modified according to the Business Plan Canvas, the Business Plan will primarily aim at raising capital, but could also be used to negotiate with suppliers, distributors, or could be presented to prospective partners. In order to create an effective and convincing Business Plan, it should have four parts:

The Context: Provide relevant factors such as the regulatory environment, demographics, marketing trends, new technologies... In other words, what is the problem in the current environment that the startup will solve.

The Opportunity: Given this problem, what is the startup's solution whether a product or service? Who are the customers? How quickly and at what scale can this business grow and generate revenues? What are the key levers that will turn the opportunity into a scalable, profitable, replicable business? Overall, what is the opportunity and the solution?

Risk and Reward: This section should address the challenges and potential challenges the startup may face in its different phases of growing, what the founders have planned in order to successfully address them, for what financial result.

The People: Credibility is crucial to sell an idea. A great way to gain credibility is to present the founding team as well as all the parties that are involved in the creation and growing of the startup.

One thing to keep in mind is that the startup's unique value proposition will be triggered by the following equation:

Unique Value Proposition = Benefits of Use – Cost of Use / Competition in the Context of a Segment

In other words, the more unique proposition, the more valuable. This does not necessarily mean that to be profitable entrepreneurs should necessarily come up with million dollar ideas, but rather that entrepreneurs effectively engage and intrigue through a solution that will clearly make a difference (developped in the Selling your Ideas section). Also, a business plan must have a pro forma or budgeted financial statements, a mission statement, business overview, strategic goals and operating principles.