Auto-evaluation tool that requires your deep honesty.

Aim: make you reflect on your personality to find the levers that can help you with your project.

No right or wrong answers

A good way to apprehend all the questions you have to ask yourself before starting an entrepreneurial project.

It can be useful to fill it by consulting your close relatives and friends.

Our advice: Keep track of your answers for the rest of the modules, then read them again and amend them after the course!

   















To be fulfilled professionally (independence, to enhance your competences)

To leave a difficult professional situation (unemployment, lack of revenue, family separation)
To take a chance (idea, partnership or client’s proposition)
To access to a certain social position (recognition, revenue)
To answer my family environment (spouse demand, etc.)
I don’t know, I have no specific reason
Other:


Yes
No
















   

 

 

Click here for video transcript (for text to speech software)

English

Appearance of a first screen on a white background with two logos next to each other: On the right, PSB’s one, Paris School of Business, On the left, h'up entrepreneurs’ one, with the caption: disabled maybe, entrepreneurs first
Second screen: title of the video in capital letters: motivation 3.0
A man appears on the screen, standing in a warm-colored living room, with two frames in the background. On the bottom right is inlaid a caption about him: Pierre Carnicelli, President: Association for Social Coaching, Psychologist, Coach, Hypnotherapist. He is standing up. Hello my name is Pierre Carnicelli I’ve been a professional coach for 20 years I support business leaders in their establishment I support people with disabilities to enable them to know how to introduce their disability and manage it Today I am going to speak to you about entrepreneurship, potential obstacles and what allows an entrepreneur to start a project in a correct way The man is now in front of a white board on which he writes during his demonstration I will now present you the “motivation 3.0” by Daniel Pink and you are going to see that there are a lot of points that as an entrepreneur you have to consider and check against your own motivation Daniel Pink presents motivation regarding to three pillars The first pillar is the finality the Meaning What makes sense to you? Why are you doing things? How important are they for you to to do? The second pillar is autonomy. Do you feel self-sufficient? If you have things to do and that you are compelled to do them it's not the same as if you have decided yourself to do them if I decide to do something I am much more motivated than if someone imposes it on me. Is it imposed by my environment or am I choosing? Third pillar: the Mastery. This is the most difficult pillar to nderstand. Mastery means becoming a master if you pay attention to the learning strategies the path goes from junior, which eans I am consciously incompetent, I do not know not yet things, I'm aware of that after I will become consciously competent I will become a senior in the company, then after I will become subconsciously competent I become an expert. From that moment if I start to realize that I can be wrong that I keep my mind open that I can continue to to learn that I can transmit things to people and that I can myself learn the pedagogy i will move on to the stage of the mastering so first and foremost mastering is being able to learn to make mistakes, being able to explain to others how not to be wrong. So if you want we'll develop that in the framework of entrepreneurship how to put this motivation at the service of your program if you want I will you explain it so we'll come all together and we will move on to the next point. The man sits in a couch and is now facing camera if you want to start a project it is important to ask yourself the question of your own autonomy in relation to this project Is this project coming directly from you? Has it been whispered in your ear by someone? By something? Do you have to do it? Do you listen to yourself talk about your project? How do you talk about it? I want to do this I want to do that or I wish, maybe, or I have to do that? What terms do you use? If you say I must, who obliges you? Is it a duty? But which type of duty is it? Who for? Compared to what? You want to make a living out of it? You've already won your life. You're alive. Your aim is not to die? You're in avoidance of a disaster? Or actually you want to achieve something? Are you alone or are you well accompanied? Who makes your base camp? Who can you count on? How are you going to rely on your resources and what are your resources? Have you taken stock of your resources? You have resources in personal energy you have resources in willpower But you also have maybe famiy resources Is your family with you? Your spouse if you have one, what does he think about your project? Your children maybe? What do they think about your project? And what do you think that others think? Autonomy is what will allow you to maintain some of your motivation. Depending on your ability to be self-sufficient the chances of success of your project are increasing. The more you will be self-sufficient the more your chances of being able to succeed will increase You can cultivate your autonomy maybe with the banker maybe with your friends maybe with associates. Create a business it's not necessarily being alone in the company. Being an entrepreneur can also be being an entrepreneur with others. Have you considered that?

 

 

 

 

 

“There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know”.

Donald Rumsfeld

 

80% of newly created businesses fail, and most of them fail because of : poor opportunity evaluation, weak business proposition and poor management. Thus, evaluation of those three aspects is crucial. Evaluation helps to operate adjustments and/or eliminate irrelevant hypothesis. In fact, questions aim to characterize and understand the environment. The main purpose is to understand the context or the environment through several questions and dimensions. Useful frameworks exist to help entrepreneurs to make decisions at each step.

 

Image description for text to speech software, click here

The image, entitled « understanding your context”, represents a scheme. This scheme is composed of 5 elements. At the centre of the image, there is a sketch of a business model canvas. This sketch is surrounded by 4 elements. Frome each element, an arrow leaves from the element to the direction of sketch at the centre of the image. On the left, there is a block named “competitive analysis”. This block enumerates the 5 industry forces that are: Suppliers and value chain actors
Stakeholders
Competitors
New entrants
Substitute products and services
On the right, there is a block named “market analysis”. This block enumerates the 5 market forces that are:
Needs and demands
Key segments
Market dynamics
Switching costs
Revenue potential
On the top of the sketch, there is a block named “key trends”. This block enumerates the 4 key trends that are:
Social and cultural trends
Regulatory trends
Technology trends
Socioeconomics trends
On the bottom of the sketch, there is a block named “macroeconomics forces”. This block enumerates the 4 macroeconomics forces that are:
Commodities and resources
Capital markets
Economic cycles
Economic infrastructure

 

Every business starts small. But by taking on some calculated risks, a lot of determination and some luck, a start-up business can become very large, profitable and valuable. However, not every entrepreneur wants to build a big business and earn a fortune.

The objectives when starting a business can be broadly split into two categories:

  • Financial objectives, and
  • Non-financial objectives

 

 

Financial objectives

Most business start-ups begin with one main financial objective – to survive.

 

Why survival? Because a large percentage of new businesses do not survive much beyond their launch. The entrepreneur discovers that the business idea is not viable – the business cannot be run profitably or it runs out of cash. Start-ups have a high failure rate. Survival is about the business living within its means. To survive, the business needs to have enough cash to pay the debts of the business as they arise – suppliers, wages, rent, raw materials and so on. To survive, a business needs to have:

  • sufficient sources of finance (e.g. cash, a bank overdraft, share capital)
  • a viable business model – i.e. one which can make a profit

 

If survival can be assured, then profit is the next most important financial objective for a new business. A profit is earned when the revenue of the business exceeds the total costs. The entrepreneur can choose to reinvest (aka "retain") the profit in the business, or take it out as a personal payment or dividend.

 

For many small business owners, profit is the return for all the hard work and risks taken. Profit is the reward for taking a risk and making an investment. Ideally, the profit earned is sufficient to provide the entrepreneur with enough income to live. In many cases it will be more than sufficient, once the business has been trading successfully for a few years. However, it is important to appreciate that, to make a sustainable profit, a new business needs to be able to:

  • add value
  • aell into a large enough market

 

Another financial objective is personal wealth. Some entrepreneurs have an objective that goes beyond wanting to earn an adequate income. They aim to build a valuable business that can substantially increase their personal wealth.

 

 

Non-financial objectives

Very often a new business is started with other, non-financial objectives in mind.

 

Here are some of the non-financial motives that are often quoted by entrepreneurs:

  • more control over working life – want to choose what kind of work is done. The need for greater independence is a major motivator.
  • need a more flexible and convenient work schedule, including being able to work from or close to home. This motive is an important reason behind the many home-based business start-ups
  • feel that skills are being wasted and that potential is not being fulfilled
  • a desire to pursue an interest or hobby
  • want the feeling of personal satisfaction from building a business
  • want a greater share of the rewards from the effort being put in – compared with simply being paid by an employer

 

What should you test?

  • The value proposition(s) of your product or service
  • Which segments (user groups) to target
  • Your revenue model
  • Your position in the value chain and key partnerships
  • Communication, distribution and sales channels
  • Will people actually buy it?

 

How to know if people will buy it?

  • How do customer currently think, feel and behave?
  • Where is the pain?
  • How can we add value?
  • How can we make it easy?

 

 

How to define value proposition ?

A value proposition defines the kind of value a company will create for its customers. It  is the element of strategy that looks outward at customers, at the demand side of the business. Strategy is fundamentally integrative, bringing the demand and supply sides together.

 

Three core questions to define value proposition :

  1. Which customers are you going to serve?

Within an industry, there are usually distinct groups of customers, or customer segments. A value proposition can be aimed specifically at serving one or more of these segments. For some value propositions, choosing the customer comes first. That choice then leads directly to the other two legs of the triangle: needs and relative price.

 

  1. Which needs are you going to meet?

In many cases, choosing the need the company will serve is the primary decision that leads to the other two legs of the triangle. Here, strategy is built on a unique ability to meet a particular need or a subset of needs. Often that ability arises from the specific features of a product or service.

 

Typically, value propositions based on needs appeal to a mix of customers who might defy traditional segmentation. Instead of belonging to a clear demographic category, the company’s customers will be defined by the common need or set of needs they share at a given time.

 

 

  1. What relative price will provide acceptable value for customers and acceptable profitability for the company?

For some value propositions, relative price is a primary leg of the triangle. Some value propositions target customers who are overserved (and hence overpriced) by other offerings in the industry. A company can win these customers by eliminating unnecessary costs and meeting “just enough” of their needs. Where customers are overserved, the lower relative price is often the dominant leg of the triangle.

 

Conversely, some value propositions target customers who are underserved (and hence underpriced) by other offerings in the industry. These customers want an enhanced product or service and are willing to pay a premium for it. The unmet need is typically the dominant leg of the triangle, while the higher relative price supports the extra costs the company has to incur to meet it.

 

How to enhance value proposition ?

How do we :

  1. raise awareness about our company’s products and services? (awareness)
  2. help customers evaluate our organisation’s value proposition? (evaluation)
  3. allow customers to purchase specific products and services? (purchase)
  4. deliver a value proposition to customers? (delivery)
  5. provide post-purchase customer support? (after sales)

 

 

Why a business plan?

A business plan is a comprehensive overview of the business idea. It outlines what the business will do and how it will be launched, covering everything from sources of funding to potential competitors. Business plans are especially useful for startup companies looking to attract and convince prospective investors. The business plan covers what you intend to do with your business and how it will be done. The process of writing down what is involved in bringing your idea to reality requires dealing with the why, what, who, how, where, when, and how much of your venture. Doing so helps you recognize areas that need rethinking or support.

 

You can use a convincing business plan to gain capital needed to get beyond the initial difficult years. If the purpose of your plan is to seek funding, request those funds, and describe how they will be used. As with any venture, there will be risks. Identify and describe the most threatening risks to your success. Outline the activities you will pursue to manage the risks.

Lean Startup

The Lean Startup provides a scientific approach to creating and managing startups and get a desired product to customers' hands faster. The Lean Startup method teaches you how to drive a startup-how to steer, when to turn, and when to persevere-and grow a business with maximum acceleration.

 

> Emilinate uncertainty

The lack of a tailored management process has led many a start-up to abandon all process. They take a "just do it" approach that avoids all forms of management. But this is not the only option. Using this approach, companies can create order by providing tools to test a vision continuously. Lean isn't simply about spending less money. Lean isn't just about failing fast, failing cheap. It is about putting a process, a methodology around the development of a product.

 

 

>Work smarter not harder

The questions are "Should this product be built?" and "Can we build a sustainable business around this set of products and services?" This experiment is more than just theoretical inquiry; it is a first product. If it is successful, it allows a manager to get started with his or her campaign: enlisting early adopters, adding employees to each further experiment or iteration, and eventually starting to build a product. By the time that product is ready to be distributed widely, it will already have established customers. It will have solved real problems and offer detailed specifications for what needs to be built.

 

> Develop an MVP (minimum viable product)

A core component of the methodology is the build-measure-learn feedback loop. The first step is figuring out the problem that needs to be solved and then developing a minimum viable product (MVP) to begin the process of learning as quickly as possible. Once the MVP is established, a startup can work on tuning the engine. This will involve measurement and learning and must include actionable metrics that can demonstrate cause and effect question.

 

The startup will also use an investigative development method called the "Five Whys"-asking simple questions to study and solve problems along the way. When this process of measuring and learning is done correctly, it will be clear that a company is either moving the drivers of the business model or not. If not, it is a sign that it is time to pivot or make a structural course correction to test a new fundamental hypothesis about the product, strategy and engine of growth.

 

> Validated learning

Progress in manufacturing is measured by the production of high quality goods. The unit of progress for Lean Startups is validated learning-a rigorous method for demonstrating progress when one is embedded in uncertainty. Once entrepreneurs embrace validated learning, the development process can shrink substantially. When you focus on figuring the right thing to build-the thing customers want and will pay for-you need not spend months waiting for a product beta launch to change the company's direction. Instead, entrepreneurs can adapt their plans incrementally.

 

 

Five principles

  1. Entrepreneurs are everywhere

You don’t have to work in a garage to be in a startup. Prerequisites to be an entrepreneur include a strong vision for the future, and an appetite for risk taking.

 

  1. Entrepreneurship is management

A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty. It is not just a product, and so it requires a new kind of management geared towards its context of extreme uncertainty.

 

  1. Validated learning

Startups exist not just to make stuff, make money, or even serve customers. They exist to learn how to build a sustainable business.

 

  1. Build-Measure-Learn

The fundamental activity of a startup is to turn ideas into products, measure how customers respond, and then learn whether to pivot or persevere. The faster you get through this loop, the better your chance of success.

 

  1. Innovation accounting

Improving entrepreneurial outcomes requires a new kind of accounting designed for startups and the people who hold them accountable.

 

 

Validated learning

Validated learning is the unit of progress for lean startups which shrinks the development process substantially especially in uncertain markets. The process is rigorous as it attempts to demonstrate, with empirical evidence collected from real customers, valuable truths about a startup's present and future business prospects. It helps to treat your startup, regardless of the industry as a grand experiment.

 

Startups validate learning by asking questions:

  • What products do customers really want?
  • How will our business grow?
  • Who is our customer?
  • Which customer should we listen to and which should we ignore?

These are the questions that should inform the establishment of structures in the company.

 

 

Build-Measure-Learn

Measuring productivity, the lean way In the lean startup, everything the startup does, is an experiment designed to achieve validated learning. Among the data the startup will acquire in this “grand experiment”, one of the most significant is the Customer Insight.

 

Customer Insight : “Value is seen as providing benefits to the customer; anything else is waste”.

 

Experimentation is encouraged because it is the only way to discover how to build a sustainable business. Experiments with a negative outcome prove useful, perhaps more so than ones with positive outcomes, because they provide instruction and can inform strategy.

 

An MVP allows a startup to fill in real baseline data in its growth model, such as conversion rates, sign up and trial rates, customer lifetime value etc. This data will prove invaluable as it forms the foundation for learning. Once the baseline has been established, the startup can work toward the second learning milestone - tuning the engine. Every product development, marketing or any other initiative that a startup undertakes should be targeted at improving one of the drivers of it growth models. This is called tuning the engine. If tuning activities are not having desired effect on the baseline, that is a sure sign that it is time to pivot.

 

The two most important assumptions entrepreneurs make in this model are:

  • the value hypothesis – test whether a product or service really delivers value to customers using it.
  • the growth hypothesis – test new ways of acquiring new customers for a product or service.

 

 

Pivot or preserve

The true measure of a startup's runaway is how many pivots it has left. It means the number of opportunities it has to make a fundamental change to its business strategy. A lean startup sees its runaway - the time until it runs out of money - not in months or years, but in the number of cycles it has. Pivot is a structured course correction designed to test a new fundamental hypothesis about the product, strategy and engine of growth. A pivot requires the startup to keep one foot rooted in learnings they have acquired so far, while making a fundamental change in strategy in order to seek even greater validated learning. It is about repurposing what has been built and what has been learned to find a more positive direction.

 

Types of pivots:

  • Zoom-in pivot:

A single feature in a product becomes the whole product, highlighting the value of “focus” and “minimum viable product,” delivered quickly and efficiently.

 

  • Zoom-out pivot:

In the reverse situation, a single feature is insufficient to support a customer set, so what was considered the whole product becomes a single feature of a much larger product.

 

 

  • Customer segment pivot:

A product attracts real customers but not the ones in the original vision. Although it solves an actual problem, it must be positioned and optimized for a more appreciative segment.

 

  • Customer need pivot:

Early customer feedback indicates that the problem solved by the product is not very important, necessitating a repositioning or the development of a completely new product. Platform pivot: an application is changed to a platform, or vice versa.

 

  • Value capture pivot:

The monetisation or revenue model is tweaked to capture value, with corresponding changes in business, product, and marketing strategies.

 

  • Engine of growth pivot:

A startup selects one of three primary growth engines — the viral, sticky, or paid growth models — to affect the speed and profitability of growth.

 

  • Channel pivot:

A company selects unique pricing, feature, and competitive positioning adjustments to deliver its product to customers.

 

  • Technology pivot:

A startup achieves the same solution using a completely different technology that can provide superior price and/or performance to improve competitive posture.

 

 

 

Lean Startup metrics’ characteristics

Creating learning milestones is not to make the decision easy; rather it is to make sure that there is relevant data in the room when it comes time to decide.

 

> Split test

Split tests save amount of time in the long run by eliminating work that doesn’t matter to customers. It also helps teams refine their understanding of what customers want and don’t want. In order to avoid collecting data which is useless to the startup.

 

> Actionable

To be considered actionable, metrics it must demonstrate clear cause and effect. When cause and effect is clearly understood, the startup is better able to learn from its actions.

 

> Accessible

A big mistake is spending your energy learning how to use data to get what you want rather than treating data as genuine feedback to guide future actions. Remember that your metrics are going to be used by actual people on your team. Everyone must understand the reports. Try to write user stories that described the feature from the point of view of the customer.

 

> Auditable

Unsure that the data is credible to employees. Transparency is the name of the game here.

 

 

Every business has a few key numbers that can be used to measure how well it is performing. These numbers are key for both measuring progress and identifying hot spots in your customer lifecycle.

 

  • Acquisition

Acquisition describes the point when you turn an unaware visitor into an interested prospect.

In the case of the flower shop, getting someone walking by your window to stop and come in to your shop is an acquisition event.

On a product website, getting someone to do anything other than leave your website (abandon) is a measure of acquisition.

I specifically measure successful acquisition as getting my visitors to view my signup page.

 

  • Activation

Activation describes the point when the interested customer has his first gratifying user experience.

In the case of the flower shop, if the prospect found the shop in disarray once he comes inside, there would be a disconnect with the promise made at the front of the store. That wouldn’t be a gratifying first user experience.

On the product site, once the prospect signs up, you have to make sure you get the customer to a point where he can connect the promise you made on your landing page (your UVP) with your product.

 

  • Retention

Retention measures “repeated use” and/or engagement with your product.

So, in the case of the flower shop, the action of coming back to the store—and in the case of the product website, the act of logging back in to use the product again—would count toward retention.

As we’ll see in Part 4 of the book, this is one of the key metrics to measuring product/market fit.

 

  • Revenue

Revenue measures the events that get you paid.

These could be buying flowers or buying a subscription for your product. These events may or may not occur on the first visit.

 

  • Referral

Referral is a more advanced form of a user acquisition channel where your happy customers refer or drive potential prospects into your conversion funnel.

In the case of the flower shop, this could be as simple as telling another friend about the store.

For the software product, this could range from implicit viral or social sharing features (like Share with a friend), to explicit affiliate referral programs or Net Promoter Score.

 

Innovation accounting

Startups need a disciplined, systematic approach to measuring and recording progress and validated learning. This is called innovation accounting, an alternative method of accounting that begins by turning the leap-of-faith assumptions into a quantified financial model. Lean Startups can grow to become lean enterprises whilst maintaining their agility, learning orientation and culture of innovation. Organisational structures are a startup's major weapon against the extreme uncertainty that defines startups in general.

 

The critical first question for any lean transformation is about value. Which activities create value and which are a form of waste? Understanding this distinction makes lean techniques become effective in eliminating waste and increasing the efficiency of the activities creating value.  Value in a startup is not about the creation of stuff, but rather validated learning about how to build a sustainable business.

 

Innovation accounting works in three steps:

  • use of an MVP to accumulate real data on the company's current performance
  • tuning the engine from the current baseline toward the ideal
  • make an important call - to pivot or to persevere. This is based on outcome of all the micro changes and product optimizations made when "tuning the engine".

 

The innovation accounting framework makes it clear when the company is stuck and needs to change direction.

 

 

How to use it? Lean Startup Canvas

The Lean Startup method teaches you how to drive a startup-how to steer, when to turn, and when to persevere-and grow a business with maximum acceleration. As a business entrepreneur it’s your duty to get ideas out from your head onto paper so that others can see and help build the problem solution. Traditional business plans are not relevant in the ideation stage, they take too much time and are usually created without any validated learning. Business plans are more suited to once you have a business running and are look to scale.

 

During the ideation stage try to stay lean, use the Lean Canvas to get your ideas down and use lean principles to test your hypothesis by getting out the building. The idea is to spend around 15–20 minutes to get that idea down on to paper. Some people prefer to project the PDF onto a wall and use sticky notes to add their ideas into the boxes. But I’ve become so used to Lean Canvas that I sketch my business model ideas directly into my notebook.

 

Description of the illustration

The image represents an A4 page in the landscape orientation and is composed of 9 rectangles. At the bottom of the page stand 2 rectangles in the landscape mode. The rectangle on the left corner is named “cost structure” and contains the following sentences:

  • Customer acquisition costs
  • Distribution costs
  • Hosting
  • People, etc.

The rectangle on the right corner is named “revenue streams” and contains the following sentences:

  • Revenue model
  • Life time value
  • Revenue
  • Gross margin

Over these 2 rectangles, there are 7 rectangles composing 5 columns. On the left side, there is a rectangle named “problems”. This rectangle contains the following sentence: Top 3 problems

 

On the right of the first column, there is another one composed of 2 rectangles. The one on the top is named “solutions” and contains the following sentence : top 3 features.

Below this rectangle and still in the same column, the other rectangle is named “key metrics” and contains the following sentence: key activities you measure.

 

The third column is made by 1 rectangle named “Unique Value proposition” in which there are the following sentence: single, clear, compelling message that states why you are different and worth paying attention.

 

The fourth column is composed of 2 rectangles. The one on the top is named “unfair advantage” and contains the following sentence: can’t be easily copied or bought.

Below this rectangle and still in the same column, the other rectangle is named “channels” and contains the following sentence: path to customer.

 

The last column contains 1 rectangle named “customer segments” in which the following sentence is written: target customers.

 

  1. Problem

Each customer segment (CS) you are thinking to work with will have a set of problems that they need solving. In this box try listing the one to three high priority problems that you CS has. Without a problem to solve, you don’t have a product / service to offer.

 

  1. Customer Segments

The problem and Customer Segments can be viewed as intrinsically connected — without a CS in mind you can’t think of their problems, and visa versa.

 

  1. Unique Value Proposition

In the middle of the canvas is the UVP. A value proposition is a promise of value to be delivered. It’s the primary reason a prospect should buy from you. A way to get your head around this is to think why are you different and why should your CS buy / invest time in you .

 

  1. Solution

Finding a solution to the problem is the golden egg! You’re not going to get this right off the first bat — it’s OK, as that’s what Lean is all about. What you need to do is ‘get out the building’. It means that the solution is not in your office, it’s out there in the streets. So go interview your customer segment, ask them questions, and take those learnings. Remember the Lean Startup is validated learning through a continual build-measure-learn cycle.

 

  1. Channels

Channels are ways for you to reach your CS. And remember that in the initial stages it’s important not to think about scale but to focus on learning. With that in mind try to think which channels will give you enough access to your CS at the same time give you enough learning. Channels can be email, social, CPC ads, blogs, articles, trade shows, radio & TV, webinars etc. and BTW you don’t have to be on all of them, just where your CS are.

 

  1. Revenue Streams

How you price your business will depend on the type of model it is however it’s quite common for startups to lower their cost, even offer it for free to gain traction however this can pose a few problems. The key being it actually delays / avoids validation. Getting people to sign up for something for free is a lot different than asking them to pay. There is also the idea of perceived value.

 

 

  1. Cost Structure

Here you should list all the operational costs for taking this business to market. How much will it cost to build / landing page? What is your burn rate — your total monthly running costs? How much will it cost to interview your customer segment? How much do market research papers cost? etc. You can then use these costs and potential revenue streams to calculate a rough break-even point.

 

  1. Key Metrics

Every business, no matter what industry or size, will have some key metrics that are used to monitor performance. The best way to help with this is to visualise a funnel top down that flows from the large open top, through multiple stages to the narrow end.

A good model to help with this is Dave McClure’s ARRRR (aka Pirate Metrics) .

 

  1. Unfair Advantage

This is the most difficult to block to answer. However, do try to think about this as having an unfair advantage can help when it comes seeking partners & investors. Here is a great definition of unfair advantage: “The only real competitive advantage is that which cannot be copied and cannot be bought.” — Jason Cohen.

 

Unfair advantage can be insider information, a dream team, getting expert endorsements, existing customers etc. So rather than think about adding something like “commitment and passion” as an unfair advantage (because it is not), think about what you have that no one else can buy.

 

Case study (source : Run Lean (Maurya, 2014))

Case study : cloudfire

Background:

 

CloudFire

Prior to CloudFire, I had launched a file-sharing application called BoxCloud that simplified the process of sharing large files, using a proprietary peer-to-web (p2web) framework we had built.

BoxCloud’s unique value proposition (UVP) was that it allowed the sharer to share a file/folder directly from his computer without any uploading. Recipients accessed the shared file/folder directly from their browser without the need to install any ad- ditional software.

BoxCloud was primarily targeted at business users and was in use by graphic design- ers, attorneys, accountants, and other small-business owners.

I was interested in exploring other uses of the p2web framework, especially around media sharing (photos, videos, and music), which is how CloudFire came about.

 

Really broad category:

Anyone that shares lots of media content.

More specific possible customers:

  • Photographers
  • Videographers
  • Media consumers (scratch my own itch)
  • Parents

While I was initially drawn to building something for the consumer segment (with myself as the prototypical customer), I had recently become a parent and witnessed some pain points around photo and (especially) video sharing. That is the segment I decided to model first.

 

Question : based on all the elements you can find, try to fulfil Cloudfire lean canvas

Example here

Problems:

  • Sharing lots of photos/videos is time- consuming.
  • Parents have no free time.
  • There is lots of external demand on this content.
  • Existing alternatives: Flickr Pro, SmugMug, Apple MobileMe, Facebook
 Solution:

  • Instant, no-upload sharing
  • iPhoto/folder integration
  • Better notification tools
Unique Value Proposition:

  • UVP : The Fastest Way to Share Your Photos and Videos
  • High-level concept: Photo and video sharing without the uploading

 

 Unfair Advantage:

  • The Fastest Way to Share Your Photos and Videos
  • High-level concept: Photo and video sharing without the uploading
Customer segments:

  • Parents (creators)
  • Family and friends (viewers)
  • Early adopter: Parents with young kids
 Key Metrics:

  • Acquisition – Signup
  • Activation - Created first gallery
  • Retention - Shared an album and/or video
  • Revenue - Invited family and friends
  • Referall - Paid after trial
 Channels:

  • Friends
  • Daycare
  • Birthday parties
  • AdWords
  • Facebook & social networks
  • Word of mouth
Cost structure:

  • Hosting costs - Heroku (currently $0)
  • People costs - 40 hrs * $65/hr = $10k/mo
 Revenue streams:

  • 30-day free trial then $49/yr

Break-even point : 2 000 customer


  1. Definition

In recent years, the business model has been the focus of substantial attention by both academics and practitioners. Since 1995 there have been 1,177 papers published in peer- reviewed academic journals in which the notion of a business model is addressed. However, there is no widely accepted understanding and modelization of what business model is (Zott, Amit and Massa, 2010).

 

Author Year Definition of business model
Timmers 1998 Architecture for product and service flows including a description of the business activities and its sources of income
Stewart and Zhao 2000 How the company aims to make profits and sustain them over time
Amit and Zott 2001 Structured prepapred to create value
Plé, Lecocq and Angot 2008 Choices made by a company to make profit. These include resources and expertise to create value through products operated by the firm, internally or externally
Casadesus-Masanell and Ricart 2010 How the organisation creates and delivers value to its stakeholders
Osterwalder and Pigneur 2010 Logic of creation, delivery and capture of value by an organisation
Zott, Amit and Massa 2011 How a company does business and creates value
Nielsen and Lund 2012 Coherence of the strategic choices of the company, which enable relationships to create value at its operational, tactical and strategic levels

Source : Bonazzi and Zilber (2014)

 

One the most consistent definition is given by Osterwalder (2004) : «A business model is a conceptual tool that contains a set of elements and their relationships and allows expressing the business logic of a specific firm. It is a description of the value a company offers to one or several segments of customers and of the architecture of the firm and its network of partners for creating, marketing, and delivering this value and relationship capital, to generate profitable and sustainable revenue streams».

 

The business model encourages the entrepreneur to :

  • conceptualize the venture as an interrelated set of strategic choices;
  • seek complementary relationships among elements through unique combinations;
  • develop activity sets around a logical framework;
  • ensure consistency between elements of strategy, architecture, economics, growth, and exit intentions.

 

Through the building and the ongoing adjustment of the model, the Business Model guide the entrepreneur  to understand and analyze :

  • how the company works ;
  • the environment and identify the stakeholders that govern it;
  • how to create economic value and create margin ;
  • the end customer and the means to put in place to ensure a lasting relationship of trust over time;
  • the key resources and skills needed to set up our offer.

    2. Framework building : The Business Model Canvas

As defined, the business model is consistent with a number of emerging concepts from the field of strategic management. It has elements of both strategy and operational effectiveness. Activity systems can be mapped so as to capture the evolution of organizations along discernable developmental paths. Siggelkow (2002) characterizes activity sets in terms of core elements, elaborating elements, and interactions. The business model organizes these core elements and activities around six key decision areas. The model captures all of a firm’s core elements, although more than one core element can fall into a given decision area. Further, each of the six decision areas and the interactions between areas are supported by a variety of activity sets. The business model represents a framework for doing this constructing in the early stages of a venture and for conducting predictive, what-if scenario analysis. For early stage entrepreneurs, many of the potentially most productive activity sets are less apparent, as the firm has little experience, highlighting the importance of entrepreneurial vision.

 

Morris, Schindehutte and Allen (2005) developed a standardized framework in order to characterise a Business Model. Three increasingly specific levels of decision making are the dimensions of the framework called : foundation, proprietary, rules. At each level, six basic decision areas are considered. The different components are reflecting the need to translate core competencies and the value proposition into a sustainable marketplace position. Moreover, the framework is developed in order to be consistent and be applied to all types of ventures. It remains important to emphasize on the necessity to accommodate differing levels of growth, time horizons, resource strategies, ...Thus, the sixth decision area captures growth and time objectives of the entrepreneur.

 

Foundation level: “defining basic components”

This dimension encompass six components related to value creation, firm position and entrepreneur’s characteristics :

 

Component 1 : Factors related to the offering (how do we create value? select from each set), offering:

  • primarily products/primarily services/heavy mix
    • standardized/some customization/high customization
    • broad line/medium breadth/narrow line
    • deep lines/medium depth/shallow lines
    • access to product/ product itself/ product bundled with other firm’s product
    • internal manufacturing or service delivery/ outsourcing/ licensing/ reselling/ value added reselling
    • direct distribution/indirect distribution (if indirect: single or multichannel)

 

Component 2 : Market factors  (who do we create value for?select from each set)

  • type of organization: b-to-b/b-to-c/ both
  • local/regional/national/international
  • where customer is in value chain: upstream supplier/ downstream supplier/ government/ institutional/ wholesaler/ retailer/ service provider/ final consumer
  • broad or general market/multiple segment/niche market
  • transactional/relational

 

Component 3 : Internal capability factors (what is our source of competence? select one or more)

  • production/operating systems
  • selling/marketing
  • information management/mining/packaging
  • technology/R&D/creative or innovative capability/intellectual
  • financial transactions/arbitrage
  • supply chain management
  • networking/resource leveraging

 

Component 4 : Competitive strategy factors (how do we competitively position ourselves? select one or more)

  • image of operational excellence/consistency/dependability/speed
  • product or service quality/selection/features/availability
  • innovation leadership
  • low cost/efficiency
  • intimate customer relationship/experience

 

Component 5 : Economic factors (how we make money? select from each set)

  • pricing and revenue sources: fixed/mixed/flexible
  • operating leverage: high/medium/low
  • volumes: high/medium/low
  • margins: high/medium/low

 

Component 6 : Personal/investor factors (what are our time, scope, and size ambitions? select one)

  • subsistence model
  • income model
  • growth model
  • speculative model

 

Proprietary level: creating unique combinations

Sustainable advantage depends on the entrepreneur’s skills and abilities to apply specific approaches to one or more of the foundation components (factors related to the offering ; market factors ; internal capability factors ; competitive strategy factors ; economic factors ; personal/investor factors). The identification of novel ways to realize the decisions identified at the first level of this framework is crucial for entrepreneurs. This is referred to as the proprietary level of the model, as it entails innovation unique to a particular venture. The proprietary level is specific and unique for each venture, contrary to foundation level that is generic. Thereby, strategy becomes specific.

 

Rules level: establishing guiding principles

Rules and principles are guidelines ensuring that the model’s foundation and proprietary elements are reflected in ongoing strategic actions. The definitions of those guidelines have to be in coherence with the characteristics of the venture. Their role is indivisible from the business strategy as discussed by Eisenhardt and Sull (2001). They discuss ‘‘priority rules’’ that determine how Intel allocates manufacturing capacity and ‘‘boundary rules’’ that govern the types of movies Miramax decides to make. Girotto and Rivkin (2000) explain how Yahoo! adheres to a set of guiding rules in the formation of partnerships, a critical part of the firm’s business model.

 

  1. Business Model Canvas application : flexibility and sustainability

Consistency of the dimensions and components is the most important characteristic of the Business Model to build. Consistency can be defined as fit,  both internal and external ‘‘fit’’. Internal fit refers to a coherent configuration of key activities within the firm. It includes both consistency and reinforcement within and between the six subcomponents of the model. External fit addresses the appropriateness of the configuration given external environmental conditions.

 

A given economic model might not be workable when selling in a regional b-to-b market where significant investment in customer relationships is required or when selling a value offering involving extensive customization. If the economic model calls for penetration pricing with low margins and high fixed costs, this may imply a value proposition that centers on medium to low quality, a target market that is fairly broad and relatively price elastic, competitive positioning based on cost leadership, and a growth-oriented investment model.

 

Ultimately, each component affects and is affected by the other components. While each is vital, the firm’s investment model effectively delimits decisions made in all the other areas. For instance, a speculative business, with its shorter time horizon, may require a cost structure with lower operating leverage and a customer focus that is not predicated on long-term customer relationships. Alternatively, if one is building a lifestyle business, the firm is apt to have a more narrowly defined product and market focus, may be more dependent on customer relationships, and is likely to require an economic model that includes lower volumes. With the lifestyle venture, it may not be necessary to invest as much in the model’s proprietary elements. External fit is concerned with consistency between choices in the six areas of the model and conditions in the external environment. As environmental conditions change, the model may require adaptation or wholesale change. Adaptability may require models with loosely fitting elements or introduction of new elements that change the dynamics among existing elements.

 

A process of experimentation may be involved as the model emerges (and a viable model may never emerge). Lessons are being learned regarding what is required to make money on a sustainable basis. As competencies are developed, keener insights may result regarding sources of innovation or advantage as they relate to those competencies. The entrepreneur is also likely to become more strategic in his/her view of business operations over time. In terms of the proposed framework, a firm’s model might be expected to evolve from the foundation level toward a more complete articulation of the proprietary and rules levels.

 

Initially, the entrepreneur may have a fair picture of the foundation level and limited notions about some components at the proprietary level. As the firm develops and learns, it is able to flesh out more components at the proprietary level, furthering its advantage, and develops rules that guide operations and ongoing growth. Model evolution can also be linked to the type of venture being pursued. Models for survival, lifestyle, growth, and speculative ventures might be expected to vary in formality, sophistication, and uniqueness.

 

Image description for text to speech software, click here

The image represents an A4 page in the landscape orientation and is composed of 9 rectangles. At the bottom of the page stand 2 rectangles in the landscape mode. The rectangle on the left corner is named “cost structure” and contains the following questions:

  • What are the most important costs inherent in our business model ?
  • Which Key Resources are most expensive?
  • Which Key Activities are most expensive?

The rectangle on the right corner is named “revenue streams” and contains the following questions:

  • For what value are our customers really willing to pay?
  • For what do they currently pay?
  • How are they currently paying?
  • How would they prefer to pay?
  • How much does each Revenue Stream contribute to overall revenues?

Over these 2 rectangles, there are 7 rectangles composing 5 columns. On the left side, there is a rectangle named “key partners”. This rectangle contains the following questions:

  • Who are our Key Partners?
  • Who are our key suppliers?
  • Which Key Resources are we acquiring from partners?
  • Which Key Activities do partners perform?

On the right of the first column, there is another one composed of 2 rectangles. The one on the top is named “key activities” and contains the following questions:

  • What Key Activities do our Value Propositions require?
  • Our Distribution Channels?
  • Customer Relationships?
  • Revenue streams?

Below this rectangle and still in the same column, the other rectangle is named “key resources” and contains the following questions:

  • What Key Resources do our Value Propositions require?
  • Our Distribution Channels?
  • Customer Relationships?
  • Revenue Streams?

The third column is made by 1 rectangle named “value propositions” in which there are the following questions:

  • What value do we deliver to the customer?
  • Which one of our customer’s problems are we helping to solve?
  • What bundles of products and services are we offering to each Customer Segment?
  • Which customer needs are we satisfying?

The fourth column is composed of 2 rectangles. The one on the top is named “customer relationships” and contains the following questions:

  • What type of relationship does each of our Customer Segments expect us to establish and maintain with them?
  • Which ones have we established?
  • How are they integrated with the rest of our business model?
  • How costly are they?

Below this rectangle and still in the same column, the other rectangle is named “channels” and contains the following questions:

  • Through which Channels do our Customer Segments want to be reached?
  • How are we reaching them now?
  • How are our Channels integrated?
  • Which ones work best?
  • Which ones are most cost-efficient?
  • How are we integrating them with customer routines?

The last column contains 1 rectangle named “customer segments” in which the following questions are written:

  • For whom are we creating value?

Who are our most important customers?

 
Decisions at the proprietary level become vital for sustainable advantage. Conceptually, it is possible to envision a business model life cycle involving periods of specification, refinement, adaptation, revision, and reformulation. Initially and during a period,  the model is fairly informal or implicit is followed by a process of trial and error. Number of core decisions are made that delimit the directions in which the firm can evolve. After a period, it leads to a fairly definitive and formal model. The model is the result of several adjustments subsequently to errors and experiments processes. Such adjustments are described as : augmentation, reinforcement, and deletion (Siggelkow, 2002).

 

 

 

Bibliography

Bonazzi F.L. and Zilber M.A. (2014). Innovation and business model : a case study about integration of innovation funnel and business model canvas. Review of business management, 16(53), 616-637.

Eisenhardt K.M. and Sull D.N. (2001). Strategy as simple rules. Harvard Business Review, 79(1), 106-116.

Morris M., Schindehutte M. and Allen J. (2005). The entrepreneur’s business model : Toward a unified perspective. Journal of business research, 58(6), 726-735.

Osterwalder A. (2004). The business model ontology : A proposition in a design science approach. PhD thesis. Université de Lausanne – Ecole des Hautes Etudes Commerciales.

Siggelkow N. (2002). Evolution toward fit. Administrative science quarterly, 47(1), 125–159.

Zott C., Amit R. and Massa L. (2010). The business model : Theoretical roots, recent developments, and future research. Working paper, WP-862, June 2010. IESE, Business School, University of Navarra.

 

  1. The importance of writing a business plan

 

This part discusses the importance of writing a business plan. Although some new ventures simply “wing it” and start doing business without the benefit of formal planning, it is hard to find an expert who doesn’t recommend preparing a business plan. A business plan  is a written narrative, typically 25 to 35 pages long, that describes what a new business intends to accomplish and how it intends to accomplish it. For most new ventures, the business plan is a dual-purpose document used both inside and  outside the firm.

 

Inside the firm, the plan helps the company develop a “road map” to follow to execute its strategies and plans. Outside the firm, it introduces potential investors and other stakeholders to the business opportunity the firm is pursuing and how it plans to pursue it.

 

To begin this part, we discuss issues with which entrepreneurs often grapple when facing the challenge of writing a business plan.

Topics included in this part are reasons for writing a business plan, a description of who reads the business plan and what they’re looking for, and guidelines to follow when preparing a written business plan.

 

Video – link to YouTube : CLICK HERE FOR VIDEO

 

 

1.1. Why do business plans matter ?

A large percentage of entrepreneurs do not write business plans for their new ventures. In fact, only 31 percent of the 600 entrepreneurs who participated in a Wells Fargo/Gallup Small Business Study indicated that they had started their venture with a business plan.  This statistic should not deter an entrepreneur from writing a business plan, however. Consider that we do not know how many of the entrepreneurs participating in the Wells Fargo/Gallup Small Business study who did not write a business plan wish they had done so.

 

We’re also not sure how many aspiring entrepreneurs never got their businesses off the ground because they didn’t have a business plan. One academic study found that potential entrepreneurs who completed a business plan were six times more likely to start a business than individuals who did not complete a business plan.

 

 

1.2. Two primary reasons to write a business plan

We show the two primary reasons to write a business plan.

First, writing a business plan forces a firm’s founders to systematically think through each aspect of their new venture. This is not a trivial effort—it usually takes several days or weeks to complete a well-developed business plan—and the founders will usually meet regularly to work on the plan during this period. Consistent with Whiting and Wieber’s experience, writing a business plan forces a firm’s founders to intently study every aspect of their business, a process that’s hard to replicate in any other way.

 

The second reason to write a business plan is to create a selling document for a company. It provides a mechanism for a young company to present itself to potential investors, suppliers, business partners, key job candidates, and others. Imagine that you have enough money to invest in one new business. You chat informally with several entrepreneurs at a conference for start-ups and decide that there are two new ventures that you would like to know more about. You contact the first entrepreneur and ask for a copy of his business plan. The entrepreneur hesitates a bit and says that he hasn’t prepared a formal business plan but would love to get together with you to discuss his ideas. You contact the second entrepreneur and make the  same request. This time, the entrepreneur says that she would be glad to forward you a copy of a 30-page business plan, along with a 10-slide PowerPoint presentation that provides an overview of the plan. An hour or two later, the PowerPoint presentation is in your e-mail in-box with a note that the business plan will arrive the next morning. You look through the slides, which are crisp and to the point and do an excellent job of outlining the strengths of the business opportunity. The next day, the business plan arrives just as promised and is equally impressive.

 

Which entrepreneur has convinced you to invest in his or her business? All other things being equal, the answer is obvious—the second entrepreneur. The fact that the second entrepreneur has a business plan not only provides  you with detailed information about the venture but also suggests that the entrepreneur has thought through each element of the business and is committed enough to the new venture to invest the time and energy necessary to prepare the plan. Having a business plan also gives an investor something to react to. Very few, if any, investors will free up time to “listen” to your idea for a new business, at least initially. Investors prefer to vet or evaluate business ideas by looking through business plans (or the executive summaries of business plans) initially before they are willing to invest more of their time and effort.

 

 

1.3. Who reads the business plan and why ?

There are two primary audiences for a firm’s business plan. Let’s look at each of them.

 

A Firm’s Employees

A clearly written business plan, which articulates the vision and future plans of a firm, is important for both the management team and the rank-and-file employees.

Some experts argue that it’s a waste of time to write a business plan because the marketplace changes so rapidly that any plan will become quickly outdated. Although it’s true that marketplaces can and often do change rapidly, the process of writing the plan may be as valuable as the plan itself.

A clearly written business plan also helps a firm’s rank-and-file employees operate in sync and move forward in a consistent and purposeful manner.

The existence of a business plan is particularly useful for the functional department heads of a young firm. For example, imagine that you are the newly hired vice president for management information systems for a rapidly growing start-up.

The availability of a formal business plan that talks about all aspects of the business and the business’s future strategies and goals can help you make sure that what you’re doing is consistent with the overall plans and direction of the firm.

 

 

Investors and Other External Stakeholders

External stakeholders who are being recruited to join a firm such as investors, potential business partners, and key employees are the second audience for a business plan.

To appeal to this group, the business plan must be realistic and not reflective of overconfidence on the firm’s part. Overly optimistic statements or projections undermine a business plan’s credibility, so it is foolish to include them. At the same time, the plan must clearly demonstrate that the business idea is viable and offers potential investors financial returns greater than lower-risk investment alternatives.

 

The same is true for potential business partners, customers, and key recruits. Unless the new business can show that it has impressive potential, investors have little reason to become involved with it. A firm must validate the feasibility of its business idea and have a good understanding of its competitive environment prior to presenting its business plan to others.

 

Sophisticated investors, potential business partners, and key recruits will base their assessment of the future prospects of a business on facts, not guesswork or platitudes. The most compelling facts a company can provide in its business plan are the results of its own feasibility analysis and the articulation of a distinctive and competitive business model.

 

A business plan rings hollow if it is based strictly on an entrepreneur’s predictions of a business’s future prospects. Morphology, the board game company started by Dartmouth student Kate Ryan Reiling, is an example of a business that laid a firm foundation for its business plan via the feasibility analysis that it conducted very early on. Morphology is profiled in the opening feature for Chapter 3.

 

In addition to the previously mentioned attributes, a business plan should disclose all resource limitations that the business must meet before it is ready to start earning revenues. For example, a firm may need to hire service people before it can honor the warranties for the products it sells. It is foolhardy for a new venture to try to downplay or hide its resource needs. One of the main

reasons new ventures seek out investors is to obtain the capital needed to hire key personnel, further develop their products or services, lease office space, or fill some other gap in their operations. Investors understand this, and experienced investors are typically willing to help the firms they fund plug resource or competency gaps.

 

 

  1. Guidelines that influence the writing of a business plan

There are several important guidelines that should influence the writing of a business plan.

It is important to remember that a firm’s business plan is typically the first aspect of a proposed venture that an investor will see. If the plan is incomplete or looks sloppy, it is easy for an investor to infer that the venture itself is incomplete and sloppy.  It is important to be sensitive to the structure, content, and style of a business plan before sending it to an investor or anyone else who may be involved with the new firm.

 

 

2.1. Structure of the Business Plan

To make the best impression, a business plan should follow a conventional structure, such as the outline shown in the next section. Although some entrepreneurs want to demonstrate creativity in everything they do, departing from the basic structure of the conventional business plan format is usually a mistake. Typically, investors are very busy people and want a plan where they can easily find critical information. If an investor has to hunt for something because it is in an unusual place or just isn’t there, he or she might simply give up and move on to the next plan.

 

 

2.2. Content of the Business Plan

The business plan should give clear and concise information on all the important aspects of the proposed new venture. It must be long enough to provide sufficient information, yet short enough to maintain reader interest. For most plans, 25 to 35 pages (and typically closer to 25 than 35 pages) are sufficient.

Supporting information, such as the résumés of the founding entrepreneurs, can appear in an appendix.

 

After a business plan is completed, it should be reviewed for spelling, grammar, and to make sure that no critical information has been omitted. There are numerous stories about business plans sent to investors that left out important information, such as significant industry trends, how much money the company needed, or what the money was going to be used for. One investor even told the authors of this book that he once received a business plan that didn’t include any contact information for the entrepreneur. Apparently, the entrepreneur was so focused on the content of the plan that he or she simply forgot to provide contact information on the business plan itself. This was a shame, because the investor was interested in learning more about the business idea.

 

 

2.3.  Style or Format of the Business Plan

The plan’s appearance must be carefully thought out. It should look sharp but not give the impression that a lot of money was spent to produce it. Those who read business plans know that entrepreneurs have limited resources and expect them to act accordingly.

A plastic spiral binder including a transparent cover sheet and a back sheet to support the plan is a good choice.

When writing the plan, avoid getting carried  away with the design elements included in word-processing programs, such as boldfaced type, italics, different font sizes and colors, clip art, and so forth. Overuse of these tools makes a business plan look amateurish rather than professional.

 

 

 

  1. Key sections of a business plan

 

3.1. Executive summary

Characteristics and advice

It appears at the start of a business plan, but is written last, after other sections have been written, evaluated and redesigned. The executive summary provides a short overview of the business plan. It is often considered the most crucial part of the plan because it is the first section your readers see. It should invite the prospective investor to read the rest of the business plan.

A strong executive summary should be concise and engaging.

 

Content

The executive summary will touch on all of the areas of the plan, including:

  • The main objective of the business
  • What makes the business unique or distinctive
  • The skills and experience of the management team
  • The target audience
  • Future aspirations
  • How the business will operate
  • The current competition in the market
  • Costs and financial projections (Cost benefit analysis)

 

 

3.2. Company Description or Business Overview

Characteristics and advice

This section is used to explain your vision and goals for the business venture in practical terms. It provides an overview of the company, explaining how it is run, how it makes money and what plans are in place for the future.

By the end of this section, the reader should understand why you believe this business will work by presenting steady data and arguments.

 

Content

  • The legal structure of the business (Sole proprietorship, corporation, etc);
  • Type of business (Manufacturing, retail or sales, service or a combination);
  • Potential for profitability (How you will make money);
  • Location (Where you will be based);
  • Means of doing business (Internet, storefront operation, mail order);
  • Time of business operations (Open daily, seasonal, specific hours, etc.);
  • Resources (What you will need to get started and operate, from machinery to computers to manpower).

 

 

3.3. Products & Services

Characteristics and advice

This section describes the products manufactured or sold, or the services offered. Classify the different types of products or services and provide a brief description of each. Indicate why you have selected to market such products or services and the need you fulfill for your prospective customers.

 

Content

  • Types of products, services
  • Description – present their advantages or quality characteristics
  • Which customers needs are fulfilled?
  • Benefits of your products or services and how they provide something other than what is currently available from competing companies

 

 

3.4. Market Information

Characteristics and advice

Market information describes the larger picture of the industry and market trends in which your business will compete. This sets a framework where you will build your customer base. Carefully research and evaluate the industry and determine how you can make an impact. Market information must be Timely, Accurate, Measurable, Easy to read and understand.

Your market information should correlate with the products and, or services you have presented above.

 

Content

  • An overview of the market and current status
  • Trends and changes in the market
  • Possible or recognized Niche markets or segments within the larger market
  • Your target audience
  • The specific needs of your target audience
  • How you will impact on those needs
  • How you anticipate the market will change over the next two, three or five years

 

 

3.5. Competitive analysis

Characteristics and advice

It is vital that you study; analyse, understand and evaluate your competition. This will provide investors and stakeholders  with a clear understanding of what market share you can realistically gain. Learn how your competitors conduct business, price their merchandise or services and manage their businesses.

More creativity will be required on your part.

 

Content

 

  • Include the strengths, weaknesses and details of the competition.
  • Describe exactly how your business will differ and present alternatives to what your competition is offering.
  • You may need to find a niche market that will allow you to compete against a more established business.

 

 

3.6. Operational plan and operational strategy

Characteristics and advice

This section describes how the business will operate. It will include how items will be ordered, stored, sold and/or produced or a service will be offered and performed.

The key to the operations section is to explain your strategies and approach and how they best facilitate the type of business you plan to do.

Include other companies, vendors and distributors that your business will rely on to complete transactions and explain why you have chosen them.

A contingency plan may be necessary if your business is sensitive to external factors.

How you do business will change with time and you need to address changes in technology, ecosystem and marketing trends. You should include some general projections of how you expect the operational plans of your business to change and grow over time to meet the demand for increased sales.

 

Content

The operations plan should include:

  • Who will handle specific tasks;
  • How the business will be physically set up;
  • Inventory details;
  • Manufacturing details including supplier chains;
  • Distribution network
  • Pricing details;
  • Safety precautions;
  • The need for sub-contractors or freelancers.

 

Strategy: How your method of doing business

  • will benefit your customers;
  • will ensure quality customer service;
  • give you a competitive advantage.

 

Partner companies

Contingency plan

Projections for sustainable functioning and future growth

3.7.  Management and ownership

Characteristics and advice

This section features short biographies of the key personnel involved in forming and running the business. You will also include key staff members and members of your Board of Directors. What each member of the team brings to this business, including past experience and significant achievements. His or her key responsibilities in the company should also be noted.

Explaining who is behind the company and what each person brings to the table is of great interest to any potential investor.

 

Content

  • Key personnel – short biographies, incl. past experience and achievements; responsibilities, roles;
  • Staff members;
  • Board of Directors;
  • Organizational structure;
  • Day-to-day operation;
  • External advisors or Advisory Body – if any

 

 

3.8.  Pricing

Characteristics and advice

Pricing needs should be carefully determined and be in line with the market you are trying to reach. Your pricing strategy should reflect the applicable factors listed along with your overall market strategy.

For example, you may be setting your prices low to penetrate a saturated market. Conversely, you may have an offering that is unique to your demographic region and can therefore set higher prices.

 

Content

  • Costs of purchasing or manufacturing goods
  • Time involved in performing a service or making a sale
  • Economic factors
  • Location
  • Competition
  • Market conditions
  • Consumer needs
  • Seasonal activities
  • Availability or exclusivity of an item or service
  • Manpower or labor involved

 

 

3.9. Financial plan

Characteristics and advice

A solid financial plan should be outlined within the overall business plan. Outline the financial structure of the business before including it in the business plan.

All of these elements of your initial financing should coincide with the goals and visions of the business as stated earlier in the business plan.

The financial plan will also include the start-up budget and operations budget, indicating what you need to launch the business and how much you will need to keep the business going on an ongoing basis.

 

Content

The financial section should outline:

  • How much money is necessary to start the business
  • How much money will be needed over the next two, three and even five years
  • How funds will be utilized
  • How many funding sources you will exploit
  • A timeline of when you will need funding

Financial documents will include:

  • Break-Even Analysis
  • Balance Sheet
  • Projected Profit and Loss Statement
  • Projected Cash Flow Statement
  • Other assets – if any

The financial plan should provide for: salaries, wages, insurance costs, accounting costs, equipment costs,land cost,  legal fees, taxes, cost of goods sold, advertising and promotional expenses and all other pertinent costs in each of your two budgets.

 

 

3.10.  Review your business plan

Characteristics and advice

Once you have completed your business plan, go back and review your work. Make sure that you include all major sections.

This document is typically designed to attract investors and also to provide a blueprint for the business.

 

Content

  • Include a Table of Contents listing where each section can be found
  • Cover all key points in clear and concise language
  • Proofread carefully for spelling and grammar
  • Fact check to make sure all data is accurate and all claims are substantiated
  • Eliminate any extraneous information
  • Have clearly visible contact information on a cover page and at the end of the document
  • Present all graphs or charts in a clear and easy to read manner
  • Have not over-estimated your financial projections or underestimated your time frame for launching the business

 

When you are starting a business, there are a number of mistakes you can make. These could be classified according to the different aspects of your business such as planning, analysis, marketing, financial, hiring personnel, sales, business name mistakes etc., as well as various overall and practical mistakes.

A. Overall mistakes:

  1. Absence of overall realism about the Business (general vision concerning economic parameters)

Overall realism about the Business is important as it is the backbone of everything you engage in. To check that you are realistic try to formulate 3 main challenges as well as your vision statement, mission statement and core values.

The answers to the following questions will help you clarify your business vision:

  • What will put you out of business?
  • What is your ultimate vision of success?
  • What is your ideal community vision?
  • What about your priorities?
  1. Absence of clear aims of your new business

Formulating clear aims of your new business will help you ensure its success. These aims could be:

  • Entering new market niches
  • Replacing similar product from the given market sector
  • Earning more incomes and return investment
  • Enlarging product/services portfolio
  • Upgrading a company
  • Definition of a good idea
  • To meet a significant customer need – a market
  • Achieving competitive advantage
  • Reasonable cost
  • Quality performance

B.  Planning and analysis mistakes

Before putting a business idea into practice a number of analyses, plans, assessments, choices will have to be made. Absence of these will prove a mistake.

  1. Absence of market analysis and strategy

The market analysis is a study on the current situation from various informative sources. Main issues which should be investigated here are:

  • Community trends and needs
  • Potential market opportunities and problems (Transform the problem into opportunity)
  • Assessing what competitors offer
  • Scanning internal capacity
  • Assessing functioning network
  • Evaluating product attractiveness
  • Evaluating marketing issues
  • How likely is the product/service to be implemented successfully (easy or hard)?
  • Does the product advance mission and strategic priorities?
  1. Absence of operational plan, time-schedule

Operational plan consists of detailed steps for product/service realization. It should deal with:

  • Needed equipment and/or facilities
  • Needed providers (suppliers)
  • Staff qualification
  • Various scopes of sells techniques

Compulsory elements to be defined before the business starts are:

  • Business location - venue, access to the market; resources; acceptable infrastructure
  • Facilities; buildings; equipment; infrastructure, management plan
  • Basic operations (this could be not applicable for new starting business)
  1. Absence of Risk analysis

Risk analysis is one of the main element of business planning and includes two main parts:

  • Assessment of risk factors ( market, technical, financial etc)
  • Defining (envisaging) measures for risk minimizing

There are two main types of risks – internal and external. Examples of internal type are:

  • Non properly functioning equipment
  • Leaving of key expert or manager
  • Not enough skilled personnel
  • Payments delay
  • Higher costs than calculated ones
  • Low innovative technologies

As for the external risks most often they are connected with:

  • Unrespectable competitors intervention - offering lower prices for the same product

Drastic changes in the political conditions

  • Sharp inflation increase
  • New competitor on the stage
  • Tax fee increasing
  • Accidents hazard

Measures reducing the risk should correspond to every identified risk:

RISK MEASURE
Key expert or manager leave the company Creation of fast reacting system for HR qualification
Payment delay Agreed on credit turnover line
Lower prices of competitors More ads
New providers More rebuts from providers
Low quality Staff training
  1. Absence of realistic assessment of resources (financial, human)

Concerning financial resources, the entrepreneurs have to assess the investments needed. Primary investments include infrastructure expenditures - equipment, materials, software products and licenses, etc; administrative tax fees; HR investments. Secondary investments are connected with depreciation payments, serving of loans or credits, labor cost, tax fees, operational costs, satellite events incl. promotions, advertising, etc.

Concerning HR resources we have to assess:

  • Needed staff for entrepreneur project performance
  • Number of necessary special qualified staff
  • Additional training and retraining
  • Expenditure for further qualification

Concerning financial resources one has to assess the overall investment evaluation - this is the last stage of resources assessment

It is good to answer the following questions:

  • Is there economic use for project realization
  • What is the balance between investments and incomes
  • How to manage cash flow
  • What is pay back period or what is the period of investment return
  1. Absence of appropriate management structure

A management structure includes the creation of a new or adaptation of existing organisation in order to integrate administrative and fundraising functions, and thus to increase the administrative efficiency and effectiveness.

While a sole proprietorship requires less formality and administrative work, you may want to consider forming a corporation to protect your personal assets from any liability of your company. The type of business structure you choose affects certain aspects of how you conduct your business and your taxes. Consult accounting and legal resources to help determine the best fit for your company.

The above is a short summary of several of the most common risk for entrepreneurs when starting a new business. The awareness and measures proposed will help you avoid them

A. Do’s in other aspects of your new business

Check the business name you have chosen 

Don’t start using a business name on your business cards, social media, and other marketing collateral before verifying it’s not taken by someone else.

Set up a business bank account

Keep personal and business monies separate—and certain legal structures require you to do it that way.

Marketing

Market to a defined group. Determine your marketing audience and gear your plan to address this group.

Have a clear marketing message.

Delegate tasks

Business owners feel the need to take care of everything themselves. But do not be afraid to delegate appropriate tasks to appropriate people. Otherwise, there is a risk of becoming unable to direct the proper level of attention on the task at hand, rendering a business incapable of reaching its full potential.

Numerous do’s and dont’s can be found on the web sources below and by simple web searches.

Quizz: Provide 3 common mistakes of entrepreneurial business.

Which are the main challenges of business planning?

vision                        Y      N

mission                      Y      N

value                          Y      N

strategy                     Y      N

How many Risk assessment types do you know?

What resources should be assessed before starting the business?

Is choosing the right business stucture important? Why?

Web resources: (different views)

https://www.success.com/article/the-8-biggest-mistakes-entrepreneurs-make

https://www.forbes.com/sites/theyec/2017/08/30/eight-biggest-mistakes-first-time-entrepreneurs-should-avoid/#651dfa2e734c

Search Results

Definition

The market analysis is an important part of of the business plan and any startup strategy. The market analysis is a study on the current situation of the market by various sources.

Your market analysis should enable you to:

Avoid putting a lot of resources and time into creating a product or service before you’ve determined that your solution is needed.

Determine that the need for your product or service is big enough that people will pay for it.

Aspects of market analysis

Main issues which should be addressed are:

  • Community trends and needs
  • Potential market opportunities
  • Assessing what competitors offer
  • Evaluating product attractiveness
  • Evaluating marketing issues

Make a comparative analysis with other offered market competitive  products  and assess your  product/service  advantages

  • How likely is the product/service to implemented successfully(easy or hard)?

The following topics also should be considered when preparing a market analysis:

  • General economic trends
  • Branches trends and characteristic
  • Specificity of the competitors
  • Market state of the art
  • Prognosis
  1. General economic trends include GDP trends, inflation, demand trends, general ability for purchasing of the population and trends of labor market, including level of unemployment.
  2. The next step includes analysis of the main market characteristic of the branch where your product/service will be sold. The main branch factors are connected with technology changes,changes of the consumers need and preferences,demographic changes, social media, etc.
  3. Usually the competitive forces on the market are: companies from other branches delivering similar products and services; providers, consumers, new competitors, barrier for entering the market.
  4. Market analysis reflects possible consumers and their specifies- size; social status; motivation; possible share of market; frequencies of demand; balance - “demand - supply” of the offered product/ services; acceptable price level.
  5. Prognosis in market analysis reflects capacity and sustainability of demand, market absorption capacity.

In short to make an offer successful you should answer the following questions:

  • Who are my potential customers?
  • What are their buying and shopping habits?
  • How many of them are there?
  • How much will they pay?
  • Who is my competition?
  • What have their challenges and successes been?

Strategy of the 4 Ps

Market analysis includes creating of a successful market strategy. It consists of several strategy steps:

  • Product strategy
  • Price strategy
  • Providing strategy
  • Promotion strategy

1. Product Strategy

Aims at the attractiveness of your offer. It is a mix of:

  • Quality
  • External vision
  • Packaging
  • Price
  • Trade mark - if any
  • Providing services
  • Main specificity – your offer should pose competitive advantages

2. Price Strategy

Should take into account market reality and reducing the risk. There are different mixtures of price defining approaches. Some of them are:

  • On the base of company criteria
  • Producing expenditures
  • Competitors pricing - considering prices of competitive services or product
  • Demand prices

3. Providing strategy

Concerns the system of product/services distribution you are offering.

  • Is it flexible or rigid
  • What kind of distribution do you apply?
  • On common point
  • On big stores with follow up redistribution
  • Door to door services
  • What is the time lag of service/product providing
  • Do you offer contestation and what is the manner of receiving it; Time for reaction?

4. Promotion strategy

Information about it is included in the next chapter 4 Marketing and communication.

Tips for writing an effective market analysis

Here are some tips to help you write an effective market analysis for your small business plan.

  • Use the Internet

Since much of the market analysis section relies on raw data, the Internet is a great place to start. A series of searches can uncover information on your competition, and you can conduct a portion of your market research online.

  • Be the Customer

One of the most effective ways to gauge opportunity among your target market is to look at your products and services through the eyes of a purchaser. What is the problem that needs to be solved? How does the competition solve that problem? How will you solve the problem better or differently?

  • Conduct Thorough Market Research

Put in the necessary time during the initial exploration phase to research the market and gather as much information as you can. Then use the data gathered as supporting materials for your market analysis.

  • Relate Back to Your Business

All of the statistics and data you incorporate in your market analysis should be related back to your company and your products and services. When you outline the target market's needs, put the focus on how you are uniquely positioned to fulfill those needs.

Quizz: What is market analysis?

Part of BP                                         Y      N

Foundation of BP                        Y      N

Coherent part of any business        Y      N

Identify 3 economic trends

Identify important elements of market strategy.

 

Web resources:

http://articles.bplans.com/how-to-write-a-market-analysis/

https://www.thebalance.com/how-to-write-the-market-analysis-section-2951562

This section will address sales tactics, advertising and an overall marketing plan.

Sales & Marketing Your sales and marketing strategies will need to coincide with your overall company goals and vision. External influences, including political changes, changes in the marketplace, competition and the overall economic climate will play a role in how you plan to market your business. Manufacturing companies will include methods of sales and distribution; retailers will include an overview of their anticipated product sales. Specific sales strategies including how the services will be offered to the public, anticipated promotions, should be detailed.
Marketing Marketing will play a significant part in the success of any new business. To create a successful marketing plan, you need to first do market research and learn as much as possible about your potential customer base. By learning the preferences and buying habits of your projected target audience you can create a marketing plan that will peak their interest and meet their needs.

Your marketing plan, should include:

An overview of market trends in general, your current market

Description of your target audience

New markets you plan to tap into

Methods of reaching your target audience.

Promotional and advertising campaigns

You need to portray your product or service in the marketplace.

Explain how your choice of marketing vehicles will best reach the audience that you are targeting.

Define the image that you are seeking. For example, are you trying to establish your business as a high-end company or a cost saving alternative to established brands? The corporate image of the company will be part of your plan.

Types of media to use for advertising:

print,

television,

radio,

online banner ads,

Internet paid listings or search engines, etc.

Public events - fairs, exhibitions targeted days on given branch etc

Create your corporate image

Targeting Your Audience  When forming a new business it is usually advantageous to focus on capturing a specific narrow market. Typically, this will allow the new business to establish itself. Trying to mass market a new business (in most industries) can be difficult. It is also more cost effective for start-up companies to go after a smaller target audiences to establish themselves. The marketing plan should provide a cross section of carefully selected methods designed to reach your target audience with the features and benefits of your product or service. It should be outlined in the business plan in a manner that shows diversity and fits within the scope and means of your overall budget.

 Create marketing plan. Includeplans for:

Promotional activities or sponsoring events

Contests, coupons and free giveaways

Special incentives and discounts

Trade show representation

Search engine optimization and search engine marketing

Social media marketing

Professional events with education elements

Basic rules for marketing communication

Define the goal of your marketing communications

For example, the goal could be:

  1. Create demand for your products
  2. Create awareness of your company and brand for potential customers
  3. Create awareness for fundraising (VC, angels, corporate partners)
  4. Create awareness for potential acquirers of our company

Define your target and tools - Audience, message, media, messenger

Once you figure out why you’re creating a communications strategy, you can figure out how to use it. It requires four steps:

  1. Understand your audience(s)
  2. Craft the message for that specific audience
  3. Select the media you want the message to be read/seen/heard on
  4. Select the messenger you want to carry your message

Step 1: Who’s the audience?

The audience is who specifically you want your messages to reach. It can be potential customers, venture capitalists who may want to invest, other companies. Often there are multiple audiences you want to communicate with. Different audiences require their own messages, media, and messengers.

How do you figure out who the audience is? Who’s the user of the product? The recommender? The decision maker? It depends on the role each of these people play in the buying process. And you should spend some time on investigations.

Step 2: What’s the message?

Messages are what you deliver to the audience you’ve selected. Messages answer three questions:

  1. Why should the audience care?
  2. What are you offering?
  3. What action is expected?
  4. Things to keep in mind about messages:

Message context. In crafting your messages, remember that all messages operate in a context that may have an expiration date. Make sure your context is current, and revisit your messages periodically to see if they still work.

Memorable messages. The more memorable the message, the greater its ability to create change. Not only do we want people to change their buying behavior, we also want them to change how they think. If you were told you were going to pay for cold, dead fish wrapped in seaweed, you might not be too hungry. But when we call it sushi, people line up.

Examples of memorable messages

HAVE A BREAK. HAVE A KIT KAT – Rowntree, 1957

I LIKED IT SO MUCH, I BOUGHT THE COMPANY – Remington, 1979

THE BEST A MAN CAN GET – Gillette Razors, 1989

THERE ARE SOME THINGS MONEY CAN’T BUY. FOR EVERYTHING ELSE, THERE’S MASTERCARD – Mastercard, 1997

Product versus company messages. There is a difference between detailed product messages and messages about your company. At times, you may have to communicate what the company stands for before a customer is ready to listen to you talk about product messages.

Step 3: Media

Media refers to the type of communications media each audience member reads/listens to/watches. It could be print (newspapers/magazines), Internet (website, etc.), broadcast (TV, radio, etc.), or social media (Facebook, Twitter, etc.). In customer discovery, you probably asked how they get information about new companies and new products (if not, do so!). The media your prospective customers told you they use ought to be on top of your target media.

The online media your company controls (your corporate website, company Facebook page, etc.) should be the first place you experiment finding your audience(s) and message.

Typically, you pick several media to reach each audience. It’s likely that each audience reads different media (potential customers read something very different than potential investors.) You’ll need a media strategy – a plan that describes the mix of media and how you will use it. This plan should start with the right category of media (print, Internet, broadcast) and then identify specific sites, blogs, magazine, etc.

Step 4: Messengers

Messengers are the well-placed and highly leveraged individuals who have influence over your audience(s). Messengers convey and amplify your message to your audience through the media you’ve chosen.

There are three types of messengers: reporters, experts, connectors. (Each audience will have its own unique set of messengers.)

Customer discovery never stops

Understanding your audience is important not just for startups but for companies already selling products. It helps you stay current with customers, get ideas for other needs to fill, and create new products. In addition, the audience > message > media > messenger cycle seamlessly moves this learning into getting, keeping, and growing customers.

Lessons learned

Marketing communications = Audience, Message, Media, Messenger

Use the Value Proposition Canvas[1] to understand who your audiences are

Craft messages to match what your audience has already told you

Pick the media they said they read

Find the right messengers to amplify your message

[1] Value proposition canvas - a tool to understand what customers want and needs, and design products and services they want. It works in conjunction with the Business Model Canvas and other strategic management and execution tools and processes. https://strategyzer.com/canvas/value-proposition-canvas

Find the right messengers to amplify your message

Quizz:

What is a marketing plan about?

List 3 media to use for advertising

Which is more effective for start-up companies in targeting their audience?

  • To go after a smaller target audiences Y   N
  • To go after a large target audience   Y   N

List 4 steps of a basic communications strategy.

Why is it important to understanding your audience?

Web resources:

www.allbusiness.com

Everything your startup needs to know about marketing communications

https://www.thebalance.com/best-advertising-taglines-ever-39208