Size up your business: The Lean Canvas provides a great template for SME and startup owners to define their business objectives and unique problems on one page. Photo credit: Unsplash
A new year is a new start for you and your business.
The one thing you can do as a SME or startup owner is to refine your business trajectory before you even start planning how you will secure business financing or project financing, or that elusive startup loan or working capital loan.
It is almost impossible to do that with just a vague idea of how you want your business to be. What you need is a tried-and-tested template to help you define your objectives, challenges and vision.
After all, even if a great idea pops into your mind, you need to put it down in a tangible form.
Thankfully, there is such a template that can help you define your business objectives – called the Lean Canvas.
The Lean Canvas is a business framework that was adapted from the Business Model Canvas, which was developed by Dr Alex Osterwalder.
Ash Maurya, who created the Lean Canvas, describes it as “a one-page business plan template that helps you deconstruct your idea into its key assumptions using nine basic building blocks”.
These nine blocks are: problem, solution, key metrics, unique value proposition, unfair advantage, channels, customer segments, revenue streams, and cost structure.
That sounds like a lot, but the guiding principle behind the Lean Canvas is that it is a one-page business plan that can be done in 20 minutes. What this means is instead of having to write pages and pages for a super-detailed business plan, you put everything on one page.
It doesn’t matter if you are planning for project financing, an SME business loan, or need more working capital or a startup business loan. For this exercise, think purely on where your business is headed.
Think of it as the paper version of a five-minute elevator pitch that is succinct, can be done up quickly, easily shared and modified (owing to its length and format), and able to be presented to anyone – from a bunch of potential investors, to your own team, or big corporations.
In fact, the Lean Canvas is used worldwide by not only entrepreneurs, but any organization that has a need for some business clarity, such as universities and conglomerates.
As per Maurya’s definition, the Lean Canvas is essentially a business plan template that helps you deconstruct your idea into its key assumptions – and on one single page using blocks of varying, but specific, sizes. You can find plenty of Lean Canvas templates online.
The Lean Canvas’ nine basic building blocks are adapted from the BMC’s nine building blocks.
However, for the latter, the nine blocks are: customer segments, value proposition, distribution channels, customer relationship, revenue streams, key resources, key activities, key partners, and cost structure, which differ from the building blocks of the Lean Canvas.
But five of the BMC’s building blocks – value proposition, distribution channels, customer segments, revenue streams and cost structure – are also in the Lean Canvas, albeit reordered.
Although they were designed for different purposes, both templates are valid and widely used. And as Maurya put it, one is not better than the other.
He said his main objective with Lean Canvas was making it as “actionable as possible” while “staying entrepreneur-focused”.
The key difference is that the Lean Canvas was developed from the customer-problem-solution relationship vantage point of entrepreneurs, while the BMC is more about strategic business planning.
Here are more key differences between the two:
It is important to know what the nine building blocks mean before you start filling in each block with the right information.
1. Problem: The one way to create demand is to help solve a problem. So this section should have a problem that customers want solved, which will help you develop the right product. As Maurya once said: “Life’s too short to build something nobody wants.”
2. Solution: Once you have the problem to be solved, you come up with a solution for it, and in doing so, arrive at the basic set of functionalities and features that make up the Minimum Viable Product.
3. Key metrics: This helps you to determine the most crucial and absolutely essential numbers that make or break your business. Once you have these, you can focus all your energy and resources on how to bring up these numbers.
4. Unique value proposition: What makes your business different from others? What is the intrinsic value of your product or service?
5. Unfair advantage: You basically need to know what your product or service has that no one else has. This would explain why your customers must only go to you and no one else. Ideally, this should be something that cannot be copied or acquired.
6. Channels: This should include the methods that you will use to reach your audience, including marketing, communication, and distribution channels through traditional and digital media.
7. Customer segments: If you don’t know who your customers are, you don’t know what problems they are facing. If you don’t know that, you won’t have a solution, and consequently, a product. If you have a few customer segments, make a canvas for each.
8. Revenue streams: How will you price your product or service? What are the payment modes that your customers will use to pay for it?
9. Cost structure: Write down all the costs you will have in the process of selling your product. Examples include expenses such as payroll, cost of materials, research and development fees, etc.
Whether you are starting a business from scratch or hoping to review your business objectives, the BMC and Lean Canvas respectively offer a great medium for you to put your goals on paper.
Download the Lean Canvas template here and the BMC, here.
The beauty of the Lean Canvas is that you can do up your own version and discuss it with your team – or have everyone write their own version, after which you compare them with yours.
It could be a great way of uncovering insights that you may have overlooked – for instance, problems you haven’t thought of solving, solutions you didn’t think of, or customer segments you neglected to capture.
If you intend to scale or grow your business this year, the Lean Canvas can be a useful tool with which to obtain some much-needed clarity, which will be a big help when you strike up a conversation with lenders and investors.
And the best part? All you need is one sheet of paper and 20 minutes to spare!
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Belinda loves thinking about random stuff, and collecting useless bits of facts and trivia. She often roots for the underdog, and believes the world needs more happy endings.