How to compile a Lean Canvas, the business plan in one page
To compile a Lean Canvas is the very first step to evaluate a business idea and to identify the riskiest assumptions to be tested. It’s also a good companion along the journey from initial idea to Product-market fit.
The whole concept behind a Lean Canvas is to briefly and concisely explain a business model to a person who does not know anything about what the company is doing and why.
It takes just a few minutes to create a first draft and it’s so powerful that the simple act of preparing it will help anyone with a business idea to get more clarity around their thoughts.
A Lean Canvas template is available for free from this website, together with some guidance on how to proceed.
KEY RULES
While the Lean Canvas has been designed to be simple and straightforward, it might present some challenges to first timers. There are two key rules to keep in mind:
— write statements that are meaningful and concise. No “but”, “however” or even subordinate sentences. Keep it simple and straight to the point.
— prepare a Lean Canvas for each customer segment.
AN EXAMPLE: UBER LONDON
To get an idea of what we are talking about, let’s see an example of how a Lean Canvas would look like for a well known company: Uber in London.
Being Uber a marketplace, its job is to let demand (passengers) and supply (drivers) meet.
We have then two different customer segments, passengers and drivers, and so two different canvases to be compiled.
Here is the first one, for Uber passengers.
And this is the second, for Uber drivers.
As you can see, most of the elements of the two canvases are different.
This is because the problems of each customer segment are different, and so are the solutions that Uber is offering them, the value proposition and the channels that they use to acquire them, etc.
This is super important, so in case it’s not clear enough, I suggest to review the two examples again.
STEP BY STEP GUIDE TO COMPILE A LEAN CANVAS
Now that we have clear in mind how a Lean Canvas looks like, let’s see step by step how to compile a meaningful one.
The steps are in sequential order, because whatever is coming first is informing the next steps.
So make sure to follow the process.
CUSTOMER SEGMENTS
This is where to start, as customers are at the center of any new business or new product development.
Who do you think is going to use your service? Do these people have specific job titles or roles? Are they working in specific industries? Or have particular demographics?
In case of a marketplace or multi-sided platforms, you will need to create two lean canvasses, one for the supply, another for the demand.
The same applies in case you are undecided on which customer segment is most attractive for your business; you will have to compile a lean canvas for each one.
EARLY ADOPTERS
Based on your experience or gut feeling, can you make an assumption about who are the customers that are more in need of what you are proposing?
Do they have specific job titles or roles? Are they working for specific companies/sectors?
This is about who feels the problems the most, and is inefficiently already trying to solve them in a way that you believe you can solve better through technology.
Identifying early adopters is very important, because these are the guys that are going to be your first customers. Here some tips about how to identify them.
PROBLEM
It’s a brief description of at least the top 3 problems you are addressing with your business idea.
In this section you should try to describe the strongest frustrations or aspirations that your potential customers have.
The best way to describe the problems is in terms of the job customers need to do, what they are ultimately trying to achieve. Possibly with a concise sentence.
What you write needs to be in a way that even someone who is completely unaware of what the business is about should be able to understand.
So no technical terms or single words like “time”, or “price”, as these will be very hard to understand for external people.
EXISTING ALTERNATIVES
Who are the current competitors of your future business? Here you should describe how customers are currently solving these problems. They may be solving the problems through a single service, or through a combination of them, or even through basic and primitive techniques. The key thing is to list them, so that you will be able to compile a competitive analysis (see how to here) and differentiate your value proposition later in the process.
SOLUTION
How are you going to solve those customers’ problems and frustrations?
Again, you should try to describe the solution not in a technical way, but with brief and concise sentences that even someone who is completely unaware of what the business is about should be able to understand. Each problem should be matched by a solution.
UNIQUE VALUE PROPOSITION
This is really the core of the canvas, the key reason why what you do and offer is different from competitors and why that difference matters to customers.
Writing a good value proposition is not easy, it might take years of experience to learn how to craft a powerful and meaningful one.
It’s so complex because it combines
— the target segment
— the key problem
— the key benefit your customers are going to get
— the special and unique way you will deliver it
All in a single statement, possibly less than 200 characters.
A good approach to craft a meaningful and powerful value proposition statement is to derive it directly from the problems you are willing to solve. A value proposition statement should contain the end result customers want from using your product, the benefits they get AFTER having used it. A good template is “We help (who?) achieve (what benefit?) by doing (the special and unique way the new business/new product is doing it)”.
HIGH LEVEL CONCEPT
A single statement to describe your business idea. For example: YouTube = Flickr for videos.
This is the so called “elevator pitch”, and it’s important because you will use it everywhere: when explaining what you do at events, when the press wants to communicate what you do, etc. Your future team members, investors, recruiters and customers will use it when talking about your company as well.
If it is too long it means that you don’t have enough focus yet, and you will need to work until it feels right, concise and catchy.
REVENUE
Now that we know what you are going to offer your customers, how are you going to make money? Try to list here the top 3 ways you will charge your customers. It’s ok not to put numbers at a very early stage, just how you are planning to charge them or get money from your product.
CHANNELS
How are you going to sell your product? Which are the channels are you going to use to acquire customers?
Social media? Paid advertising? Google adwords? PR?
Most successful startups have 2 or 3 marketing channels that work best for them. The effort at this stage is to list all possible channels so that you can later validate whether they can really make the difference or not.
KEY METRICS
This is how you will measure success and performances. A good framework is a funnel called AARRR: Acquisition, Activation, Revenue, Retention, Referral.
Which are the customers’ actions that you are going to track to define the steps above and monitor your business performance?
For example: visitors to the website, number of signups, number of trials, specific actions they can do with your service, number of paying customers, etc
COSTS
What are the fixed costs of your business? There is no need to write down the numbers at a very initial stage. But at least you should list the ones you can think of.
At the end of the business idea validation process you will have clarity about these two last steps, and you will be able to calculate how many paying customers you will need to cover the fixed costs.
UNFAIR ADVANTAGE
This is what makes you different from anyone willing to do the same, your non replicable competitive advantage.
It’s something that cannot be copied or bought.
For example it might be a long time experience in the industry, credibility in a particular area or skill, access to a broad network or patents.
Main sources for the Uber Lean canvases:
— Uber’s first pitch deck
— YouGov for brand awareness
— The Telegraph for profiles of drivers and passengers in London
— The Guardian for early adopters of the service in London
— Countless late night chats with Uber drivers
An extended version of this article, with more examples and guidance, is available on StudioZao.com.
