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You might have heard everyone around you talking about entrepreneurship and starting their own businesses. You might have yourself considered opening one.

Entrepreneurship is the “cool” thing to pursue in this age. Yet so many people are confused over what or who an entrepreneur is.

What does it really take to become one?

Is it just a businessman? Or is it a conceptualist or an “ideator”?

Can one become an entrepreneur without innovation?

Are some people born entrepreneurs or can someone be developed to become one?

Can someone call himself an entrepreneur if he does not own a company but is a leader and innovator in his own space?

The opinions are so divided and the questions so varied that we decided we had to do something about it. It was time to put an end to all this confusion and crisply explain what entrepreneur means and how to differentiate it from self-employed and other similar entities.

Who Is An Entrepreneur?

An entrepreneur is an innovative initiator who takes the responsibility to translate ideas into commercially viable innovation, entities, or businesses, taking on greater than normal financial risks in order to do so.

This definition of entrepreneur stands on five pillar key phrases. These are –

• He is innovative: An entrepreneur is someone who is a source of new ideas, offerings, businesses, or initiatives. 
• He is an initiator: An entrepreneur is the beginning of an initiative, a project, or a business. He’s the one who decides to build upon an idea and turn it into something bigger than just a mental construct.
• He takes the responsibilities: The entrepreneur is the backbone of a venture. He’s the one who takes the responsibility of its success or failure from the start and the one who handles the venture’s growth direction and speed.
• He finds and builds value: An entrepreneur is someone who not only ideates, but the one who converts the mental construct into a valuable innovation, entity, or business. He finds the apt direction for the idea to grow and builds it till it transforms into something valuable.
• He takes more than normal risks: The entrepreneur has the highest stake in the venture, both mentally and financially. He’s the one who’s ultimately responsible for the success or failure of the venture. This makes his job riskier than normal jobs.

But contrary to the common belief, one doesn’t have to be associated with a startup to be an entrepreneur. There are entrepreneurs, known as intrapreneurs, within companies who help the company develop new offerings, plans, models, etc. There are infopreneurs who are innovative initiators of information-based offerings who find opportunities and build a venture by bridging knowledge deficiency among the target audience.

No matter who they are or what they’re associated with, these entrepreneurs possess some identical yet distinct characteristics.

Entrepreneur Characteristics

Entrepreneurial spirit is a phrase often used by many but not understood by most. This spirit is the set of entrepreneurial traits that most famous entrepreneurs like Mark Zuckerberg, Jeff Besos, etc. possess.

Here are some of these entrepreneur characteristics –

• Self-Motivation: Entrepreneurs are highly self-motivated individuals with an inherent burning desire to innovate and create. They have tremendous faith in themselves and their ideas which keeps them going in spite of all the obstacles. 
• Decisiveness: Entrepreneurs need to make very hard decisions quickly that affect them and their venture’s fate. All of the workers, employees, and other stakeholders depend on their decisions. Hence, they can’t afford to be indecisive. 
• Risk Tolerance: Entrepreneurship involves higher than normal risk-taking, which often results in failure and losses too. An entrepreneur accepts risks in return of success.
• Creativity: Entrepreneurs are creative enough to see business opportunities where others don’t.
• Optimism: Optimism and positivity help the entrepreneur go ahead in his path of high risks and tough obstacles. 
• Future Orientation: An entrepreneur always thinks of the future before making any decision. All his decisions are oriented towards a big long-term gain rather than small short-term gains.
• Independent: Entrepreneurs think outside the box and are not swayed by others who don’t agree with their ideologies. 
• Flexibility: Entrepreneurs are flexible enough to try and do most of the tasks they can. They are also flexible to pivot and change their goals as and when required. 
• Adventurous Mindset: Entrepreneurs choose this profession because of their adventurous mindset – that make it enticing for them to bet big to gain big.

Types Of Entrepreneurs

Entrepreneurship is a mindset found in small businesses, big companies, startups, social entities, and web-entities alike. Here are the five types of entrepreneurs that exist today –

Small Business Entrepreneurs

These are usual business owners who innovate and take more than normal risks. Often times, these entrepreneurs don’t disrupt the entire industry, but they do make a name for themselves and their businesses.

That being said, they are definitely different from usual business owners considering their innovative mindset and risk-taking attitude.

Entrepreneur vs Businessman

A businessman is an individual who runs a business, undertaking an unoriginal idea which might not involve more than normal risks.

Entrepreneurs, on the other hand, ideate and work on innovative concepts which involve more than normal business and financial risks.

Scalable Startup Entrepreneurs

A startup is a business structure powered by disruptive innovation, high scalability, and extreme uncertainty.

Entrepreneurs behind startups are true disruptors that often change the traditional industries. These entrepreneurs are highly innovative but often bear a very high financial risk as they’re accountable to investors for millions of dollars invested.

Large Company Entrepreneurs

Also called intrapreneurs, these entrepreneurs actually perform the job of an entrepreneur within a company.

Precisely –

An intrapreneur is an employee with entrepreneurship skills who is given the responsibility and authority to use those skills to develop a new product without incurring the risks associated with it.

That is, if the product fails, the company will take care of it.

Intrapreneurs are half entrepreneurs – they do innovate and develop new offerings, businesses, initiatives, etc. but they get salaries in return, and they don’t bear all the risks of failures.

Social Entrepreneurs

Social entrepreneurs are individuals who innovate and develop an offering, entity, or business to help solve a social problem.

They are driven by a social objective and are not money-minded.

Infopreneurs

Infopreneurs are entrepreneurs who solve the problem with the information they have rather than developing a product or service.

Most people know them as bloggers, vloggers, journalists, etc. But not all bloggers and vloggers are infopreneurs. An infopreneur is someone who innovates and starts a new information-focused venture, taking more than normal business and financial risks.

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We are surrounded by entrepreneurs. Some sell great products, some provide unique services, some come up with an incredible idea, and some build upon an existing idea. Every kind of entrepreneurship has its own risks and conditions.

But there is a new type of entrepreneurship finding its way in the startup world. Unlike other entrepreneurship styles, this entrepreneurship requires less monetary investment and risks and more time, perseverance, and energy. These entrepreneurs are commonly known as infopreneurs who capitalize on the data consumption needs, wants and desires of the target market.

Who Is An Infopreneur?

An infopreneur is an entrepreneur who makes money by collecting, organizing and selling information mainly in a niche market (online and offline). The term infopreneur is a portmanteau of the words information and entrepreneur.

In simple terms – an infopreneur is an entrepreneur who makes money through information by recognizing knowledge inadequacy state.

By investigating the history of infopreneurship, it was found that the term infopreneur was registered as a trademark by Harold F. Weitzen on February 1, 1984, who published a book, “Infopreneurs: Turning Data Into Dollars” on 1988 which became the first book on infopreneurship. Videos, audiotapes, CDs, talk shows etc. were the offline approaches used by infopreneurs in the ’80s and ’90s. However, Infopreneurship became a rising trend with the advent of the internet as anyone with a computer and an internet connection could start a business by issuing valid knowledge and information regarding a particular niche.

Infopreneurs changed the face of entrepreneurship as they proved that it is possible to set up a business without having to hire staffs or equipment or invest tremendous amounts of capital and even have involvement of very low financial risks.

Types Of Infopreneurs

In general, there are 7 types of infopreneurs. These are –

• Course Creators: These infopreneurs create full-fledged courses and sell it either on their own websites or through online marketplaces like Udemy.
• Authors: These types of infopreneurs put down their expertise, experience, and insight in a book or an e-book and make money by selling those.
• Niche Bloggers: Usually, bloggers don’t sell anything. They share their thoughts, expertise, experience, and insight on a publically available platform and make money either through advertisements or by partnering with brands they advocate.
• Niche Podcasters: Niche podcasters are similar to bloggers, the only difference being the platform. Podcasters share their information in the form of audio.
• Niche Vloggers: Vloggers are bloggers who share their information in the form of videos.
• Speakers: A speaker is an expert in his own field who influences others through his speech. His business model includes charging money to speak in an event.
• Coaches: Coaches are people who help others to unlock their personal potentials. They provide their services both online and offline.
• Consultants: A consultant is an expert who gives sells his professional advice to businesses and individuals.
• Thought Leaders: A thought leader is a niche expert who people look up to when it comes to making decisions related to that niche. They operate through many channels which even include social media.

How To Become An Infopreneur?

Becoming an infopreneur is one way of turning passion into profit. One of the best advantages of being an infopreneur is that there is no need to be at a specific place to work. It, however, requires the entrepreneur to have more than average knowledge on the niche he wishes to start a business in.

Here are the steps involved in becoming an entrepreneur –

ChooseThe Niche

It is best to first decide what you’re good at and will the target market benefit with your knowledge about it. Choosing a niche is probably the most important aspect of being an infopreneur.

If you want to start something in the online world, it becomes easier to research and validate your idea hypothesis as you can make use of tools like Google Trends, Google Adwords, Market Samurai, Buzz Sumo, etc.

In the offline world, however, there can be difficulties to determine if there’s a need for what you have to offer. But you can always provide your services for free initially to validate your need hypothesis and build your audience.

Choose The Channel

Once this hypothesis is validated, decide on what format the product has to be released. Books, e-books, videos, podcasts, tutorials, webinars etc are some ways that infopreneurs can use to sell their products and ideas online.

Build A Personal Brand

While the offering occupies the first position in the priority list, building a personal brand doesn’t fall much behind. It is absolutely necessary to let the customers know about the infopreneur.

Build associations, create more than communication channels, and develop an identity by assigning brand colours, creating channel logos, etc.

A website, being the cornerstone of the business, will cement the infopreneurship firmly on the market by making the product go live and giving the product a brand name and value. Having a textual, audio, or video blog along with the website will help to reach more customers as a blog gives more specific and personalized information about the business and is indeed an integral part to decide whether the business will succeed or fail.

Develop A Revenue Model

Until this step, there is no possible way of making a profit from the website and thus it is important to monetize the website so that revenue can be generated from it. The most popular revenue models are consultation charges, affiliate marketing, Google Adsense, and referral fees.

Many infopreneurs eventually become influencers in their own niche and often charge for providing consultation services.

Affiliate marketing is promoting a third-party product on the website which will earn a commission for every sale made through the link on the website.

Google Adsense uses its advanced technology to decide the content of the webpage and then delivers ads that are contextually relevant to the audience. The infopreneur will be paid for every single click on the ads. Getting income from referring people from the website is another way to earn money from the website.

Infopreneurs’ Success Stories

There are a lot of entrepreneurs who have been successful and their success stories have been an inspiration to thousands. Among them are a handful of infopreneurs who managed to stand out from the crowd with their unique and innovative ideas.

Tara Reed, Founder and CEO of Apps Without Code

“When people ask me for advice, I tell them: Get going. Chances are, you’ll have something wrong, but you won’t know until you test those assumptions with actions”

Tara Reed is one of the most successful infopreneurs. She is the founder and CEO of Apps Without Code, a startup school that tutors non-technical founders how to launch their apps without coding. Her story is not a rag to riches story but it is worth mentioning as she is one of the most successful infopreneurs ever.

She found that while people browse Amazon for E-books or Netflix for movies, there is no place where art lovers can get recommendations. This led to her launching Kollecto, a personalized art recommendation app, which she created without using code. When the Youtube videos about her experiences gained over a hundred thousand views, she became the founder and CEO of Apps Without Code. Apps Without Code is a startup school that provides coaching, webinars and is, in fact, a rigorous boot camp. It helps entrepreneurs, as well as future infopreneurs, turn their ideas into feasible businesses.

Stephanie Chandler, Author and Founder-CEO of Stephanie Chandler Enterprises, LLC

Stephanie Chandler is known as the woman who used her knowledge of creating small businesses into a large content empire. After opening a bookstore in 2003, she discovered her passion for teaching other entrepreneurs on how to run successful businesses. This prompted her to launch BusinessInfoGuide.com, an educational blog and directory of resources for entrepreneurs. She then began to create and sell books like ‘Own Your Niche’ and ‘The Nonfiction Book Marketing Plan’. It was through the profits she generated by selling the books, that she founded Stephanie Chandler Enterprises, LLC which was the parent company to her business ventures including the publishing house, Authority Publishing as well as various other ventures like the ‘Nonfiction Writers Conference, an annual online event, the ‘NonfictionAuthors Association’, a marketing community for authors and BusinessInfoGuide.com.

Her book ‘Own Your Niche’ was recognized with the ‘Best Business Book Award’ at the Global Ebook Awards in 2012. She was named in the Top 100 Small Business Influencers by Small Business Trends in 2012.

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The ultimate motive of every business is to reap benefits in monetary form by performing certain primary business operations like selling the offering, investments, etc. This monetary benefit is referred to as revenue and is essential for the business to keep it going in the long run.

But what is revenue and what are its components? Let’s find out.

What is Revenue?

Revenue is the total earnings generated by a business through its primary operations like the sale of offerings, interests, rents, etc., less any returns or discounts.

For example, a chocolate seller will generate revenue through the sale of chocolates, a hairdresser will earn revenue by selling their services, and a bank will generate its revenue in the form of interest on the loans to borrowers.

Revenue does not include income in the form of interests on investments, capital gains, sale of assets or other miscellaneous earnings which are not from the primary operations of the business.

It can be classified into gross revenue and net revenue.

What is Gross Revenue?

The term revenue without any prefix refers to the gross revenue of the business. Gross revenue is the revenue earned before subtracting the costs and expenses incurred to earn it (directly related selling expense). These costs and expenses include overhead, commissions, cost of production, taxes, wages, freight, etc.

What is Net Revenue?

Net revenue is the revenue earned after subtracting the costs and expenses incurred to earn it (directly related selling expense). These costs and expenses include overhead, commissions, cost of production, taxes, wages, freight, etc.

Net revenue = gross revenue – directly related selling expenses.

What is a Revenue Model?

A revenue model is a conceptual structure that states and explains the revenue earning strategy of the business.

Revenue vs Income

Even though many use revenue and income interchangeably in the business world, there is a big difference between the two. Income refers to earnings from all the sources combined. Revenue is a subset of income which includes earnings only from the primary operations of the business.

While revenue includes earning generated only through the sale of goods and/or services associated with the company’s primary operations, income also includes earning from other operations like

• Interest on investments,
• Dividends,
• Sale of assets, etc.

Revenue vs Sales

Sales are a subset of revenue and can be defined as the economic price paid by the customers for a product or service offered by the business. While sales are a source of revenue, a company may include other revenue sources like interest on loans, rent on the property, etc. as well.

Revenue is the money generated by the business through its primary operations which usually include sales but isn’t limited just to sales. Sales usually are less than or equal to the revenue but in cases where there are returns and discounts involved, the sales can be more than the actual revenue earned.

Revenue vs Profit

Revenue is the top line of the income statement whereas the profit is the bottom line. While revenue includes the gross earning from primary operations (without any deductions), profit is the resultant income after accounting for expenses, expenditures, taxes and additional income and costs in the revenue.

Profit = Revenue + Other income – Total expenses

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Entrepreneurs spend months designing and planning how their business model will work and create value in the market.

This business model is made up of components – the value created; the operating model, which specifies how the business works and operates; and the revenue model, which specifies how the business makes money and how much does it spends in doing so.

While the operational blueprint is important for the business, a blueprint of the revenue model is equally important as it decides the feasibility and long-term projections of the business by stating its money-making process.

But what is revenue model and why is it important?

Let’s find out.

What is a Revenue Model?

A revenue model is a conceptual structure that states and explains the revenue earning strategy of the business. It includes the offerings of value, the revenue generation techniques, the revenue sources, and the target consumer of the product offered.

Revenue can be generated from a myriad of sources, can be in the form of commission, markup, arbitrage, rent, bids, etc. and can include recurring payments or just a one-time payment. A revenue model is that part of the business model that includes every aspect of the revenue generation strategy of the business.

A revenue model is how a business makes money.

A revenue model is important for the company’s long-term business projections as it gives an overview of the company’s current and future potential to earn profits.

Importance Of A Defined Revenue Model

The revenue model is just like a fuel system to a car. While the engine or the operating model is a necessity, a car cannot move for long if its fuel system is damaged.

Hence, a well-defined revenue model is important for any business to –

• Operate and expand
• Remain in the market for long
• Make profits

Components of a revenue model

Revenue model forms an integral part of the business model covering the financial aspect of the business. It has two major components –

• Revenue streams: This includes all the direct and indirect streams that brings in revenue to the business.
• Cost structure: It includes all the fixed and variable expenses that the business incurs to do its operations and generate revenue.

In simple terms, a revenue model elaborates on how the business makes money and how much does it spends to make so, indicating the profits it makes or intends to make.

Types of Revenue Models

With the advent of the internet, the revenue models of many companies now include countless income sources from the digital world. Nevertheless, all of the income sources, whether online or offline, can be confined to 10 types of revenue models on the basis of revenue source

Markup

Markup is the most common and oldest revenue model seen among the businesses. It involves setting up the selling price of the good by adding profits and overhead charges to its cost price. This revenue model is common among retailers, wholesalers, etc. who act as middlemen and buy the products from manufacturers/other parties before selling it to others.

However, manufacturers also use markup model to earn money by selling the good at a price which includes profits over and above the cost involved in manufacturing it.

Arbitrage

Arbitrage revenue model makes use of the price difference in two different markets of the same good. It involves buying security, currency, and/or commodity in one market and simultaneously selling the same in another market at a higher price and making profits from the temporary price difference.

Licensing

Licencing revenue model is common among inventors, creators, and intellectual property owners which grant a license to use their name, products or services at a predetermined or recurring cost. The revenue model is common among many software companies and legally protected intellectual property (patents, trademarks, copyrights) owners which grant a license limited by time, territory, distribution, volume, etc. to anyone who fulfils their requirements and pays for it.

Commission

A commission revenue earning model is a type of transactional revenue model where a party charges commission for every transaction/action it mediates between two parties or any lead it provides to the other party. It is one of the most common revenue earning strategy among the online marketplaces and aggregators where they provide a platform for selling items digitally and charge a commission as a percentage or fixed price on every item sold.

Affiliates, brokers, and auctioneers are also seen working on a commission-based revenue model.

Rent/Lease

Rent/Lease revenue model is common where a physical asset is involved. This revenue earning strategy involves recurring (rent) or one time (lease) payment for temporary use of the asset.

Subscription

A subscription model is a great example of recurring revenue strategy. This is a common strategy among SAAS, entertainment services, and online hosting companies like Netflix, Youtube etc. where they provide the specified service for a pre-determined periodic cost.

Advertising

An advertising revenue model is usually adopted by media houses and information providers which usually earn money by including advertisements in the content provided. This revenue model is widespread in both offline and online businesses and the company makes money by charging the advertiser: per size of the space offered, thousand impressions or per click on the advertisement.

Fee-for-service

Unlike other service-based models, a fee-for-service model charges the customers for the type of and times the service is provided. This is pay-as-you-go or pay-per-usage revenue model where the customer pays only for the services he actually used. This revenue model is common in telecom and cloud-based services industries.

Interest

An interest-based revenue strategy or an investment based revenue strategy is common among banks. Banks usually generate revenue in the form of interest on their offerings (loans).

Donation

Many companies provide their products and services free of cost and rely totally on donations paid to them by their customers. These companies hardly make any profits as donations usually cover only their operating costs. Wikipedia is one such company which relies on donations.

Symmetric Vs Asymmetric Revenue Models

Symmetric Revenue Model

In symmetric revenue models, the user of the business’s offering is also the customer who pays for it. Generally, this model involves a single sided flow of offering and money – offering from the business to the customer and money from the customer to the business.

For example, a retailer charges a markup on every good sold to the customer, or an agent charges brokerage for every deal made on behalf of the client. The flow of this revenue model is simple and direct where only two parties are involved – business and the customer.

Asymmetric Revenue Model

In asymmetric revenue models, the user of the business’s offering is not the customer who pays for it. This company uses a two-fold revenue model where it monetises the data provided by its offering’s users and sells the same to another customer segment.

For example, Facebook users don’t pay for the service they use. But the company earns its revenue from advertisements where the data of the users is provided to the advertisers to target ad in a better way.

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Just like you, every stakeholder in your business expects a greater return from their investment. Everyone is looking to reap certain benefits when they plan to move out of the business or after a certain time period. An exit strategy is how you see your business after you are no more a part of it. It makes clear the future benefits one will reap when he exits the business.

What Is An Exit Strategy?

An exit strategy is a contingency plan where the business owner, the investors and the other stakeholders decide how and when they will liquidate their position in the financial asset (the business).

Every investment is done to reap greater benefits. The exit strategy is a plan to reap those benefits when you retire from the business and decide what will happen to your hard work when you move out; Who will run the business? Who will own the shares?

Is Exit Strategy Important?

Most of the entrepreneurs we’ve met till now are so busy planning and growing their business that they never even imagine themselves exiting their business, and then there are those who build their business only to offer them for acquisition to a bigger company. This has led to one of the biggest questions of the startup process – Is an exit strategy important for your startup?

You should realise that there are many parties involved in a business which includes you, the investors, the employees, and the partners. While an exit strategy may not be a priority for you, the investors who block their money by investing in your business always look for the most benefitting strategy to exit. Hence, if you’re planning to raise money to expand your business you should always include an exit strategy in your pitch deck that’ll appeal the investors but at the same time be beneficial for you and your business.

Is exit strategy important? Yes. But a well-crafted, long-term strategy which benefits every stakeholder of the business.

How To Plan An Exit Strategy?

Planning an exit strategy requires a lot of time, effort and clear objectives on your side. In order to draft a perfect strategy, you need to ask yourself these 2 questions-

When Do You Want To Exit?

Even though most of the entrepreneurs aspire for early and a big exit, it is not often viable unless your business model and product have a huge potential and a great market share. It is often presumed that entrepreneurs who plan for early exits undertake risky and short-term decisions which not only backfire on the business but also is a huge turn-off for the investors. Hence, it is advised to look for a long-term (>5 years) exit plan with the right research and better decisions and wise investments which will benefit the business, you, and the investors.

How Do You Want To Exit?

This differs for different businesses. Your exit strategy hugely depends on your business type, size, and people involved. While the easiest way to exit a business is by selling the business to a bigger company, exiting by offering an IPO is the most profitable (but difficult) strategy. Many businesses which run on patented and one of a kind model or have invented or created some out of the box technique may exit by licensing the same to someone who pays them royalty over time.

Many entrepreneurs also plan a two-tiered exit plan where they offer to buy back the investors shares at a premium after a certain period of time and then exit themselves in a different way.

Types of Exit Strategies

There is the perception that if it’s always available, it’s less attractive.

An exit strategy should be planned in such a way that everyone exits at the right time and with most profit. It should be planned after conducting thorough research on exit strategies of similar companies and should be supported by the current and projected stats of your business. Exit strategies can be categorized into 5 types.

Asset-Based (Merger & Acquisition)

Your company is your biggest asset. This exit strategy focus on growing this asset to a level where it is most favourable to be acquired by a bigger company. The strategy is also called merger and acquisition as the bigger companies often acquire your company to merge your offerings with their own offerings and expand by offering a better product, breaking into a new market, or getting a competitive edge over others. Most of the times, it’s the competitor which acquire the company to get a better hold of the market.

The asset-based exit strategy is the most common exit strategies among startups. The strategy is preferred if there are many prospective buyers of the business as it creates an atmosphere of a bidding war and the company could be sold for a lot more than its worth.

Dividend-Based

This strategy is preferred when there is less competition and the company is expected to earn enough profit which can be distributed as dividend among the shareholders. Dividend based exit strategy requires an in-depth analysis of current and future expenses and revenues of the business and also requires the investors and entrepreneurs to be on the same page to avoid conflict in the future.

Royalty-based

This is the best exit strategy for the inventors and the creators. This strategy involves licensing your patented or unique technique or technology to other businesses who pay you the royalty for using it over time.

Stock Buyback

This strategy involves buying back investors shares at a premium after a certain period of time. This exit strategy is directed towards getting more investors on board. However, you have to be certain about your startup’s success and future profits before pitching this idea to the investors. One of the major reasons investors say no to a startup is because entrepreneurs offer them an unresearched and unviable exit strategy such as stock buyback.

IPO

An IPO is the most complex exit strategy and is not advisable for small businesses as it involves convincing both the investor and the investment bank about the potential of the company. Another reason why an IPO is considered the hardest aspect of startup funding process is that it involves a lot of rules and regulations to be followed by the stakeholders.

Even though this is the most profitable plan, most of the investors are not convinced by IPO as an exit strategy unless you present to them a proven and experienced team and a detailed plan on how you’re planning to offer an IPO.

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Entrepreneurs spend most of their time designing and drafting a well-researched and thorough business plan which isn’t necessary at the ideation stage or the introduction stage of their product. One of the major drawbacks of developing a business plan is that it is hardly read (twice) by anyone which leaves the scope of it being edited to zero. Steve Blank refers to a business plan as:

“a document investors make you write, that they don’t read”

The lean canvas is a new and efficient approach to developing a single-page business plan that helps you to deconstruct your business idea into key assumptions to analyse it better.

What Is A Lean Canvas?

Lean canvas, designed by Ash Maurya, is a single-page business plan template that helps you to break down your idea into its basic assumptions to make it more readable and easily editable.

It has been adapted from Alex Osterwalder’s Business Model Canvas and replaces complex business plans with a concise and portable single-page document.

The business model canvas applies the methods and techniques used by Skype and Apple to attain product success in the market whereas the lean canvas is more target-specific and integrates both small and large businesses effectively. The lean canvas is designed specifically for startups; it pivots on addressing wider customer problems and solutions and through a unique value proposition, it delivers them to customer segments.

Difference Between Business Model Canvas And Lean Canvas

The business model canvas was created to solve the issue of business plans being uninterruptedly outdated as soon as they are in the initial stages of development. Hence, it can be said that it was developed for the companies which had a physical presence in the market to ease the planning and successful execution of the next phases. However, when startups which didn’t have a legit physical presence used the business model canvas, they weren’t able to fill all the boxes and the canvas remained partially complete.

The lean canvas is acclimatised for startups at the beginning of their existence, unlike the business model canvas which is applicable to existing businesses as well. The canvas uses the same 9 blocks technique except the blocks have been renamed to suit perfectly the needs of a lean startup. It provides the founders with an opportunity to record the business model of their startup which will then be updated constantly as time goes on. The lean canvas is always entrepreneurs-focused and is equally useful for every person involved in introducing a new product or idea to the market.

Unlike the business model canvas, the lean canvas has a problem-solution fit approach to eliminate what’s not needed in the business plan.

This approach of lean canvas became useful for new startups. Since startups often have no products to test the demand in the market, it doesn’t pay much attention to customer segments. This is often interpreted as to its drawback.

Ash Maurya’s Lean Canvas Template

On comparing this template with the Osterwalder’s Business Model Canvas Template, it is seen that Ash Maurya took out four boxes and replaced them with new boxes in the Lean Canvas.

Key Activities, as well as Key Resources, have been removed because these boxes were more “outside-in” focused. They are called “outside-in” because they help outsiders to understand what the startup did.
Ash Maurya was an advocate of starting every product with a direct customer relationship. He felt it seemed better captured by the existing Channels box and thus replaced the Customer Relationships box in Lean Canvas.

Quite a few products were successful by having the right partners in the company. However, most products do not fall into this category. Over time, partners can become censorious in rearranging the data to increase the efficiency of the business model of the company. Then it was found that the risk here isn’t the lack of partners but can rather be traced back to inefficiencies in Cost Structure and Distribution Channels and thus Key Partners was removed from Lean Canvas.

Structure of Lean Canvas

Each component of the Lean Canvas has been briefly explained below in the order they are charted.

Problem

The problem box in Lean Canvas was created to list one to three high-priority problems that need solving. The wrong products are built when several businesses fail to apply good effort, time and fiscal resources. It is thus crucial in understanding the problem first.

Customer Segments

It has been observed that if the target is to attract more than one range of customers, for example, engineers and accountants, it is better to create a canvas for each one. The Problem box and CS can be seen as linked with each other intrinsically, i.e. You can’t think of any problems without a Customer Segment, and vice versa.

Unique Value Proposition

Unique Value Proposition is situated in the middle of the Lean Canvas. A promise of value to be delivered to the customers is called a value proposition. This should be the main reason a prospective buyer has to buy from you. Thinking and understanding why your product is dissimilar and why should your Customer Segments want to buy or invest in your company and your product is the best way to understand unique value proposition.

Solution

A cordial solution has to be found once the problem has been recognised. This is the reason why the Minimum Viable Product concept within a Solution box was introduced in the Lean Canvas. The jackpot has been finding the solution to the problem. What is needed to be done is ‘Get Out The Building’ — a phrase created by the godfather of Lean Startup, Steve Blanks. What Blanks meant is that the solution cannot be found in the office building but out there in the streets. The best way to understand the phrase is by interviewing your CS, asking them questions and taking those learning into account.

Key Metrics

It is better for a Startup to pivot on one metric and develop on it.  The metrics should include the range of services or products you like to provide. Since the wrong one could be disastrous to the startup, it is therefore critical that the right metric is identified. Irrespective of industry or size, every business will have some key metrics that are used to monitor performance.

Channels

Channels are the best way for you to reach out to your Customer Segment. It is essential to focus on learning about the channels than not to think about scale in the initial stages. Channels, which are free as well as paid, can be used to reach your customer directly. Some examples of Channels are social, trade shows, email, CPC ads, radio & TV, blogs, webinars, articles etc.

Cost Structure

The entire variable cost, as well as the fixed costs, is to be listed here. Questions regarding Cost Structure are to be thought out here. How much will it cost to build a page? What is the amount required to run your company in a month? What will be the cost to interview your customer segment? How much do market research papers cost? etc. A rough break-even point can then be calculated from these costs and potential revenue streams.

Revenue Streams

The model type decides how you rate your business. It is common for startups to lower their cost or even offer it for free in the beginning to gain attraction. The key is it actually delays or even avoids getting checked for validity. It has been seen that getting people to sign up for something for free is a lot different than asking them to pay as they are more interested in free products.

Unfair Advantage

Ash Maurya said, “You may initially have to leave this box blank but the reason it’s here is to have you really think about how you can both make yourself different and make your difference matter”. A startup should always have the capability to recognise whether or not it has an unfair advantage over others. Unfair advantage can come in different forms like getting expert endorsements, a dream team, insider information, existing customers etc.

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