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When starting your business venture a business plan is a vital tool to have on hand. It helps in maintaining focus throughout their journey and keeps the company’s short-term and long-term goals in hindsight.

Some choose to believe that the act of writing down a business plan has been dead for years, but many business experts agree that having a strategic plan for your business is the safest way to start. Even well-thought-out ideas can turn out utterly useless without including proper execution and implementation steps.

What Is a Business Plan and What Does It Consist Of?

A business plan is a road map that describes your business goals and details how you will accomplish those goals for it to succeed.

Business planning is essential for startups as it allows individuals to break down its elements into meaningful pieces that are easier for you to understand and comprehend. This would most likely include expense budget, milestones, tasks and responsibilities, and expected outcomes.

A smart entrepreneur will pay close attention to how much money the business is bringing in and its expenditure. This comes in handy when you’re planning to recruit new employees or purchase new equipment. Outlining such needs in a solid financial plan helps you assess how much capital your business needs in order to grow and function efficiently.

Business Plan Types

There are three common types of business plans which are used as per the business objectives of a startup:

The Lean Business Plan

A lean plan deals with the formalities required when displaying a plan for a loan or investment. It focuses on your main business strategy, objectives, tools and equipment, budget estimation, and forecasts. They’re used as tools to promote strategic planning and growth within the business.

The lean business plans include more financial data but skip units like company history and the team of management since the focus is mostly on projected sales, expenditure, and cash flow.

One-page business plan

A simple one-page format is outlining your business objective and goals within a single page. Everything you find important is listed in concise points that are easy to interpret and understand by anyone.

This kind of business plan is great for startups that just wish to summarize their concept in the best possible way. Sticking to a single page allows you to re-visit the general model whenever you need it without having to rummage through different pages every time. Similarly, it’s a lot easier to tweak and refine as you come up with new ideas and schemes.

In the same way, it can also be used to introduce the business to potential stakeholders who have limited time to read through a comprehensive business document. This is preferable during first meetings as it provides them with a general idea of your business model. A detailed plan can be prepared later in the future but a one-page plan is a better approach to get your business concept through.

Formal or External Business Plan

Formal business plan documents are normally intended for outsiders to provide comprehensive information about a business and its aim. They’re mostly used to convince investors to fund an enterprise or to support a loan application. This type of plan should be designed to look professional, and pay extra attention to detail in language and formatting.

The formal business plan will explain where and how the funding would be used and what return is expected from their investment. Finally, a detailed list of your skilled team should be included to showcase that you’ve got a strong team to help your business grow.

Why Is Startup Business Plan Important?

A survey conducted by Palo Alto resulted that people who create business plans are twice as likely to succeed than people who don’t. To solidify the reason why business plans are still relevant, we’ve explained the importance of writing a business plan for startups below:

Plotting a Course

Business plans allow individuals the opportunity to think long-term. It outlines the directions to follow, the goals and aims of your business, the expected outcome and other futuristic objectives to help your business grow. Its purpose is to keep entrepreneurs focused through every phase in their business venture and not disrupt the flow.

It also helps in briefing recruits, management teams, and employees as you can share your business objectives and motivate them to work towards those goals.

Securing Funding

It’s no secret that businesses can’t function without any operating capital to kick-start their production cycle. Entrepreneurs are often required to take loans from financial institutions to purchase property, get the equipment or hire manpower. But for this to work out the way you want, you need to present an up-to-date business plan to potential financiers. An accurately plotted business plan will highlight all the capital requirements and serve as written proof for the deed. The better the business plan, the higher the chances of securing reliable suppliers.

Identifying Possible Weaknesses

If this is your first startup rodeo then there is a high probability of you encountering several pitfalls in your business venture, which is completely normal. Highs and lows are a part of life and without them; we wouldn’t feel the need for improvement.

A business plan allows you to cut down the chance of consequences so you can focus on other aspects of business operation. It eliminates the spot for unnecessary errors that are time-wasting and highlights areas that can be improved with modern tools and technology. Also, it allows you to recognize which regions are better handled by automated technology and which can be appointed to manpower.

Execution Plan

Describing how your business will function and perform in the market is important when dealing with sponsors and investors. A business plan will explain your products and services, your targeted customers, the required funds and what’s necessary for your startup to thrive. It guides you through the initial stages and rotates motivation and focus within the business.

If you’re unable to remember important details, having a business plan on hand will assist you in employing staff and distributing the workload to operate smoothly. For instance, if your business specializes in web design and development services your target audience is individuals looking to launch or revamp websites for their blog or company. When you fail to present any aspect of your business, it can lead to confusion and cost you a financer before you’ve even started running.

The Best Possible Chance to Succeed

Taking time out to thoroughly analyze the elements included in writing the best business plan for your startup is guaranteed to bring you success. It allows you to work through important business details like financing and market planning, so you’re not going in blind.

You will be entering the field knowing your target audience and implementing the best strategies to pique their interest. Having a business plan helps you to present your ideas and concepts to investors, sponsors and potential clients to convince them about your commitment to the enterprise and its success.

Using your business plan as a constant management tool is the best way to obtain benefit from it. For this, your plan must be regularly revised and polished to include updates on current conditions and any new data that you’ve gathered while running your business. You’re constantly learning new things while managing a business like a customer’s response to your services, their likes and dislikes, effective marketing techniques, and affairs that require immediate attention. This keeps you on your toes and keeps you determined to succeed.

It is important to understand that a business plan intended for internal management and strategic planning within the business walls differs in length, detail, and presentation. On the other end of the spectrum, a business plan document meant for outsiders like venture capitalists, will focus on high growth aspects of the business and have a much more sophisticated arrangement.

In Summary

Ultimately, constructing a startup business plan involves a lot of thought and research. You must focus on its core principles and identify what’s best for effective management and functioning. Providing adequate information about your startup is what attracts angel investors and venture capitalists, you just need to apply the right tone and format in your business plan. While it doesn’t guarantee success, it can help in reducing the likeliness of failures you may encounter in the future and raise capital.

Go On, Tell Us What You Think!

Did we miss something? Come on! Tell us what you think about our article on startup business plan in the comments section.

You had an idea for a startup which you really believed would disrupt the market. So, you gathered a team, succeeded in getting investors on board, and launched a full-fledged company just like any other entrepreneur would have.

The start proved out to be slow but you expected the sales to rise with time.

…which never did.

Your product was truly innovative and had all the features which would have made the customers’ life easier. But it never really took off.

Why, you ask?

Because your product was never needed in the market and you never validated that assumption.

7 out of 10 new products meet the same fate.

No, the teams behind these products aren’t incapable, the products aren’t bad either. It’s just that the customers don’t need these products either because they don’t gain much by using them or these products don’t really relieve their pains in doing the jobs.

Now, this failure would have been easily aborted if the makers went out to the market, surveyed, and used the answers to fill their value proposition canvas.

What is Value Proposition Canvas?

Value proposition canvas is a tool which helps to align the value proposition of the offering with what the customer values and needs, in order to make it a better fit for the market.

Originally developed by Dr Alexander Osterwalder, this tool acts as a framework to ensure that the offering is actually desired by the market and is capable of satisfying the customers’ needs. This reduces the chances of the product failing in the market to a large extent.

The value proposition canvas can be used both for refining an existing offering or launching an entirely new product in the market. Whatever the case be, it is an essential tool to visualize, design, and test how you create value for customers.

Value Proposition Canvas Elements

The value proposition canvas is an extension of the business model canvas with a focus on customer profile and value map. It requires you to observe what the customer actually wants and then design a value proposition which will sell.

It includes two elements – customer profile to observe the target market, and value map to design the value proposition of the offering.

Customer Profile

The customer profile section includes important details about the needs, wants, pains, and gains of the target market. It is further divided into three parts –

• Customer Jobs: Jobs describes the important issues your customers are trying to solve in their lives. These could be usual tasks they are trying to complete, problems they are trying to solve, or needs they are trying to satisfy. These jobs are further classified as functional (practical jobs like getting from A to B), social (jobs that are driven by social duties like working with others), and emotional (that are related to feelings) jobs. An example, for instance, could be – a father drives a child to school daily before heading towards his office.
• Pains: Pains are internal and external factors which pose difficulties in the path of customers getting the job done. Pains include barriers as well as negative outcomes which the customers hope to avoid like risks, obstacles or dissatisfaction from the outcome. An important factor that needs to be considered is whether the specified pain is severe or light. Pains in the above-mentioned example could be a traffic jam, an early meeting, undesired costs, or even the extra two miles the dad has to travel.
• Gains: This section includes the benefits and gains in the form of positive outcomes and satisfaction that the customers require, expect, desire, or will be surprised by, and which will increase the likelihood of adopting a value proposition. An important aspect to be kept in mind is that some gains have more value and are more preferred by the customers over others. Gains for the dad in the above example could include building a good relationship with the daughter, safety, and affection.

Value Map

• Product and services: It includes the list of products and services you offer to the customers to help them get their functional, social, or emotional job done. It forms the base to addressing their pains and gains.
• Pain relievers: Pain relievers answer the question of how your products and services will alleviate the customers pains before, during, and/or after the job is done. Pain relievers are specific to the pains mentioned in the customer profiles and usually, different pain relievers are assigned to address different pains. A pain reliever for the above-mentioned example could be a branded cab provider which takes the children to school and provides live footage of what’s happening within the cab to the parents. It could also have a video chat option to let the children talk to their parents during the ride.
• Gain creators: These explicitly specify how your product or services create customer gains. They show which of the mentioned customer gains does your value proposition addresses. The children school cab addresses both the safety and affection aspects mentioned in the gains segment.

How To Fill In A Value Proposition Canvas

While understanding the value proposition canvas is easy, actually working on it requires much effort. If you don’t count yourself as your own customer, the process becomes even harder. You might need to step out of your comfort zone into the actual market and ask many questions from as many customers belonging to your target market as you can.

Once you’re ready with your answers, follow this process –

Download The Value Proposition Canvas Template

You can either download this value proposition canvas template (right-click on the image and click on ‘save image as’ or download the PDF by clicking here) or draw it yourself on a big sheet of paper.

Once done, be ready with markers and sticky notes and include all the team members who you think should be part of this process.

Fill The Customer Canvas First

You should never fill both sides of the canvas simultaneously.

Divide the canvas into two halves and put aside the value map for the time being. This helps to focus on the actual problems you need to solve.

Now, there could be a chance that you might have different customer segments that you serve. A rule of thumb here would be to use your research and build a customer persona of your perfect customer who has the characteristics of most of your segments.

Start with the customer jobs and mention all the functional, emotional, and social jobs your customers do on a daily basis. Also include how they do that job, how they feel, and what social qualities come into play. And don’t forget to rate them according to their importance.

Ask a lot of whys, whats, and hows. They’ll lead you to uncover all the pains and gains behind the job.

Then Comes The Offering

Once the right side of the canvas is completed, it’s time to move to the left side.

The customer profile has already provided you with many problems to solve, now all you need to do is to rate the problems according to the severity and find exact solutions for all or most of them.

Start with defining your product offered and go on to answer all the whats, whys, and hows, here.

Focus On The Problem-Solution Fit

A problem-solution fit is achieved when the value proposition map matches perfectly with the characteristics of the customer segment profile. Your value proposition canvas workshop is considered finished only when you reach the problem-solution fit. If you fail to reach this stage, maybe you need to do some work on your product.

Aim For The Product-Market Fit

Once you reach the problem-solution fit, you can release an MVP or beta version of your product to let the market validate it.

When the market validates that the characteristics of the customer segment profile are perfectly addressed by the value proposition map, the offering is said to have achieved a product-market fit.

Value Proposition Canvas Examples

Here are two examples of how you can go forward filling your value proposition canvas.

Discount Dolly

Dolly is a middle-aged work-from-home mother. She usually shops online and has an eye for quality. However, she only shops whenever she sees an attractive offer on the brands she is loyal for. She often buys a lot whenever she shops. However, she has to wait a lot and sometimes, she doesn’t have much money to buy all the stuff she wants during a sale.

Now, people like Dolly form a perfect customer segment for a company connecting loyal customers with the brands. This company makes these customers fill out surveys and give them exclusive access to deals and sales. It can also provide certain benefits like easy EMIs considering the needs of these loyal customers.

Unhealthy Harvey

Harvey is in his twenties and has recently got his job. He doesn’t earn much and can’t spend on a gym or other healthy habits. Since he has recently started living on his own, he doesn’t know how to cook and usually eats fast food as it’s cheap and doesn’t take a lot of time to get served.

Now, a low-cost daily meal subscription service would do wonders for this segment. They can build their value proposition around these pains and gains and succeed in achieving a product-market fit in no time.

Bottom-Line?

Before you start converting your conceptional business model to actual business, make sure you fill your value proposition canvas just to be sure you have a problem-solution fit. This will make you sure that the product you’re going to launch is actually required in the market. Besides this, we suggest you release an MVP or beta version first just to get more validation from the market.

Go On, Tell Us What You Think!

Did we miss something? Come on! Tell us what you think about our article on value proposition canvas in the comments section.