From the article:
"The most significant goal of a startup is finding a scalable and repeatable business model and the process for doing so follows the same validated learning loop.
You start by documenting a set of business model hypotheses, then systematically validate those assumptions against reality and make course-corrections, or pivots, along the way.
It is really important that you write these hypotheses down.
As Brant Cooper and Patrick Vlaskovits point out in their book: “The Entrepreneur’s Guide to Customer Development”, storing them just in your mind is a “subconscious rationalization” trap.
I’ve experimented with a number of different ways now for documenting my hypotheses and this is how I go about doing it:
1) Start with worksheets
All these worksheets more or less tackle the same set of questions with slight variations in approach. However, you choose to answer these questions, the point of this exercise is to free form your answers.
Then it’s time to get it down tighter.
2) Create a Business Model versus Business Plan
Writing a business plan, at this stage (or ever?), is a form of waste – You can capture the same level of information in a 1 page business mode and have it be more portable and accessible.
But more importantly, it’s a lot harder to distill the essence of your business down to a single page which is great practice for articulating your hypotheses – whether you’re pitching a customer or investor, you only get a tiny slice of time to make your case."
...
Business Plan: A document investors make you write that they don’t read.
Business Model: A single diagram that describes your business.
Key elements around which to build a "sound" business model:
1. Problem: A brief description of the top 3 problems you’re addressing
2. Customer Segments: Who are the customers/users of this system? Can they be further segmented? For example, amateur photographers vs. pro photographers.
3. Unique Value Proposition: What is the product’s tagline or primary reason you are different and worth buying?
4. Solution: What is the minimum feature set (MVP) that demonstrates the UVP up above?
5. Key Activity: Describe the key action users take that maps to revenue or retention? For example, if you are a blogging platform, posting a blog entry would be a key activity.
6. Channels: List the FREE and PAID channels you can use to reach your customer.
7. Cost Structure: List out all your fixed and variable costs.
8. Revenue Streams: Identify your revenue model – subscription, ads, freemium, etc. and outline your back-of-the-envelope assumptions for life time value, gross margin, break-even point, etc.
9, Unfair Advantage: Most founders list things as competitive advantages that really aren’t. Anything that is worth copying will be copied. So what is a competitive advantage: Unfair Advantage: Something that cannot be copied or bought.
- Jason Cohen, A smart bear
Recommended. 8/10
Read the full article by Ash Maurya here: http://www.ashmaurya.com/2010/08/businessmodelcanvas/