Business Plan

What is the Lean Startup Model?

Have you heard of the Lean Start-Up model ?

There has been a lot of talk lately in the entrepreneurial world about the usefulness of business plans.  In 2011 Eric Ries published a book titled, The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. Since then, there has been a lot of talk about this new, streamlined approach to new business planning.

Do I Really Need a Business Plan?

The lean startup model is still relatively new , so the question of whether or not you need a full business plan will depend on your needs. Consider these questions:

  • Are you looking for investors?
  • Will you be applying for traditional bank financing or a loan through a micro-finance fund?  If so, then you will most likely need to complete a business plan.
  • Are you just starting and working to develop your product, market and customer base?
  • Are you still early in your exploration of what your business will look like and how you will define success?

If so, then the lean startup approach might be for you.  A business plan can help you think about a lot of questions you might not otherwise consider and it can help you plan for the future, but in order for it to be useful, the business plan must be based on accurate assumptions.  The lean startup model and business plan model are not mutually exclusive, but the lean startup model might be the best place for you to begin.

As the Harvard Business Review notes, the lean startup model, “favors experimentation over elaborate planning, customer feedback over intuition, and iterative design over traditional “big design up front” development.”   To learn more about what the Harvard Business Review has to say, click here.

The process starts with a hypothesis regarding your business.  That information is consolidated into a business model canvass, where all the important information is visible on one page.  See below:

hbr-canvas

Next, you go out and talk to potential customers (what a novel idea!).  You gather real-life data on demand, pricing, distribution, product features and any other information that can inform how you will create your product (whether it is a good or service) and how that product will be sold.  Finally, through an iterative process that includes additional customer feedback, you create a minimally viable prototype to help you further refine and sell your product.

To get started, click here  to download a printable Lean Startup Model sheet.

You can read more about the lean startup model at http://theleanstartup.com/principles