SESSION II:How to build a Business Plan

Eitan Katz

eitank@gmail.com

“Startups operate under conditions of extreme uncertainty.”Eric Ries

“A startup is a temporary organization used to search for a repeatable and scalable business model.”Steve Blank

“Startups operate under conditions of extreme uncertainty.”Eric Ries

Increase odds of success through rapid experimentation

“Startups operate under conditions of extreme uncertainty.”Eric Ries

Identify risksDefine experimentsExecute and measureAnalyzeRepeat

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The Lean Canvas focuses on Risk

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Risk

Problem

Solution

Unfair advantage

Key metrics

Customer segments

Channels

Value Proposition

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Let’s get to work ☺

Customer segments

1. Who are the customers? List all potential segments

2. Can they be further segmented? Try to be as focused as possible

3. Who are the users?4. Who would be the early adopters within the

customer segments?

The problem

1. What are the 3 main problems your customers have?

2. Are they aware of the problem?3. Do they want the problem to be solved?

Back your assumptions with evidence: talk to customers!

“A problem well stated is a problem half-solved.”

– Charles Kettering

Unique value proposition

What’s your promise to your customer?- Distill it to a single statement that depicts the problems

you’re addressing- What would amaze your customer and make him/her

want to hear more?

Unique Value Proposition:

A tool, for video distributors, which will enhance videos in order to facilitate information search by making its content more accessible.

Unique Value Proposition:

Making videos searchable

The solution

What is the minimum feature set (MVP) that demonstrates the UVP up above?- List the top 3 components of your solution

Back your assumptions with evidence: talk to customers!

“Perfection is achieved, not when you havenothing left to add, but nothing left to take away”

– Antoine de Saint-Exupery

Unfair advantage

What are your advantages? (that would cause other players fail)- Good examples: network effect, unique IP, loyal customer base, brand and reputation, disruptive business model

- Bad examples: first-mover, size, price

“A true unfair advantage is something that cannot be easily copied or bought”-- Jason Cohen

Cost structure

List out all your fixed and variable costsMust include:- Customer acquisition cost (CAC)- Average cost of service (CoS)

Revenue streams

Identify your revenue modelExamples: Subscription, freemium, license fee. Outline back-of-the-envelope assumptions:- Lifetime value (LTV)- Recurring revenue (RR), average recurring revenue (ARR)

- Gross margin- Break-even point

Channels

Which free and paid channels you can use to reach your customer?

Key metrics

1. What are the main metrics (and what is the single macro metric or goal) that drives what you do?

2. Which experiments you will run to optimize the metric?

Note: every experiment should formulate a falsifiable hypothesis which requires you to identify a metric you’ll use to measure success or failure

“A startup can only focus on only one metric. So you have to decide what that is and ignore everything else”-- Noah Kagan

Bonus slides

Metrics - 5 Steps to Success

User acquired (a sign up in SaaS)

The user uses your product, indicating a good first visit

The user continues to use the product, indicating she likes it

The user pays you

The user likes your product so much he refers other new users

Example of Conversion Metrics

Define the Metrics for Your Product

Metric What does this metric mean, in relation to your product?

Current state

Acquisition (x signups / month)

Activation

Retention

Revenue

Referral

2. Choose one to optimize through experiments

1. Define the top metrics

Cheat sheet