Now, just before we dive into it, there is a disclaimer: this exercise requires utmost self-honesty – it only works if you’re serious about your skills and expenses and your expectations in the market. Anyone can write in “I’ll make a million dollars a day in the first month!” and be proud of their business plan, but we’re here to be real and honest, and pragmatic. In order to play up our strengths and cover our weaknesses, we need to first know what those even are.
The idea is to mitigate risk in our investments, and the best way to plan for risk is if we give it the gravity it deserves.
With all that said, this is a fun exercise and we’re building something (hopefully) cool and useful – this is your baby and I want you to be proud of it.
Problems and Solutions
Starting in the top left corner, just working through it takes us roughly through the previous four lessons.
What’s the problem these people are having? How are we solving it?
It says ‘top three’ because usually there are compounding issues with existing products and better niches to get into our markets with multiple existing issues: current products are both ugly AND costly, etc.
Key metrics are what we talked about on day two: how do we know this data? How are we testing it, finding it out, determining where we’re drawing conclusions from. It’s worth repeating, the market doesn’t care about your opinions. It’s a data-driven monster, go test your hunches and see if they’re right before investing yourself dry.
Unique Value Proposition
Just like in the last section we’re talking about how you’re solving it in a unique way. How are you cornering your market such that customers can only find/buy what they need from you?
As with all of these boxes, sometimes the answer is simple and easy: maybe it’s merely cheaper or better or taking X + Y and making something new out of it – that’s fine – the act of writing these points down will help align your brand with your goals.
The sum of this sheet is sort of like a manifesto or business slogan, it’s displaying what you’re about by how you define yourself; what you’re doing, why, what the goals are, how you’re going to achieve them.
The boxes are small for a reason. Work on conciseness and focus.
New to this course is the idea of unfair advantage, and it’s fairly self-explanatory: what’s the thing you’ve got that can’t be copied, stolen or bought?
Sort of similar to the unique offering, but more on the business side than the product side. The fact is, if you achieve any sort of success with what you’re doing, someone will try and take that market from you – how are you going to keep it? What’s the uniquely powerful aspect of you / your business that’s valuable and hard to duplicate or fight against?
Channels and Segments
Also on the business side, this is defining both the market itself (demographics, target customer profile, etc.) and also how you’re going to do that (direct retail, online marketing, eCommerce, B2B, etc.)
Little pro tip here: I find it’s really useful to try and work backward. If my target consumer is a business, say, where are those businesses looking to a) hear about products and b) the space where they’d be putting down money to buy the product? Or maybe my customer is a teenager – are they on Amazon? Are they shopping in physical retail anymore? How do they see ads / do they even see ads? Which mediums are we targeting to get maximum effectiveness?
Those sorts of thoughts might steer how you sell and market your product.
I am an eCommerce site – how do I get people to buy my sunglasses?
I sell sunglasses – where’s the best place to sell sunglasses?
And naturally, different markets and products will have different answers. Looking into existing data will help determine these things systematically.
With that said, sometimes there’s a fortune to be found in taking an existing product and selling it in a new space. Soylent is just Ensure sold to tech bros in the valley rather than old ladies in drug stores. Same idea (food replacement shakes), new market / distribution model (demographic, online / non-retail).
Cost and Revenue
These two are also linked: one is the product and one is the company. They’re both “in” and “out” money, despite each name, so ‘revenue’ includes all money coming in and also expenses going out.
Cost is everything related to individual sales: product Cost of Goods Sold (COGS), manufacturing, packaging, logistics, pricing, discounts/sales, that sort of thing.
Revenue is everything related to the business: overhead, upkeep, wages, marketing expenses, development costs, income, debts, that sort of thing. It should be obvious but you’d be shocked how many times I go through this and have to say: in order to be profitable you need to take in more money than you spend.
Even the business models that bleed cash in an effort to evaluate high and exit are leaving with net positive cash flow, albeit late.
If you’ve done everything right, you should be fully confident in your business at this point. Use the canvas as a navigational tool, where you can alter the parameters of your business. It's a way to adapt and evolve as market conditions change.
If at any point in this you realize why it might not work, that’s okay, it just means you have some more problem solving to do before you can execute (or at least invest too heavily).
If you have filled in every box and things seem at least reasonably close to honest, congrats! Your business is now more water-tight than most people’s out there. Of course, there’s always uncertainty – everything here is somewhat of a gamble, but our main job is reducing risk and making informed, pragmatic decisions towards defined goals.