The last step of Lean Startup method is to do a Business Validation. Business Validation is needed to ensure that the chosen solution to solve society’s problem really does have a business value, which is possible to generate profit for the company. If the first step, Market Validation, and the second step, Product Validation, have been done, then it is the right time to do business validation.
Business Validation
#GenerasiPenemu, do you know how to do business validation? The right first step is to make a business model for the problem-solution scheme you have. A good business model for building a startup is one that can sustain for a long time (sustainable) and can keep growing the income exponentially while pressing the expenses linearly.
What is business model?
According to Michael Lewis in his book titled The New New Thing: A Silicon Valley Story, a business model could be understood as “a plan to make money” on a business to be built. Yet, the real definition of business model is not that simple. In more complete, a business model is a series of activities related to how the business could make money, for example understanding the customers of your business, where and how your product is being created, and so on.
Business Model Canvas
These days, there is a popular term among start-up industry fans. That term is called Business Model Canvas (BMC). BMC is one of the most popular ways to do business validation because of how many benefits it has for the business itself. According to Small Business, the benefits of making BMC for the business are being superior to competitors, having a clear plan for the business growth, financial sustainability, and attracting investors.
Elements of Business Model Canvas are:
- Customer segments
Who is the customer with the most possibility to generate revenue? For whom did you create this business?
- Value propositions
Your business value is located on your product/service, so what kind of the right product/service for your customers?
- Revenue streams
How the customers will give you feedback for the product/service you make for them? How the business will make revenue?
- Channels
How the customer can know about your business? Where they can buy or get the product/service?
- Customer relationships
What kind of relationships that the customer expects between you as the business owner and them? How to maintain the relationship?
- Key activities
What kind of activities that you will do every day so that your product/service could reach the customers?
- Key resources
What kind of resources do you need for your product/service so you can deliver value to the customers?
- Key partners
What kind of partners do you need for your business? What kind of resources do you expect to get from the partner? And who is the most important partner in your business?
- Cost structure
What costs will be needed for your business to deliver its values to the customers?
After knowing the elements in BMC, you also need to know how to make BMC. Below are the steps.
1. Do competitor research
Before making a BMC for your start-up, you or your team better do research first upon the competitor’s business model. You can start by mapping out the competitor’s business model and apply it to your BMC, therefore you will have a better understanding of customer needs and wants in the industry, and not only in some areas related to your startup.
2. Choose the most important factor for your start-up
In making BMC, you only need to make or write down important and crucial factors for your startup. Make some kinds of BMC that each is adjusted according to your startup timeline, so you or your team can have a clear understanding of what goals need to be achieved in the next few months or years.
3. Connect the boxes
Each box has a relation with the other box. Please remember that every value proposition, needs a customer segment and a revenue stream. Connect them slowly, no rush, then you can think carefully about the relation of all elements in BMC.
4. Focus on the present
What it means by focusing on the present is to not make a BMC which situation has not happened yet. Make a BMC on actual situations and conditions that are really happening right now, so you can see what your startup needs clearly.
5. Review it back
Make sure that every box is connected, and a customer segment needs a value proposition and a revenue stream. To make it easier, just make sure that the boxes on the left side have supported the boxes on the right. Ask your team to discuss to see if there is any blind spot in your startup BMC.
#GenerasiPenemu, there you go for a definition and steps to do business validation. Before making #IdeDariKamu become a reality through the startup you build, make sure that you have done the business validation first.
Get more information and knowledge about the start-up industry by joining Ideanation Annual Competition and win the competition. Not only that, you can have a chance to win millions of rupiahs and billions of rupiahs for funding your startup. Do not miss the registration date, guys!
