what is a lean startup business plan

Lean Business Planning

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What’s a Lean Business Plan?

Lean business planning starts with a lean business plan. The lean plan contains four essentials every business needs, and nothing else. It’s a streamlined core plan for running the business, not a document or detailed plan, full of descriptions, to be presented to investors or lenders. It’s to optimize management. Here’s what the lean business plan includes.

The principles apply to every business plan. Fight the fallacy of the formal plan. Start lean. Make it formal only when needed . Tweet

1. Strategy

Who you are, what you do, and for whom you do it. Ideally, the smaller your business, the more focused. Maybe you keep it in your head, always — and lots of us do that — but maybe you write it down. Simple bullet points. Just reminders.

• Planning outside of strategy is a waste of time.
• I like this framework : the problem you solve; your solution; who you are; and the market you try to reach.
• But don’t sweat any strategic framework too much. Strategy is focus. It’s as much what you’re not doing, whom you’re not reaching, as what you are doing and whom you reach.

Strategy without tactics is just puffery. Keep your strategy in mind — your focus, what you are and aren’t doing, for whom — as you develop specific action plans filled with tactics that make strategy matter. This is all about execution.

• Marketing tactics : Target market, differentiators, positioning, messaging, pricing, channels, online presence, engagement, content, sales structure, and all the old-fashioned marketing mix stuff like advertising, public relations, special promotions, and so forth.
• Offering (product or service) tactics : launch dates, feature sets, packaging, product lines and options, apps, menu items, Stock Keeping Units (SKUs), services, website, technology, vendors, delivery options, and so forth.
• Financial (and admin and infrastructure) tactics : Funding and financing, hiring and recruiting, training, policy, and so forth.

And don’t think of all this as a document. At least, not yet. Early on, it’s a matter of form following function; you keep it in bullet points, maybe orderly sections, but none of these plans are independent of all the others.

Do think about strategic alignment. What you do with your tactics should flow from your strategy.

And what this means, specifically, is that you think all these factors through, and set down some plans, in writing but not fancy text, just bullets, so you can get back to them at least once a month to see how you’re doing. It might even be a bit like the classic business plan, covering topics like pricing and distribution — except that you do it for yourself. Keep it just big enough to run the business.

3. Forecasts of Sales, Costs, Expenses, and Cash

You can’t optimize management without managing the money. You need to forecast your basic business numbers because without the forecasts, you can’t track results and catch problems or capitalize on pleasant surprises.

Don’t worry too much about forecasting; just do it. If you can run a business, you can do a basic forecast of sales and costs. It’s not about being accurate; it’s about laying out realistic assumptions. Of course you’ll be wrong, but with good assumptions you can track how you were wrong, in what direction, and make regular corrections.

And you can’t plan a business without considering cash flow. Although for some simple businesses, cash flow is a matter of staying profitable, keeping sales above costs and expenses; for most businesses, it’s much more complicated because you don’t get paid exactly when you make the sale, and you have to buy things ahead of time. Being profitable doesn’t guarantee having money in the bank.

4. Execution: Assumptions, Milestones, Metrics, and Schedule

Tactics without concrete specifics are just wasted effort. None of what you have in tactics means anything without dates, deadlines, and specific task assignments. Here are the essentials:

• Review schedule: This is absolutely essential. This is the real world, in which we’re all very busy. If you don’t schedule your monthly review in advance — and then follow up and do it — it’s not likely to happen. I always did it the third Thursday of the month, and you do it whenever — but make sure that “whenever” is a real date.
• List of assumptions : You should always list assumptions because that’s the first thing you look at when it’s time to revise. You set the plan running, then track results, and when results are different from the plan (and they always are), you look at assumptions first to see whether they have changed. If so, then revise the plan. If they haven’t changed, maybe you still revise the plan, but you look first whether you executed correctly.
• Milestones : What’s supposed to happen, when, and who is responsible? It’s a simple list to do, but it’s the core of execution. Tailor it to fit your needs, so it’s either reminders for yourself, in its simplest form; or commitments from the team, plus budgets, start dates, end dates. This is for real management accountability. This is so you can track progress and deal with standstills.
• Metrics : These are performance metrics, the other side of milestones, also for real management accountability. Of course the most important are sales, costs, and expenses, with the details of who is responsible for which lines or revenue or spending. But most businesses have many other useful performance metrics, like web traffic, conversions, foot traffic, sales per square foot, sales per employee, tweets, followers, minutes per call, presentations, leads, lines of code (ugh), contacts made, likes, retweets. Tailor this for your business.

Run, Review, Revise.

If you’re like me and most businesses, you start with a lean plan and then get going. Track the plan results, do your reviews, and revise often. Your first plan is done. Now execute.

You may have heard of the  lean startup  or  lean manufacturing . It’s a set of ideas that started about 70 years ago, revolving around  PDCA :  plan-do-check-adjust . The idea came up first related to the auto manufacturer Toyota, as lean manufacturing; that goes back 70 years. It was also called “the Toyota way.” It was adopted later by by a collection of experts and authors, most notably Eric Ries and Steve Blank with their work on  The Lean Startup . It’s a process of continuing improvement in steps, or cycles, each one involving plan, action, checking results, and revising the plan to start again.

That term “lean,” and the idea of continuous process, applies perfectly to business planning. It’s a shame that so many people think of a business plan as a document, the formal business plan; but good planning is a streamlined simple plan in a process that could be called PDCA, which I prefer to call PRRR:  plan-run-review-revise .

Unless you have a business plan event

If you’re a business facing a business plan event , then your lean business plan is still most of what you need. Just add an executive summary and, if needed, market information, pitch deck, and whatever else is required.

This is important: form follows function. So of course you want a plan, no matter who you are or how big or how new your company is. However, that doesn’t mean everybody needs to have the full formal business plan with all the supporting information.

For example, you might be running or growing or starting your own one-person business. You feel very comfortable about knowing your customers and your market, and you have a strategy. Why are you writing all this down, formalizing it, making a big project that you don’t really need?  No good reason. Planning is about the decisions it causes,  not about showing off your knowledge.

You do what the business needs demand —  no more, no less.

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Lean Business Plan Template & How-To Guide

Written by Dave Lavinsky

Historically, business owners have devoted months to constructing a detailed plan to establish strategy, executive, and financial numbers for their business. Although a strategic plan is often created, these entrepreneurs often miss a big piece: gathering feedback from potential customers.

Without collecting data and insight from target customers, the detailed business plan becomes a document of assumptions and guesses rather than a proven success blueprint.

Download our Ultimate Business Plan Template here

Lean business planning allows you to more quickly and accurately develop your business plan based on actual customer feedback and interactions.

On this page:

Key benefits of lean startup business planning, can you use a lean plan to raise funding, key elements of a lean business plan.

• Lean Planning Process
• Putting The Lean Plan Into Action

Review Your Results & Revise Your Plan

Lean business plan faqs, other helpful business plan articles & templates.

The lean startup business model is supported by a one-page business plan that does not require extensive financial forecasting or long-term market research and development plans. While the traditional business plan details every aspect of your company’s operations, the lean business plan focuses on key factors that present immediate opportunities for new companies to gain a competitive advantage over their competitors. This approach allows you to maintain company focus on your core mission and avoid adding unnecessary information that can weigh down your final document.

The lean startup movement has encouraged entrepreneurs to shorten their plans down from hundreds of pages to a one-page business plan or less – essentially eliminating the need for small businesses to create traditional plans at all. Rather than spending time creating lengthy reports, owners can simply list their core values, mission statement, market analysis, marketing strategies, and projected financial statements – all on one page.

Some companies even document their entire value proposition on a single sheet of paper which serves as both the foundation for further market research and development to improve its product or service offering. By having this type of information readily available to share with investors or clients, your company will appear more professional and prepared without taking up too much time creating unnecessary documentation.

Developing a lean business plan is a critical step in launching or growing your business. However, it’s important to note that if you’re seeking VC funding , bank funding, or angel investors , a traditional business plan is required. Such a plan includes additional research, strategy, and financial forecasts to give investors and lenders the information they need to determine whether they will receive an adequate ROI (return on investment) if they provide funding to you.

Below are nine key elements of a lean business plan example:

Business overview

Describe what the business does.

Value propositions

Detail the value your business brings to the market and the industry.

Key partnerships

List the key partners, including suppliers, manufacturers, distributors, vendors, or software firms, with whom your business will work.

Key activities

List the key activities your business will perform to gain a competitive advantage, grow market share, and fuel profits.

Key resources

List the resources that your business has at its disposal to create maximum value. This could include human capital (your own experience or that of your core team), intellectual property, patents, funding, etc.

Customer relationships

Describe how your customers will interact with your business. Will you have personal or automated channels of communication available? Chart out the end-to-end customer experience journey and how you intend on building customer relationships.

Customer segments and channels

Specify your target audience, what requirements of theirs you cater to, how you reach out to them, and, most importantly, the steps you are taking to generate a customer experience that will result in long-term loyalty.

Cost structure

Define your key costs and variable costs, and how they represent a competitive advantage if applicable. A lean startup business plan (versus a lean business plan for an existing company), needs to also include key startup costs you anticipate in launching your company.

Revenue streams

Describe how your business generates money. What are your revenue streams or sources, for example, selling advertising space on your app or publication, membership fees, direct sales, etc? List all your revenue sources in this section, starting with the source that delivers the largest revenue.

Download Your Free Lean Business Plan Template

Lean Business Planning Process

To create your lean business plan, follow these 4 steps:

Create the Plan

Your lean business plan will start with you, your business idea, and one sheet of paper. Yes, one sheet is all you will need.

Business Strategy

You will first begin by explaining your business strategy. This is simply a summary of what you are planning to do, who your customers are, and who your competitors are.

Identify the problem you are trying to solve along with your solution and potential alternative solutions. Then, describe your target customers. Focus on defining and describing the audience you expect to serve, who they are, where they live, etc. Lastly, explain who your competitors are. Describe what they’re doing and how they’re doing it.

Easy enough, that is all you need for your plan. With lean business planning, you simply create a business strategy that focuses on the essence and function of your business: what you’re doing and who it’s for.

Course of Action

The next piece of your lean business plan is laying out an outline of your course of action. This section will illustrate how you’re going to make your strategy happen. Here, you will focus on sales, marketing, your team members, and any potential key partners or future relationships in the business world.

Sales Strategy

It is important to first begin creating your course of action by establishing just what your sales strategy is. Will you be selling in a physical store or online? Or both? Consider whether or not your product will be sold in stores owned by other companies, and who these companies would be.

Marketing Strategy

Next up is creating your marketing strategy. Think about how you will effectively and attractively reach your potential customers. Here, consider the following:

• Target market
• Online presence
• Advertising
• Public relations
• Special promotions

Team Members

The success of your course of action will be dependent on the team members who execute it. If you need to build a team, think about who the key people are that you will need to hire. What are their qualifications and characteristics? If you already have an existing business, highlight the key members that help run your company and accomplish strategy and success.

Partners and Business Resources

Begin to think of the other businesses that you might want to work with. Most likely there are other companies that you will have to work with to make your strategy work. Brainstorm all key resources, business partners, distributors, and key suppliers that you will need to have relationships with.

After constructing your Course of Action, it’s time to create your schedule. Since lean business planning is centered around efficiency, designing an organized schedule is key.

For startups:

If you’re starting a new business, you should begin with getting to know your customers. For you to grow a viable business, you must understand your customers’ views, wants, and needs. Your goal here will be to ensure that you’ve developed a strategic, organized strategy. A startup’s schedule will often include sending out surveys, interviewing customers, and researching locations.

For established businesses:

For most businesses that have been around, your schedule should be focused on achieving the business goals you have identified. Your schedule should have specific actions with names, dates, and even times. The schedule you create should hold your business and its employees accountable for their work and progress.

The final part of scheduling is to make time to regularly review your Lean Business Plan. As your business progresses, so will your Lean Business Plan. Setting a regular review time is critical to get your business moving in the right direction and your team members on board.

Forecast and Budget

Even if you have the best business idea in the world, if the numbers aren’t there, it won’t work out. The final section of your Lean Business Plan should depict a business model that forecasts and budgets for the future.

Here, all you have to do is create basic bottom-up sales forecasts and a basic budget for expenses. Do not try to sugarcoat here, these numbers should be as practical as possible. With this, you will be able to identify just what will and won’t work for your business.

By taking on this pragmatic sense, you may begin to feel like your business will not be able to succeed unless you are flooding with customers or getting daily news coverage. You may need to alter your business model here and adjust your pricing and expenses to ensure that you can turn a profit. Also, keep in mind any funding options for large-scale marketing and PR campaigns. Keep a realistic view, but also be sure to acknowledge offers that may be available to help you out.

Putting The Lean Business Plan Into Action

After you have completed your lean business plan, it’s time to put it into action. Your main goal here should be to get a deeper understanding of your customers. Is your product solving their problem? Are they willing to pay for it? Do they want something else?

Reaching out to your customers early on will help you get a grasp on their wants and needs to make the necessary alterations to your Lean Business Plan for ultimate success. It will also provide you with some insight as to what products you may want to produce in the future.

As earlier mentioned, your lean plan should be reviewed regularly to discern just what is working and what isn’t. Compare your results with your lean plan. Are sales growing according to plan? Does the plan need to be changed?

For startups who have little to no metrics to track, review your customer interviews, surveys, or any other information that you have gathered about the industry. Here, you can begin to continually refine your plan and strategy if necessary.

If you are an established business, review your recent results with those from the past. Take note of your key metrics as well as foot traffic in stores, website visits, and any other critical units of measure for your business success.

After analyzing your results, it’s time to revise your plan. Remember that your Lean Business Plan is a process rather than a finalized document, and it is made for continuous improvements. Don’t be afraid to make any necessary changes to aid in your business’s success.

Lean business planning might just be the key to your company’s ultimate success. This simple method of business planning has helped many startups and existing businesses advance and flourish such as Google, Facebook, YouTube, and Amazon. By focusing on reviewing, revising, and business management, lean planning allows you to test out different strategies to find the best one to create a successful business.

How to Finish Your Business Plan in 1 Day!

Don’t you wish there was a faster, easier way to finish your business plan?

With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

What is a lean business plan?

A lean business plan is a compact, single-page document typically for internal use. Lean planning is a short-term business plan strategy for making small changes and measuring the results to improve the efficiency of the business. This compares to the formal business plan which is typically very detailed, includes 10 key components , and can be up to 15-25 pages in length.

What is the purpose of a lean business plan?

The lean business plan is primarily for internal use, so it doesn’t have to be a fancy document. The purpose of this plan is for you to document the changes you’ve made to your business so that you can analyze their effectiveness in improving business operations, marketing, and/or sales over a short period.

How long is a lean business plan?

The lean business plan is typically a one-page document to describe your business strategy including your goals, targeted audience, your business model, and how your sales and marketing strategies work to support your business goals. 

How do you create a lean business plan?

Refer to our article on ‘ Lean Business Plan: How-To Guide & Template ’ for the 4 steps in creating a lean business plan or a lean startup business plan template . You can also download our free lean plan template to help you get started. 

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Lean Startup: Defined, How It Differs From a Traditional Business

What Is Lean Startup?

A lean startup is a method used to found a new company or introduce a new product on behalf of an existing company. The lean startup method advocates developing products that consumers have already demonstrated they desire so that a market will already exist as soon as the product is launched. As opposed to developing a product and then hoping that demand will emerge.

Gaging Consumer Interest

By employing lean startup principles, product developers can gauge consumer interest in the product and determine how the product might need to be refined. This process is called validated learning and it can be utilized to avoid the unnecessary use of resources in product creation and development. Through lean startup, if an idea is likely to fail, it will fail quickly and cheaply instead of slowly and expensively, hence the term “fail-fast.”

The lean startup method was developed by American entrepreneur Eric Ries, founder, and CEO of the Long-Term Stock Exchange (LTSE). He fully explains the method in his bestselling book, The Lean Startup, which has been translated into 30 languages.

Lean startup is an example of consumers dictating the type of products they are offered by their respective markets, rather than those markets dictating what products will be offered to them. 

Lean Startup vs. Traditional Businesses 

The lean startup method also differentiates itself from the traditional business model when it comes to hiring. Lean startups hire workers who can learn, adapt, and work quickly while traditional businesses hire workers based on experience and ability. Lean startups also use different financial reporting metrics; instead of focusing on income statements, balance sheets , and cash flow statements , they focus on customer acquisition cost, lifetime customer value, customer churn rate , and how viral their product could be.

Requirements for Lean Startup

The lean startup method considers experimentation to be more valuable than detailed planning. Five-year business plans built around unknowns are considered a waste of time, and customer reaction is paramount.

Instead of business plans, lean startups use a business model based on hypotheses that are tested rapidly. Data does not need to be completed before proceeding; it just needs to be sufficient. When customers do not react as desired, the startup quickly adjusts to limit its losses and return to developing products consumers want. Failure is the rule, not the exception.

Entrepreneurs following this method test their hypotheses by engaging with potential customers, purchasers, and partners to gauge their reactions about product features, pricing, distribution, and customer acquisition. With the information, entrepreneurs make small adjustments called iterations to products, and large adjustments called pivots correct any major concerns. This testing phase might result in changing the target customer or modifying the product to better serve the current target customer.

The lean startup method first identifies a problem that needs to be solved. It then develops a minimum viable product or the smallest form of the product that allows entrepreneurs to introduce it to potential customers for feedback. This method is faster and less expensive than developing the final product for testing and reduces the risk that startups face by decreasing their typical high failure rate. Lean startup redefines a startup as an organization that is searching for a scalable business model, not one that has an existing business plan that it is determined to execute.

Example of Lean Startup

For example, a healthy meal delivery service that is targeting busy, single 20-somethings in urban areas might learn that it has a better market in 30-something affluent mothers of newborns in the suburbs. The company might then change its delivery schedule and the types of foods it serves to provide optimal nutrition for new mothers. It might also add on options for meals for spouses or partners and other children in the household.

The lean startup method is not to be used exclusively by startups. Companies such as General Electric , Qualcomm, and Intuit have all used the lean startup method; GE used the method to develop a new battery for use by cell phone companies in developing countries where electricity is unreliable.

Key Takeaways

• Lean startup is the process of developing a product or company based on the expressed desires of the market.
• The lean startup uses validated learning, which is a process by which companies assess consumer interest. 
• Lean startup methods focus heavily on customer-related information such as customer churn rate, lifetime customer value, and product popularity. 
• In lean startup practices, experimentation is favored more than adherence to a rigid plan. 
• Lean startup standards will involve the release of a small form or early concept products in order to assess the customer reaction to the product. 

The Lean Startup. " The Book. " Accessed Sept. 14, 2021.

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• Lean Startup Business Plan Guide

How to Create a Lean Canvas

• Startup Basics

Last Updated: January 17, 2024 By Michaela Dale

Business planning isn’t typically the part of entrepreneurship people look forward to. Fortunately for startup entrepreneurs, there is another option: lean startup business plans. These templates are less in-depth than their traditional counterparts while still allowing you to go through the necessary steps to set the groundwork for your business. If an alternative method of business planning appeals to you, you’ve come to the right place to get started with our lean business plan guide .

Recommended: Read our full guide on how to start a startup  and our review of the best business plan software tools .

Writing a Lean Business Plan for a Startup

One benefit of launching a startup is that entrepreneurs can go outside the box to plan their business. Lean business plans are a less intensive option for startup entrepreneurs to establish their business goals and determine how they can make them happen in a fluid, simple format.

What Is a Lean Startup Business Plan?

A lean startup business plan is a short roadmap that outlines the startup’s goals and the steps to reach them. Concise in nature, sometimes only as long as one page, a lean startup plan starts by identifying a problem and solution. As beneficial as it is to have a business plan to secure investors, a lean startup business plan is also a template for entrepreneurs to think out and document their business strategy.

Lean Startup Plan Pros

• Traditional business plans are time-consuming, and lean startup plans offer entrepreneurs a way to document important business information and goals without going through the process of writing a traditional business plan.
• Lean startup plans are concise enough to pitch to an investor or grab a customer’s attention in a matter of seconds.

Lean Startup Plan Cons

• Some investors may want a more in-depth business plan provided prior to funding your startup.
• Lean startup plans offer less foundational business planning than their traditional counterparts.

Lean Plan vs. Traditional Business Plan

A traditional business plan is an in-depth, detailed blueprint of your startup’s first three to five years in business. In contrast, a lean startup plan is more of a diet-business plan, meaning it includes fewer details, less in-depth analysis, and is much shorter than a traditional business plan. While the two business plans are different in length and detail, they typically include the same nine sections at varying lengths.

Lean Canvas vs. Business Model Canvas

Lean Canvas is an adaptation by Ash Maurya of Alexander Osterwalder’s widely-used business model canvas. Both are templates for the strategic management of a business’s important information. Business model canvas is for all new and existing businesses, while Lean Canvas is created specifically for lean startup entrepreneur’s use. In their approach, they differ as well; business model canvases focus on the infrastructure of a business, while Lean Canvases start with a problem and work toward a solution using an actionable template.

Lean Business Plan Sections Explained

A lean business plan includes valuable information about a startup for both the founder and relevant business partners. Unlike traditional business plans which are a more detailed business plan, lean business plans are concise, typically only one page, and include only the most pertinent information such as target market, marketing strategy, and pain point being solved. 

These are the sections you should include in your lean business plan template.

A lean startup plan starts the same way many successful startups do — by identifying a problem. In this case, it’s a good idea to start by identifying one to three problems and listing them in your Lean Canvas. The intention of starting your business plan with a list of problems is to ensure there is a market for your product. Think about it this way, if you create a solution to a problem that doesn’t exist or isn’t widespread, who will buy it?

Your startup’s task is to create a solution to the problem(s) you’ve identified. This section of your Lean Canvas outlines the solution for each problem you posted in the first section. Include a minimum viable product (MVP) that coincides with your proposed solution. Keep your solutions concise and easily digestible.

Key Metrics

Key metrics, the numbers that tell you how your business is performing, vary depending on your startup model and product. For example, some startups may include an ideal subscription percentage, while others may include an ideal amount of downloads in the first week. These goals will be used as a point of reference for you and your investors to assess your startup’s viability and success.

Unique Value Proposition

Describe in a single sentence why your startup is unique and valuable. Ideally, your unique value proposition will demonstrate to customers the promise that your startup solves their problem in an easily marketable way.

Unfair Advantage

What gives your startup a competitive advantage? Describe the edge your startup has that cannot be bought or copied by others — setting you apart from your competition.

Marketing Strategy

List the marketing strategy you’re planning to use to attract customers. This can be inbound or outbound channels to reach customers. Your strategy should be supported by market research and market analysis, as all these factors can impact the success of campaigns.

Customer Segments

Establishing your target market is absolutely essential to effectively marketing your product and keeping your startup afloat. Include your target customers as well as early adopters (otherwise known as the ideal customers) that your startup will initially appeal to. Be sure to include information about the marketing strategy that will be or is used to attract these users. 

Cost Structure

What your startup will be paying continuously without change (fixed costs) as well as costs that can change over time (variable costs) should be listed here. Essentially, any expense your startup will incur doing business should be considered in the cost structure to budget accurately and secure the necessary funding.

Revenue Streams

You know your costs. Now, you need to make a list of the revenue streams you have to cash roll your startup. These are your revenue streams, and they can be anything from business loans to venture capital.

Steps After Creating a Lean Startup Plan

Now that you have created the plan for your startup, it’s time to put it to the test. As much as startup plans can help entrepreneurs prepare for the road ahead, there is always room for improvement as the startup grows and adapts.

The ultimate test of your startup plan is to get to work. In lean startup methodology , entrepreneurs are encouraged to place their product on the market in order to rapidly improve upon their product and business as a whole. Therefore, in order to get an idea of what needs to be adjusted, you’ll need to put your business plan to the test.

Get a clear understanding of customer reception and feedback you receive about your startup’s products and services. You don’t need to take every suggestion; however, this feedback should help inform the adaption of your product to make it more consumer-friendly. Be open to criticism and ask questions. Listening to the response to your initial products can help you develop new strategies to improve.

Implement your findings from reviewing feedback by revising your business plan and rethinking product elements. Don’t be afraid to go back to the drawing board when you need to reimagine a business plan. The benefit of using a lean startup business plan is that there is a great deal of flexibility available to business owners to reassess their vision.

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The Ultimate Guide to Creating a Lean Startup Business Plan

Starting a business can be both thrilling and terrifying. On one hand, you have this brilliant idea and can’t wait to bring it into the world. But there’s also the nagging fear that your amazing concept might fall flat or fail to gain traction.

So how do you make sure your startup succeeds? The answer is charting out a solid business plan.

I know, I know. Just hearing the phrase “business plan” brings back bad memories of dry, long-winded documents from business school. But for startups, there’s a better way to plan out your venture – something called the lean startup business plan.

The lean startup approach focuses on streamlining the business planning process so you can start testing your idea faster, without getting bogged down with lengthy sections and financial projections you can’t possibly predict accurately at such an early stage.

In this beginner’s guide, I’ll walk you through exactly how to create a lean startup business plan template that helps you quickly validate your business idea with real-life customers.

What is a Lean Startup Business Plan?

First things first – let’s define what exactly the lean methodology means when applied to an entrepreneur’s business plan.

Put simply, a lean startup business plan is a streamlined, no-fluff version of a traditional business plan. It’s designed for speed and adaptability rather than comprehensiveness.

The lean startup movement first became popular around 2008. It emphasizes testing a product or service idea quickly, using a minimum viable product (MVP), and getting real user feedback before committing to long development and release cycles.

The key principles of lean startup are:

• Rapid build-test-learn loops
• Scientific testing with real customers from day one
• Iterating based on validated learning

Most new companies that take the lean approach never reach an official launch stage. Instead, they continuously test with and adapt to real customers – refining their MVP and pivoting directions based on evidence of what does or doesn’t get market traction.

So how does that tie in with writing a business plan?

Well, the traditional business plan model doesn’t fit the lean paradigm shift.

Lengthy, complex, intricate business plans take too much time to write. Attempting to project multiple years of expenses, sales, hiring, growth rates etc…..it’s all just guesswork when you haven’t started selling anything yet.

The lean startup business plan tosses unnecessary details out the window and instead focuses only on critical hypotheses and assumptions that must be tested as quickly as possible.

Investors like this approach because it shows you:

• Know what assumptions make or break your business
• Can test them quickly at low cost
• Will adapt based on real data

So if you’re an early stage startup looking for funding or entering an accelerator program like Y Combinator, a lean business plan is likely your best bet to showcase your entrepreneurial abilities.

Now the big question….

What Does a Lean Startup Business Plan Include?

The lean startup template pares down the typical business plan format to just the essential elements early-stage investors care about:

• Problem  – What pain points will your product address? Why are those needs not being met?
• Solution  – How will your product alleviate that pain better than alternatives? Why will customers buy from you over other options?
• Target market  — Who has that specific problem and will buy your solution? ( Note: Be specific!  “Everyone” is never the right answer.)
• Competition  — Who else is tackling that customer problem? How is your solution fundamentally better or different?
• Key features  – What’s the minimum feature set to address target customers’ needs on day one and provide value?
• Marketing & sales  – What tactics will you use to reach early adopters? ( Note: For most startups, digital sales & marketing channels rule supreme. )
• Operations  – Outline your core business processes. Don’t go into granular detail, just highlight how you’ll deliver value to customers.
• Milestones  – What big assumptions will you test? Include timelines + costs to conduct experiments so you can demonstrate a logical thought process.
• Financials  –  Optional  Breakdown high-level estimates only if useful. For the lean startup plan, elaborate projections are unnecessary and speculative. Focus everything on testing key assumptions.

You may have noticed one conspicuously absent item – the Executive Summary. We’re skipping it because unlike traditional business plans sent to various stakeholders, your lean startup plan has just one audience – startup investors.

And remember, the lean methodology is all about using real-life data instead of guesses and best-case scenarios. So even if some assumptions in your original lean business plan don’t pan out, that’s actually great news! It gives you hard evidence to adapt intelligently while developing your MVP.

Now that you know what the lean startup template includes at a high-level, let’s go through each of the core sections in more detail.

First and foremost, you need to spell out exactly what customer problem your startup aims to solve. (And yes, it needs to be an actual must-solve problem, not a nice-to-have).

Start by broadly describing the pain points your target customers face. Get tactical by including stats, data or quotes that showcase why this issue is so urgent for them.

Then explain how the problem ties into a larger trend in your target industry. Paint a big picture view of why common solutions up until now have failed to address this pain sufficiently.

Essentially, convincingly convey that there’s a pressing customer need ready for innovation.

You need to display beyond any doubt that you:

• Deeply understand your target customers’ challenges
• Can explain why those problems exist in the first place
• Will provide a compelling solution tailored to fix them

This sets the stage for why launching a startup to address this issue makes so much sense.

2. Solution

Now that you’ve framed the problem, shift gears into explaining your startup’s solution. Start by providing an overview of your product and how it alleviates target customer pains better than alternatives already on the market.

Then embellish with details on:

Product Benefits

How specifically will your product make customers’ lives easier? Don’t just describe product features or functionality. Speak directly to how you’ll empower them to achieve something that’s currently difficult, inconvenient or even impossible for them to accomplish on their own.

Competitive Advantage

What specifically sets your solution apart from potential competitor offerings and substitutes? Is it higher quality, better convenience, lower cost, less hassle, faster performance – or perhaps an innovative model that’s never been seen before in the market?

Highlight your startup’s special sauce that no one else can easily replicate. Explain barriers to entry that will hinder copycats.

Customer Incentive

Why will target users’ purchase from your brand over chasing other options? It usually comes down to believing you can deliver significantly MORE value than alternatives or solve an urgent pain nothing else currently satisfies. Make your case for why you fit one or both scenarios.

Scalability

Particularly if you are pursuing venture capital investors, explain how your business can rapidly scale up to tap a very large global market with your solution. Outline a blueprint for how you realistically grow from thousands to millions of customers in the coming years.

Remember, don’t drown potential investors in intricate details about every single product feature and technical specification. They care most about how your solution nails the value proposition trifecta:

• Targets an urgent customer problem
• Provides 10x+ better value over existing options
• Can scale to a very large market long term

If you can compellingly check all three boxes, you’ll spark investor interest even with limited hard evidence at such an early phase.

Of course, that doesn’t mean you won’t eventually need to back up your claims. However, the lean startup plan is more about framing hypotheses than definitive proof. We’ll cover how to demonstrate enough evidence to warrant launching experiments soon.

For now, stick to crafting an intriguing startup story that sets you up to start testing fundamental assumptions very soon after funding. There will be plenty of time to figure out minor product details once you validate solving a pressing problem for real paying customers.

3. Target Market

Up until now, I’ve used the term “target customer” quite loosely. But it’s time to get very specific on who those real-world people actually are for your startup.

Venture capital investors want to quantify the population size and traits of target buyer personas in precise detail. So you need to describe exact psychographic and demographic qualities of your beachhead market – the subset of overall customers you tackle first to gain a foothold quickly.

Start by explaining your total addressable market (TAM) – the entire population who could plausibly need and want your solution for the core problem it tackles. Depending on the ubiquity of that issue for consumers and/or businesses, the TAM could be very narrow or encompass hundreds of millions globally.

Then segment down from that full market to identify your specific beachhead target customer population. The ideal beachhead often has these characteristics:

• Suffers from the problem much more painfully than casual groups
• Has already tried existing solutions without sufficient success
• Has disposable income to purchase a premium solution for relief
• Is easy to access and serve operationally in early phases
• Isn’t incredibly price sensitive
• Can provide extensive feedback on the product
• Has influencer qualities to attract wider market segments

Nail down quantifiable population size estimates for this core beachhead subset. Combine publicly accessible data from existing market research reports with reasonable inferences or assumptions from adjacent industries.

But resist the founder’s tendency towards magical thinking – “If we nailed even just 1% of the market…!” Generic hypotheticals don’t sway experienced investors focused on tangible traction signals.

Paint a detailed demographic picture of exactly who fits the mold of a hot prospect customer for you in the beginning.

For B2C startups , call out relevant attributes like:

• Marital/family status
• Home ownership

For B2B startups , highlight qualities like:

• Industry vertical
• Company size
• Title seniority
• Annual revenue
• Tech adoption habits

Then outline statistical commonalities across your core beachhead buyers – what key similarities unite this subgroup vs. the entire population facing the problem?

Finally, convey TAM expansion opportunities once you solidify solutions tailored for that first niche. But defer outlining detailed ways to extend your reach right now since nailing product/market fit with just one segment is the critical prerequisite to win over adjacent groups.

Position your solution as optimized for an underserved niche ripe for disruption based on competitors failing to deliver adequate solutions. Then segue into how your distribution plan concentrated on this “low-hanging fruit” beachhead will purposefully evolve later to expand TAM reach long term.

4. Competition

What the competition section lacks by traditional business plan standards in length, it more than makes up for in strategic rigor.

The core question competitive analysis must answer:

Why are current solutions in the market failing to adequately alleviate your target customers’ pain?

Start by inventorying existing competitor products/services currently used by prospects experiencing this problem. List out the main options your target persona has for solving their struggles today, even if those solutions don’t perfectly fix the issue or fully satisfy them.

Then contrast point-by-point specifics on why your solution beats competitors, especially on the metrics most important to your target niche. Show how you will “disrupt the disruptors” because even pioneering products have limitations needing innovation.

Criteria to call out where you claim competitive advantage:

• Convenience
• Scale potential
• Business model innovation

Back up any bold claims of superiority with limited initial evidence beyond conjecture — data from beta user testing prototype versions, customer quotes from initial beachhead outreach, or precedents from analogs in adjacent markets.

Take care to focus specifically on competitors targeting the same early adopter beachhead market segment though. Details contrasting solutions for other peripherical segments are unnecessary right now.

Round out competitor analysis by itemizing macro trends almost certain to diminish prospects for legacy products over the next 5-10 years. These should make the rationale behind your startup now abundantly clear even to skeptics.

5. Key Features

Thus far you’ve made a case for:

• A pressing customer problem inadequately solved
• Your startup’s superior solution
• Quantified target beachhead market

Now it’s time to shift to specifics on the crucial product and feature details enabling your entire value proposition.

Remember – only include what’s absolutely necessary for launch based on addressing revealed target customer needs!

Err on the side of a minimal feature set early on. Describe additional functionality prospects request once you start serving initial customers.

Outline the critical set of features required to deploy a minimum viable product (MVP) with just enough core attributes to satisfy early adopters on day one.

Organize by:

Must-Have Features

What feature absolute “must-haves” must be ready for early adopters to provide enough value converting from current solutions?

Nice-To-Have Features

What would enhance perceived value but aren’t imperative to activate paying users? Defer these to later product milestones.

Future Features

Briefly mention functionality on the long-term roadmap to showcase platform potential.

Think of must-have features as the “walking version” of your product – unscalable manual processes providing baseline value perfect for testing with friendly early adopters.

Then nice-to-haves represent the “jogging version” – automating more of the workflow via technology – while future functionality serves as the “running version” enhanced for steep vertical scaling.

In conjunction with digital tools, brainstorm creative ways to manually deliver MVP experiences centered around must-haves. This showcases your determination to activate solutions for that first tiny niche even sans a fully built production-grade product.

Emphasize with investors that you respect their money enough to not waste it on premature optimizations. Your plan ensures you build and roadmap additional functionality responsibly IF AND ONLY IF initial feature experimentation proves substantial product/market fit warranting doubling down.

6. Marketing & Sales

Thus far you’ve covered the key value proposition and functionality your startup will offer. Now shift to tactical specifics on how you’ll connect your novel solution with that clearly defined target beachhead.

Start by breaking down your blended omni-channel market blueprint to cut through the noise and achieve conversion lift.

Here is an ideal framework pairing both scalable and targeted elements for seed-stage ventures:

Paid Digital Marketing

• Targeted Facebook/Instagram/TikTok Ads
• Search/Display Retargeting
• Streaming Radio Spots
• Industry Forum Sponsorships
• Highly-Targeted Content Marketing

Grassroots Outreach

• Beachhead Email Outreach
• Beachhead Calls/Texts
• Industry Event Networking
• Local University Campus Reps
• Early Adopter Referral Programs

Earned Media

• Contributed Articles
• Podcast Interviews
• Reviews / Testimonials
• Referral Partnerships
• PR Launches & Press Releases

The glaring omission? Sales team headcount.

Early on, founders must handle sales themselves to economize cash burn. Hiring reps too early risks overextending finances before ensuring product viability.

So spotlight your personal founder sales fit first. Play up hands-on selling experience within the specific market context you’re pursuing with this venture.

Then convey a scaling plan centered on refining and automating conversion funnel elements that empirically guide qualified leads to become delighted long-term customers.

The core funnel methodology goes:

• Broad-based brand awareness marketing → Baits wide audience
• Lead capturing mechanisms → Filters for buyers
• Consultative selling touchpoints → Focuses high-potential targets
• Frictionless conversion → Delivers ROI proof

If your business model doesn’t fit this framework, adapt concepts accordingly while sticking to the seed stage constraints of capital efficiency and lean experimentation.

7. Operations

By this point you’ve described WHAT your startup does and WHO it serves. Now it’s time to explain HOW you’ll deliver on ambitious promises to customers.

Start by simply framing core business processes required to get your product or service from raw inputs all the way through to solving target user pain points.

For physical products, that could involve flows like:

• Design concepts → Engineering specifications → Prototyping → Manufacturing → Quality assurance → Packaging → Distributing → Support

For software platforms:

• Product requisites → Cloud infrastructure → Coding → Version control → Usage analytics → Onboarding → Technical support

For services:

• Prospecting → Onboarding → Account Management → Delivery capacity → Quality control → Supplemental services → Support

You get the idea. Just define macro processes without diving into granular details. Those come through experimentation!

Primarily, concentrate operational details on two crucial pillars:

• Proprietary unfair advantages that supercharge efficiency to delight customers while maintaining profit margins despite tight costs. Common examples include algorithms, datasets, novel business model frameworks, or embedded industry experts.
• Partnerships or platforms enabling you to deliver baseline functionality matching incumbent competitors on day one. Don’t attempt to build everything end-to-end or innovate across every dimension from the start! Leverage existing commoditized solutions while you test differentiated value propositions focused on solving target customer problems 10x better.

Essentially, convey you grasp the key 20% inputs that drive 80% of customer value. If the processes seem complex, find ingenious ways to simplify. Position enhanced intricacies as optional add-ons once baseline product/market fit is proven vs. overbuilding the wrong advanced solution.

8. Milestones

The milestones section represents the culmination of everything you’ve documented thus far. Here, outline the step-by-step process for methodically testing the riskiest assumptions underlying your startup.

In conjunction with the experiment design, detail concrete metrics or signals indicating whether hypotheses prove true or false. Then estimate costs, durations, and resource requirements for rapid experiments.

Frame assumptions through statements structured like:

We believe [this capability] will result in [this customer reaction]

Then design tests around the ability to measure:

• behavioral changes
• sentiment improvements
• usage increases
• revenue lift

Common milestone tests to consider:

• Solution Viability – Manual then automated demonstrations quantifying interest
• Demand Validation – Willingness to prepay as a signal
• Market Sizing Accuracy – Applying proxies from analogous use cases
• Business Model Fit – Contrasting pricing sensitivity across customer segments
• Feature Prioritization – Gauging reactions to mockups or limited functionality
• Operational Scalability – Maximizing utilization before adding overhead

Combine testing both internally-facing operations and externally-visible customer experiences. But concentrate on product/solution related hypotheses first.

Beating competitors takes precedence over backend experimentation. Optimize business operations AFTER establishing winning customer value propositions.

The key is conveying to investors an empirical, metrics-driven approach centered on turning critical assumptions into facts or disproving them faster than incumbents hampered by legacies and red tape.

Cement belief you’ll double down on evidence proving repeatable formulas to acquire and monetize target niche segments. And quickly cut losses spending minimal capital if data suggests limited viability.

9. Financials

We’ve made it clear that traditional multi-year financial projections typical of standard business plans are counterproductive guesses for early stage startups.

However, seed investors still want to see back-of-napkin math you’ve done to quantify potential venture scale. So mock up top level metrics more as directional guidelines than definitive targets.

Take utmost care however NOT to pull imaginary hockey stick numbers from thin air. Founders claiming $100 million valuations on basic eCommerce stores face extreme investor skepticism…and deserve to!

Baseline financial model components should include:

• Estimated Customer Acquisition Costs Per Beachhead Channel
• Willingness-To-Pay Price Range For Target Personas
• Logical Volume Estimates Based On Analog Use Cases
• Assumed Conversion Rates Each Funnel Stage
• Operational Unit Economics At Various Scale Points

Use inherently bottom-up thinking grounded in realities of what combination of inputs would need to scale to hit specific 8-figure outcomes. Top-down abstract number picking lacks validity.

And remember, early-stage startup financial models serve more as instruments of learning than definitive targets. Adapt projections based on empirical evidence once live.

Concentrate everything on validating customer demand first. Defer advanced modeling of operational minutiae or elaborating hockey stick projections.

Getting REAL buyers is all that matters initially.

Bringing It All Together

Despite extending 3k+ words at this point, the lean startup methodology boils down to an elementary formula:

• Start by deeply understanding a pressing customer problem
• Design an innovative solution specifically addressing root causes
• Concentrate on dominating an underserved niche beachhead market segment
• Validate demand empirically through rapid testing
• Scale up deliberately only once achieving initial product/market fit

In that sense, think of the lean business plan format as more of an exercise in startup soul searching than a stuffy document.

It pushes founders to pressure test their value proposition, business model, and operational viability through the lens of target customers rather than theoretical academic assumptions.

You can’t survive let alone thrive in the brutally competitive startup game without getting inside the hearts and minds of actual buyers needing your solutions.

So escape the temptation to overly complicate initial planning with intricate spreadsheets and 40-page reports professional managers expect.

Instead, concentrate efforts on distilling explanations of the crucial assumptions requiring testing above all else before launch.

Then close your lean startup business plan with next step calls-to-action so readers clearly understand how you’ll leverage funding to start rapidly experimenting using the scientific method.

Now…go show the world what your brilliance is made of!

Related Posts

Partha Chakraborty

Partha Chakraborty is a venture capitalist turned entrepreneur with 17 years of experience. He has worked across India, China & Singapore. He is the founder of Tactyqal.com, a startup that guides other startup founders to find success. He loves to brainstorm new business ideas, and talk about growth hacking, and venture capital. In his spare time, he mentors young entrepreneurs to build successful startups.

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Fundamentals of Lean Planning Explained

Noah Parsons

11 min. read

Updated April 15, 2024

Let’s face facts: Writing a traditional business plan is a hassle. 

• A traditional business plan takes too long to write.
• Most people won’t even read it from cover-to-cover.
• It’s often outdated by the time you finish writing it.
• It doesn’t lend itself to frequent and easy updating—and that’s the core of the problem.

Historically, entrepreneurs have taken months to craft detailed plans without even gathering feedback from potential customers. They’ve viewed business planning as a single hurdle to get their business up and running or a thick wad of paper to shove across a banker’s desk in order to get the funding they need.

These business plans end up as just a collection of guesses and assumptions, instead of a proven roadmap for growth. 

But planning is still critical, even if the business plan might be broken. Studies have shown that businesses that set goals and track their progress grow 30 percent faster than those who “just wing it.” Furthermore, even established businesses grow faster when they have a plan . 

So what if I told you there was a better way to do business planning? One that lets you adjust and refine your plan as you gather more information about your business and customers.

A method known as Lean Planning.

• Welcome to the Lean Planning method

Lean Planning is a 4-step process that helps you discover a business model that works and manage your company successfully.

Here’s the Lean Planning process:

• Create a one-page plan
• Test the plan
• Review your results
• Revise your plan

These 4-steps replace the traditionally lengthy business plan with a 20-minute planning process. This ensures that you are taking small steps, reviewing your results, and creating incremental improvements—all while reducing your risk of failure.

It’s also simpler and faster than writing a traditional business plan. And, possibly, the greatest benefit is that this method can benefit both startups and established businesses. 

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If you’re a startup

Lean Planning helps you quickly figure out if your idea is any good and what you need to change to build a viable business.

If you’re an established business

Lean Planning works even if you’re already up and running. It helps you continually refine and tweak your strategy while measuring your progress toward your goals. After all, planning is about making better management decisions, not about producing a thick document that sits in a drawer.

Read on to learn how to make the lean model work by creating your own one-page business plan .

• Step 1: Create a one-page plan

The Lean Planning methodology starts with a one-page plan you can create in 20 minutes .

That’s right—one page. Lean Planning is a simple methodology and your one-page plan should be simple, too. You can download a lean planning template and fill it in as you follow the steps below.

What to include in your one-page plan

• Strategy: What you’re going to do
• Tactics: How you’re going to do it
• Business model: How you’re going to make money
• Schedule: Who is doing what and when

Let’s dive into each section.

Your business strategy

Your business strategy is simply an overview of what you want to do and who your customers and competitors are. Start by identifying the problem you are solving for people and follow up by explaining your solution to this problem.

The problem you’re solving

Businesses exist to solve problems for customers. Their products and services fill a need or satiate a desire. If all you have is a solution that is in search of a problem, you’re going to have a hard time building a successful business. So, start with the other side of the equation and focus on how you can help your customers solve a problem.

Start small with just one or two sentences or a few bullet points to identify the problem you are solving. Do the same thing to describe your solution.

Your ideal customer

Now, quickly describe your target market. Who is your ideal customer? If you know how many potential customers are out there, great. If you’re in the early stages of fleshing out your business idea, don’t worry too much about detailed market research . Instead, focus on defining your ideal customer —who are they, and what are their key attributes?

Your competition

Finally, create a shortlist of your competition . How do your potential customers solve their problems today?

That’s it. A business strategy doesn’t have to be complicated with Lean Planning. It’s just a few bullets points that describe the essence of your business: what you’re doing and who you’re doing it for.

The next section of your one-page plan is a short outline of your business tactics. This is just an outline of how you will make your strategy happen. You’ll be thinking about sales, marketing, the team you might need , and any partners or outside resources you’ll need to leverage.

Your sales strategy

Start by thinking through your sales strategy. Are you selling online or building a physical store? Maybe both? Or, perhaps your product will be sold in stores owned by other companies.

Your marketing strategy

Next comes your marketing strategy. How are you going to reach your customers? How do they find out that you exist and that you solve their problem?

If you need to build a team to grow your business, who are the key people that you’ll need to hire? If you’re an existing business, who are the critical employees that run the company and execute your strategy?

Key partners and resources

Finally, think about other businesses that you might need to work with to make your strategy happen. Are their key suppliers or distributors that you’ll need to have relationships with?

Remember, this is on a single page, so each of these sections should just be three to five bullet points each.

Now it’s time to build a schedule. Lean Planning is all about getting things done, so you need a timeline to follow.

Your next step is to get out from behind your desk and go talk to your potential customers (I’ll go into more detail on this in a moment). Your goal will be to verify that you’ve defined a solid strategy . To that end, a startup’s schedule should include things like conducting customer interviews, sending out surveys, researching physical locations, interviewing potential suppliers, and so on.

Your schedule will probably be focused on specific business milestones that are related to executing your strategy and implementing your tactics.

It’s critical to have accountability here. Your schedule should have dates and people responsible for completing each task.

Finally, make sure to include a time to regularly review your plan. You’ll want to review and revise this plan frequently, so having a regular review point is critical. I recommend a monthly review cycle, but reviewing more frequently is fine, too.

Business model

Even if you have a problem that’s worth solving, a solid solution to the problem, and a target market that needs your solution, you don’t have a business unless the numbers work out. You need a business model that works. The last component of your one-page plan is a basic forecast and budget to ensure that a great idea can actually lead to a great business.

Yes, forecasting and budgeting do mean looking into the future, and no one knows the future (at least I don’t!). But, it doesn’t have to be as difficult as it sounds.

Putting together some basic, bottom-up sales forecasts and a basic budget for expenses will quickly tell you if you have a business model that works—one that can create a viable business that will pay the bills.

At this stage, it’s important not to paint an incredibly rosy picture of your financial prospects. Instead, the sales forecasts should be as realistic as possible. Assume that not nearly as many people as you think will show up in your store. Assume that your website won’t get mainstream press coverage.

With this “realistic” forecast, do you still have a viable business? Can you turn a profit ? If you can only be successful with incredibly high volumes of customers, you may need to take a second look at your pricing, expenses, and other aspects of your business model. Or, make sure that you get the kind of funding that’s needed for large marketing and PR campaigns.

You can get started on your one-page plan right away by downloading our free template . You should be able to complete an initial draft in under an hour—that’s much faster than writing a traditional business plan.

• Step 2: Test the plan

Now that you have your one-page plan in hand, you’re ready to start putting the plan into action to see if your ideas will work.

Depending on your business stage, you’ll do this in different ways. If you’re a startup with an unproven idea or an existing business that’s considering a new strategic direction—your next step is to validate them.

Your one-page plan is just a set of assumptions about a business. Ask yourself:

• Do the target customers actually have the problem that you think they have?
• Does the solution you’re proposing actually solve their problem?
• Do your target customers want to pay for your solution? How much?

Reducing risk is your goal in the early stages of starting a business

Starting a business is full of risks . There are just so many unknowns, and it’s incredibly risky to just build your business based on a set of assumptions about your target market, their problems, and how they’ll react to your solution.

Your plan is a really just a set of educated guesses that need to be answered and then revised on a continuous basis until most unknowns are removed. That’s how you reduce risk.

So, you need to take the very simple, but very challenging step of actually talking to your potential customers .

Look at your first version of your plan as a set of assumptions that need to be proven true or false and then go back and revise your assumptions as you go. Refining your plan so that it’s a collection of facts instead of guesses can be the difference between a successful business and a failure.

If your business is up and running, focus on implementation

For more mature businesses that already know a lot about their target customers, the goal of the plan is to help guide implementation. In this situation, use a one-page plan to get everyone on the same page, set goals, and manage the business.

• Step 3: Review your results

Both Silicon Valley startups and Main Street small businesses need to know how they are doing. Which means  Are they growing according to plan? Why or why not? If not, what changes need to be made? Should the plan change?

For new startups

If you’re just getting started and don’t have many (or any) metrics to track yet, you should be reviewing the results of your customer interviews and any other information that you’ve gathered that would change your strategy. Perhaps you’ll be refining your solution or even tweaking the definition of the problem you are solving. Perhaps you’ll refine your marketing and sales strategy.

For established businesses

Beyond tracking key financial metrics such as cash , sales, expenses, accounts receivable, and accounts payable, businesses must track the other key metrics that are critical to their success. These other key metrics might be website visits, foot traffic in the store, tables turned in a restaurant or any other core number that drives business success.

Reviewing your results regularly is key to better management and success. These metrics should be reviewed at least monthly in a regular plan review meeting with key business partners and employees. This is when you refine your plan and your pitch if necessary and track your ongoing action plan.

• Step 4: Revise your plan

Lean Planning is a process, not just a document. It’s is all about continuous improvement. You’re quickly defining a strategy, experimenting to see if that strategy works, reviewing the results, and revising the plan before you start again.

Lean Planning is never finished. It’s simply a process for running your business better, more efficiently, and setting you and your team up for success.

What if you need a more detailed business plan?

There may be a time when you need a more detailed business plan. There’s nothing wrong with that. Some people might want to read it, you may need to submit a full plan for funding and you might even want to document your strategy in more detail. 

Your detailed business plan will be born from your one-page plan. The ideas will transfer from bulleted lists to sentences and paragraphs. You’ll add more detail to your sales and marketing strategy, your pricing strategy, and perhaps your manufacturing plans and distribution strategy.

For a step-by-step guide to creating a detailed business plan, check out our guide .

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

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Lean Startup Business Plan Guide: Innovate and Grow Your Way to Success

Starting your own business? It’s an exciting journey, but let’s be honest, it can also be a bit overwhelming. You’ve probably heard about the lean startup approach, a method that emphasizes efficiency and agility. Well, you’re in the right place to dive deeper.

A lean startup business plan isn’t your traditional, lengthy business plan. It’s more like a roadmap, constantly evolving as you learn more about your market and customers. It’s about starting small, testing your assumptions, and adapting quickly. This guide will walk you through creating a lean, mean business plan that keeps you focused and flexible.

So, grab your favorite notebook or open a new digital doc, because we’re about to embark on a journey to streamline your startup process. Let’s make your business dream a reality with a plan that’s as dynamic and innovative as you are.

What is a Lean Startup?

Imagine this: You’re on the starting line, heart pounding, ready to sprint into the world of entrepreneurship. But instead of carrying weights of hefty business plans, you’ve got the lean startup approach —your ticket to running a more flexible, adaptive race. It’s not just a strategy; it’s a mindset shift from traditional, plan-heavy methods to a dynamic, learn-as-you-go process.

At its core, the lean startup methodology is about testing assumptions and iterating quickly . You start with a basic version of your product – folks in the biz call it a Minimum Viable Product (MVP) . This MVP isn’t your final offer to the world but a test balloon. It helps you gather valuable customer feedback without spending all your resources upfront.

• Build : Create a minimum viable product, or MVP, something that’s good enough to start gathering data.
• Measure : Collect data on how customers use your MVP. This step is all about understanding what your customers actually want, not what you think they want.
• Learn : Take what you’ve learned from the data, refine your product, and maybe, your business model too. It’s a cycle of learning and adapting that’s much faster than the traditional way of doing things.

Simply put, the lean startup method is your way of validating business ideas with real-world testing , ensuring you’re building a product people actually want. It encourages constant adaptation, learning from failures , and pivoting when necessary. So, if you’re passionate about the hustle and love iterating on your ideas, leaning into the lean startup philosophy might just be your game-changer.

Benefits of a Lean Startup Business Plan

Diving into the entrepreneurial journey, you’ve probably heard the buzz around lean startup business plans . Drawing from my own adventures in the online business world and the rich tapestry of side hustles I’ve woven, let me walk you through why this approach isn’t just hype—it’s a game changer.

First off, the cost savings are undeniable. Traditional business plans often lead you down a path of heavy initial investment, where you’re shelling out for products or services without concrete evidence of customer interest. A lean startup business plan flips this narrative, urging you to create a minimum viable product (MVP) . This way, you’re not diving into your savings or seeking substantial funding right off the bat.

Let’s talk about speed and flexibility . In the fast-paced digital market, agility is your best friend. Adopting a lean approach means you’re constantly iterating, quickly adapting to customer feedback and market changes. This is paramount, especially when you’re testing out fresh side hustles or trying to carve a niche in the crowded online business arena.

Real-World Learning

When you embrace the lean startup methodology, your playground becomes the real world. Instead of hypothesizing in a vacuum, you’re out there, seeing how your MVP resonates with actual users. This direct feedback loop not only fine-tunes your product but also deepens your understanding of your target audience. You learn what truly matters to your customers, information that’s gold dust in tailoring your offerings and marketing strategies.

Risk Reduction

A significant edge of the lean startup plan is its capacity to mitigate risk . By testing your ideas in incremental steps, you significantly lower the stakes of failure. It’s about smart, calculated risks where each iteration brings valuable insights, minimizing the chances of a high-stakes flop.

Embracing this mindset opens up an exhilarating path of exploration and growth. You’re not just launching a business; you’re embarking on a continuous learning journey. From my personal journey of juggling online ventures and various side hustles, adopting a lean startup approach has been instrumental in navigating the ebbs and flows of the entrepreneurial world.

Setting Clear Goals and Objectives

When you’re navigating the sea of entrepreneurship, setting clear goals and objectives for your lean startup plan is like charting a course for your ship. Without a destination in mind, you’re just drifting. But with goals, you’ve got your north star.

First off, understand the difference between goals and objectives: goals are your broad, long-term targets, while objectives are specific, measurable steps you’ll take to hit those targets. Think of your goals as your endgame and your objectives as the milestones along the way.

Here’s how to do it right:

• Start with Vision : Your goal setting should stem from the very vision you have for your business. What problem are you solving? Who are you solving it for? This shouldn’t just be about making money – it’s about the impact you want to have.
• Be S.M.A.R.T. : Ensure your objectives are Specific, Measurable, Achievable, Relevant, and Time-bound. This framework keeps your startup agile, allowing you to iterate or pivot based on customer feedback and market demand.
• Prioritize : Not all goals are created equal. Identify which ones are critical for your MVP’s success and focus your energy there. This prioritization ensures you’re not spreading yourself too thin and losing sight of what’s truly important.
• Flexibility Is Key : One of the biggest strengths of a lean startup is its ability to adapt quickly. Set regular intervals to review and adjust your goals and objectives based on what you’ve learned from real-world testing. This continuous loop of feedback and improvement is crucial for staying relevant and competitive.

Remember, the journey of a thousand miles begins with a single step. By setting clear, actionable goals and objectives, you’re not just dreaming of success; you’re plotting a course towards it.

Identifying Your Target Market

After nailing down your goals and objectives, it’s time to zoom in on who your lean startup will serve. Knowing your target market is not just beneficial; it’s crucial . You might believe your product or service is for everyone, but in reality, a focused approach will lead to more effective marketing strategies and, ultimately, a stronger business model.

First, start by defining the demographics of your potential customers. Consider age, location, gender, income level, education, and even marital status. But don’t stop there. Understanding the psychographics—personality traits, values, attitudes, interests, and lifestyles—of your market can make your targeting even more effective. This dual approach ensures you’re not just understanding who your customers are but also why they might be interested in what you have to offer.

Here’s a tip: use your personal experiences and networks to get initial insights. Since you’ve ventured into businesses and side-hustles, tap into those communities. What do they crave? What’s lacking in the current offerings? As both an entrepreneur and a customer in various niches, you’ve got a unique perspective that can help identify untapped market opportunities.

Gathering data can be as simple as conducting online surveys, hanging out in online forums where your potential customers spend their time, or even direct interviews. The goal is to collect enough information to create a buyer persona , a semi-fictional character that embodies the characteristics of your ideal customer.

Leverage social media analytics and Google Analytics to start. These platforms offer insights into who is interacting with your content and how. Patterns in these interactions can be golden, guiding you towards understanding who really needs your product or service.

Remember, identifying your target market isn’t a one-and-done task. Markets evolve, trends shift, and new competitors emerge. Keep your finger on the pulse by continually gathering feedback and staying engaged with your audience. This way, you ensure your lean startup remains relevant and ahead of the curve.

Validating Your Business Idea

Validating your business idea is a crucial step that cannot be overlooked. It’s the bridge between a concept and a viable product. Imagine you’re gearing up for a journey. Validation is your map, ensuring you’re headed in the right direction.

Start with the Lean Canvas Model – a one-page business plan that lets you flesh out your idea quickly without diving too deep into the minutiae. This model forces you to focus on the main components: problem, solution, key metrics, and unique value proposition. It’s like sketching the outline of your masterpiece before painting the details.

Next, dive into customer validation . This isn’t just about confirming that people want what you’re offering; it’s about understanding why they want it. Engage with potential customers through surveys, interviews, or even a simple landing page test. Here’s where it gets real. You’re not just asking if they like your idea; you’re seeing if they’re willing to open their wallets for it. Data speaks louder than words, so keep an eye on those metrics. How many clicked through? Who signed up for more information? These are the signals that your idea has legs.

Don’t forget the power of a Minimum Viable Product (MVP) . It’s your idea stripped down to its essentials, ready for the real world’s scrutiny. Launching an MVP provides invaluable insights into how your product fits the market. It’s immediate, raw feedback that can pivot your idea from nice-to-have to must-have.

Remember, validation is about learning, not just confirmation. It’s possible that your idea might not hit the mark on the first try. That’s okay. Every piece of feedback is a goldmine. It helps you tweak, adjust, and sometimes even overhaul your approach to better meet your customers’ needs. Keep iterating until the market response is undeniable. You’re not just building a product; you’re crafting a solution that fits like a key in a lock.

Testing Assumptions and Hypotheses

When you’re knee-deep in the hustle of launching your lean startup, testing assumptions and hypotheses about your business model becomes critical. You’re probably buzzing with excitement and ideas, which is fantastic! But now’s the time to put those ideas to the test and see if they hold water in the real world.

First off, break down your business idea into its core assumptions. These are the foundation stones of your venture, covering everything from who your customers are, what problem you’re solving, and how your solution fits into the market. Once you’ve got your assumptions lined up, it’s testing time!

A great place to start is by employing a validated learning approach. This means launching small, controlled experiments that aim to validate your hypotheses about the business. Think of it like mini science experiments where your product or service is the hypothesis, and the market is your laboratory.

For instance, if you believe that your eco-friendly packaging will be a hit with environmentally conscious consumers, run a targeted marketing campaign to test the waters. Use metrics like engagement rates, conversion rates, and direct feedback to assess the market’s response. This data is gold and will guide your next steps.

Remember, the goal here isn’t to prove you’re right. It’s to find out what’s true. Sometimes, you’ll discover that an assumption was off-mark. That’s not a failure; it’s a vital learning experience. It’s about embracing the pivot . If an assumption doesn’t pan out, pivot your approach based on what you’ve learned. Iterate on your product, tweak your marketing strategy, or even redefine your target audience if need be.

The beauty of testing assumptions in a lean startup is that it’s cost-effective and time-efficient. You won’t waste months or resources barking up the wrong tree. Each test brings you closer to a product-market fit, fine-tuning your business model until it resonates with your intended audience. So dive in, test rigorously, and let the market guide your journey to success.

Adapting and Iterating

In the ever-evolving landscape of startups, Adapting and Iterating is not just a strategy; it’s your lifeline. Imagine your lean startup as a living, breathing entity. It’s continually growing, learning from its environment, and needs to adapt to thrive. Given my journey, where I’ve juggled numerous side-hustles and steered my online business to success, this phase is where the magic happens.

Start with understanding that no plan is set in stone . You’ve already laid a strong foundation with your MVP, but now it’s time to listen, learn, and pivot if necessary. This doesn’t mean overhauling your entire business at the slightest hiccup. Instead, focus on small, incremental changes based on user feedback and market demand. These iterations empower your startup to remain relevant and competitive.

Here’s how you can make it work:

• Gather Data Relentlessly : Use every tool at your disposal to collect feedback. Online surveys, social media engagement, and direct customer interviews are gold mines of insights.
• Analyze and Act : Don’t just collect data for the sake of it. Dive deep into what your customers are telling you. What features do they love? Where do they struggle? Use these insights to guide your next steps.
• Fail Fast, Learn Fast : Don’t be afraid of ideas that don’t pan out. Each failed experiment is a stepping stone to a better version of your product. Remember, in the world of startups, speed is key. The quicker you can iterate, the faster you’ll find what works.

Embrace the mindset that your business plan is a living document . It grows and evolves with your startup. This approach ensures you’re always ready to seize new opportunities or tackle unforeseen challenges. After all, in the thrilling ride that is entrepreneurship, being adaptable is your greatest asset.

Building a Minimum Viable Product (MVP)

Embarking on the journey to bring your innovative ideas to life, it’s critical to start with building a Minimum Viable Product, or MVP . This essential step in the lean startup approach allows you to test, learn, and iterate your way to success without fully committing all your resources upfront. Think of your MVP as the most basic version of your product that can still solve your customers’ problem or fulfill their need.

Why start with an MVP? It’s simple, really. Your MVP enables you to:

• Launch quickly
• Gather valuable customer feedback
• Make necessary adjustments
• Minimize initial development costs

By focusing on the core features that address the main problem you’re solving, you skip the bells and whistles that can slow down your launch and eat up your budget. The key here is to get your product into the hands of early adopters as soon as possible.

Next, collecting and acting on customer feedback is crucial. Use online surveys, social media, and direct interactions to find out what works, what doesn’t, and what features your users truly desire. This feedback loop will guide your development process in a customer-centric direction , ensuring that each iteration of your product is a step closer to market fit.

Lastly, remember, your MVP is not your final product. It’s a starting point for a cycle of continuous improvement. As you iterate, keep your business goals and customer needs in focus. Every change, addition, or removal from your product should be a strategic decision aimed at better serving your customers and growing your business.

Embracing the MVP approach can significantly increase your chances of success by ensuring that your product truly meets market demands before you’ve exhausted your resources. Dive in, test, learn, and iterate. Your dream business is a work in progress, and every step forward is a step towards success .

Measuring and Learning

In your journey molding a lean startup, measuring progress and learning from the results is your compass. You’ve already embraced the fluidity of your business plan; now, it’s time to quantify your steps and adapt based on what the numbers show. This is where the real magic happens. It’s not just about launching and seeing what sticks. It’s about intentional iteration and growth.

First off, set clear, measurable objectives. These aren’t lofty, vague goals but rather specific milestones you can track. Think in terms of website traffic, conversion rates, or customer retention percentages. Specific targets will give you clear success indicators and help direct your efforts where they’re most needed.

Once your goals are in place, it’s time to dive into the learning process. Utilize tools and platforms that can provide actionable data. Google Analytics for website traffic, social media insights for engagement rates, and customer feedback tools like surveys or direct interviews can offer invaluable information. What’s crucial is not just collecting this data, but analyzing it to understand the why behind the numbers.

Your lean startup is a laboratory, and every piece of customer feedback is a clue towards the next great breakthrough. Keep testing hypotheses, from pricing models to marketing channels, always with an eye on what the data tells you. This doesn’t mean chasing every shiny trend but making informed decisions that align with your strategic directions and customer needs.

Remember, the landscape of online businesses is ever-evolving. Staying static is not an option if you want to stay relevant. Adaptability, grounded in measurable outcomes and continuous learning, is what will set you apart. Keep iterating, keep measuring, and most importantly, keep learning. The path to success is paved with insights gained from each step forward, no matter how small.

Creating a Business Model Canvas

When diving into the lean startup journey, one of your first steps is crafting a Business Model Canvas . This tool simplifies the process of sketching out how your business creates, delivers, and captures value. Think of it as your blueprint; something that evolves as your understanding and the market’s needs shift.

First up, you’ve got to understand the nine essential building blocks that form the canvas. These include key partners, key activities, key resources, value propositions, customer relationships, channels, customer segments, cost structure, and revenue streams. Laying these out visually helps you see the big picture and make connections you might miss in a traditional business plan.

Key Partners : Who’ll help you succeed? These could be suppliers, allies, or even mentors.

Value Propositions : What problems are you solving? This is the heart of why customers will choose you.

Channels : How will you reach your customers? Whether it’s online ads, social media, or physical storefronts, you need a strategy.

Customer Segments : Who are you serving? Knowing your audience is crucial to tailoring your offer.

Key Activities : What actions will you take to deliver your value proposition?

Key Resources : What do you need to execute your activities? Think about physical, intellectual, human, and financial resources.

Customer Relationships : How will you interact with customers? This fosters loyalty and retention.

Cost Structure : Understanding your costs is vital for pricing and profitability.

Revenue Streams : Finally, how will you make money? This could be through direct sales, subscriptions, ads, etc.

As you flesh out these components, you’ll start to see how they interlink and support each other. This exercise isn’t just about filling in boxes; it’s about questioning each assumption and continuously iterating based on feedback and insights. Remember, your business model canvas is a living document. It’ll grow and change as you learn more about your market and refine your approach. So, don’t be afraid to make adjustments or pivot entirely if that’s what the data suggests. After all, flexibility and responsiveness are at the core of a lean startup’s ethos.

Embracing the lean startup approach is a journey of continuous improvement and adaptation. By setting clear goals and leveraging the right tools, you’re well on your way to building a business that not only survives but thrives in today’s dynamic market. Remember, the key is to learn from every outcome—every piece of data and feedback is a stepping stone towards your success. The Business Model Canvas is your map, guiding you through the complexities of creating value. Stay curious, be ready to iterate, and always keep your customers at the heart of everything you do. Here’s to your lean startup journey—may it be filled with insightful learnings and remarkable growth.

Frequently Asked Questions

What is the importance of adapting and iterating in a lean startup.

Adapting and iterating are crucial in a lean startup because they allow businesses to learn from their actions, measure progress, and make necessary adjustments. This cycle of learning and adapting helps startups grow and succeed in the dynamic market environment.

How should a startup measure progress?

A startup should measure progress by setting clear, measurable objectives and utilizing tools and platforms to gather actionable data. This enables startups to track their performance and assess whether they are moving towards their goals.

Why is analyzing collected data important?

Analyzing collected data is important because it helps understand the reasons behind the numbers. It offers insights into what is working and what isn’t, enabling startups to make informed decisions and adjust their strategies accordingly.

What role does customer feedback play in a lean startup?

Customer feedback is vital in a lean startup as it provides direct insights into the customer’s needs and experiences. It helps in testing hypotheses and making decisions that align with customer expectations, ultimately leading to better product or service improvements.

Can you explain the purpose of the Business Model Canvas in a startup?

The Business Model Canvas is a tool designed to help startups sketch out how they create, deliver, and capture value. It utilizes nine essential building blocks to provide a comprehensive overview of the business model, encouraging questioning of assumptions and enabling easy adjustments or pivots based on feedback and insights.

Why is flexibility important in online businesses?

Flexibility is crucial in online businesses due to the fast-paced and ever-evolving nature of the internet landscape. Being flexible and responsive allows businesses to adapt to changes, exploit new opportunities, and stay competitive.

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John Prince

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How to make a lean business model canvas

Imagine that you have an idea for a new product or business. Yet, as enthusiastic as you are about the potential for this nugget of inspiration, you’re also plagued by this question: Will it work? Is it actually a viable idea?

A lean business model canvas is a one-page business plan that helps you break down your product or business model, question and test your assumptions, and determine if your idea actually has legs.

Lean business model canvas explained: What is a lean canvas?

You might also hear a lean business model canvas referred to as a variety of other, similar terms like a lean business canvas, lean business plan, or even simply a lean canvas.

This tool was created by Ash Maurya and is an adaptation of the original business model canvas by Alex Osterwalder .

You can think of a lean business model canvas as a straightforward business plan that skips the fluff and gets to the most important elements you need to identify or evaluate (primarily, the problem you’re solving).

When you have an idea for a product or business, you’ll use a lean business model canvas template to fill in the various sections (more on those in a minute) and validate your idea.

The lean canvas is most frequently used by lean startups, which use a lean startup methodology to deliver products to customers faster and determine whether or not the business model itself is viable. In short, lean startups and lean canvases are all about moving fast, testing, and iterating.

Lean canvas example

One of the best ways to understand a lean business model canvas is to see one. So, let’s set up a lean canvas as an example.

Perhaps you have an idea for a business: You want to create an app or a website that’s essentially a database of parks and playgrounds, which parents can search and filter using location, features (splash pad, baby swings, etc.), and more.

You want to dig into your idea even further using a lean business model canvas. Here’s a simple peek at what that could look like after jotting your initial notes down:

Lean canvas vs. business model canvas

There’s a lean business model canvas and then simply a business model canvas . The two terms are often confused, as they have a lot in common — and the lean canvas is an adaptation of the business model canvas.

However, the biggest difference is that a business model canvas is focused on a specific product while a lean canvas focuses on a specific problem.

This means that the business model canvas has a few blocks that you won’t see on a lean canvas. These are:

• Key partners (lean canvas replaced with problem)
• Key activities (lean canvas replaced with solution)
• Key resources (lean canvas replaced with key metrics)
• Customer relationships (lean canvas replaced with unfair advantage)

That’s the gist, but here’s a chart that digs even more into the difference between a business model canvas and a lean canvas:

What is included in a lean canvas?

Now that you have a better grip on what exactly a lean canvas is let’s break it down even further. The typical lean business model canvas has nine elements or quadrants. These are:

• Problem: A brief description of the top three problems you’re addressing.
• Solution: The proposed fix for the problem you’ve identified.
• Unique value proposition: Why your solution is different and what will make people buy.
• Unfair advantage: Something you have that can’t be easily copied or bought.
• Customer segments: Who your target customers or users are and if they can be further segmented.
• Key metrics: The important numbers that will indicate how your business is doing.
• Channels: The free and paid channels you’ll use to reach your customers.
• Cost structure: All of your fixed and variable costs.
• Revenue streams: How your business model will earn income.

However, our lean canvas template here at Miro dives even deeper with the addition of a few more elements, including:

• Existing alternatives: How these problems are currently solved today.
• High-level concept: A simple X for Y analogy (e.g., “Zillow for playgrounds”).
• Early adopters: Characteristics of your ideal customers who will jump right on the bandwagon.

How to make a lean canvas in Miro

A lean canvas can provide a lot of clarity about a business model or a product idea. Ready to create one with your own team? Getting started is easy.

• Grab our lean business model canvas template and create a new Miro board . You can put as many canvases on one board as you need.
• Define the product or business idea you’re working on, and then fill in the blocks with different types of content. You don’t just have to use text — you can also use pictures, videos, and more.
• Invite your team and/or advisors to the board so you can brainstorm , collect feedback, and collaborate in real-time.
• Come back to the board regularly to make necessary changes, add new information, and discuss progress.

And that’s it! Once you’ve created your own lean business model canvas, you can move forward with a product or business idea with more strategy — and a lot more confidence too.

Get started on your own lean business model canvas with Miro

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Lean Startup Methodology: What It Is and How to Implement It

Updated: September 21, 2022

Published: February 04, 2020

Do you follow the mantra "move fast and break things" to build your startup? If so, you're not alone — this way of thinking has driven startup culture for the past decade. However, what worked to build new companies in the 2010’s isn’t necessarily the best course of action in 2020 and beyond.

Scaling a company doesn’t have to be a destructive process. According to Harvard Business Review, the next generation of startups have a responsibility to consider the moral implications of optimizing the growth of their companies, maintaining a commitment to reduce environmental, economic, and societal harm while building diverse innovative teams.

Although it sounds like a daunting task, there are resources available to help startup founders scale their businesses in a mindful way. Enter: the Lean startup methodology.

Lean Startup Methodology

A scientific approach to founding and scaling startups that focuses on customer feedback to guide the product development process. The goal is to reduce product development processes and minimize risk.

Essentially, Lean startup methodology teaches founders how to create sustainable businesses without wasting time and money. The concept was introduced in The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Business by Eric Ries. Let’s discuss how to put Lean startup methodology into action.

Lean Startup Process

Lean startup methodology focuses on three main pillars to create viable business models. Read on to break down this process further.

1. Draft a business model canvas.

During the initial stage of the Lean startup methodology, startup founders are encouraged to start with a business hypothesis or educated guess outlining how their products can create value for their customers. This hypothesis is designed to take the place of upfront research which can often take months, marking the first time-savings opportunity.

Then, instead of drafting a standard business plan, the Lean startup methodology calls for a business model canvas . This document should summarize your hypothesis, and outline your plan-of-action. A well thought-out business model canvas should include the following elements:

• Value proposition — The main concept or objective of your business. Your value proposition should explain how your business provides value to your customers, and what key problem your product sets out to solve.
• Key partners — To craft your list of key partners, begin by identifying areas of your value proposition your business cannot achieve on its own. Once you identify those areas, name potential partners such as suppliers that you can work with to provide value to your customers.
• Key activities — The key activities section of your business channel strategy should define all of the steps your business takes to make your value proposition a reality.
• Key resources — What resources do you need to have to implement your strategy and achieve your value proposition for your customers? List them all in your key resources section.
• Customer relationships — Explain how your business plans to interact with its customers to demonstrate value. In this section, you want to define all of the engagement touch points your company will have with its customer base.
• Channels — Your business channels include all of the ways your customer can be exposed to your business. This can include but isn’t limited to your content strategy, ad placements, PR, or event presence.
• Customer segments — Identifying who your ideal customers are, and grouping them into like segments based off of characteristics such as interests and spending power. Make sure you define who your company is solving a problem for.
• Cost structure — How much will it cost for you to fulfill your key activities and deliver your value proposition? Identify all the costs you plan to incur running your business. Don’t forget to include the costs of your key partnerships and resources, as well as how much your time as a business owner is valued for.
• Revenue streams — This section should detail how your company plans to bring in money related to delivering your value proposition. Specify how you will price your product and make sure you account for your company’s cost structure.

Ready to create your own business model canvas? Check out this template to get started.

2. Leverage customer development to gain feedback.

Have you ever heard the phrase, "if you build it, they will come"? While that may work for some businesses, the Lean startup methodology empowers companies to build what their customers truly want in the first place, creating immediate demand and eliminating waste.

Customer development helps you understand your market to determine if your product or idea will truly solve your customer’s problem. The goal of the customer development stage is to either validate your initial hypothesis, or to provide valuable insight you can use to modify your hypothesis. The four steps of the customer development process include:

• Customer discovery — Develop a series of hypothetical questions to test the validity of your business model with potential customers. Based on the answers to these questions, you should have an idea whether you can proceed with your current value proposition, or have an understanding of what elements need to be modified. The goal of this step is to understand what your customers truly need.
• Customer validation — Once you have determined the needs of your customer, and confirmed your product fulfills that need, the validation step gets an early version of your product that meets your value proposition in the hands of your early adopters. The feedback from early adopters should solidify the scalability of your offering.
• Customer creation — The next step of customer development is customer creation. This is where your company begins creating demand for your product, and implementing sales processes to sell and deliver the product on a wider scale.
• Company building — Lastly, company building entails facilitating company growth to achieve a sustainable user base and transition from startup to established company focused on execution.

3. Carry out agile development.

The goal of running a Lean startup (in addition to growth) is to minimize waste. Though the term "agile development" was originally coined for cross-functional software development teams, the concept can apply to other industries.

Agile development focuses on shortening product development cycles, encouraging an iterative, collaborative process for creating new products. As your company grows and you begin to introduce more offerings, taking an agile approach implementing customer feedback, making incremental changes, and striving for continuous improvement can help your Lean startup thrive.

By following these principles, you can scale your business in a way that minimizes waste and creates value for your customers. Looking for more resources to help launch your startup? Check out this post .

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Lean Business Plan Template

Free Lean Canvas Template

• Vinay Kevadia
• April 27, 2024

Are you too struggling to figure out how to write a lean business plan?

Well, you’re not alone—many entrepreneurs do! A lean business plan is the first document that introduces your business to potential investors or partners.

So, it has to be appealing to persuade potential investors or partners!

Making a plan visually appealing with all the essential information about your business can get overwhelming. Worry not—here is a guide on writing a lean business plan with all the sections and an example.

Thus, don’t wait any longer and dive right in.

What is a Lean Business Plan?

A lean business plan is a short, one-page document that acts as a roadmap for your business.

It focuses on the most important aspects like what your business does, who it is for, what makes it unique, and how it helps you make money.

Unlike traditional business plans that are lengthy and complex, a lean business plan is simple to understand.

It also provides a foundation for creating a more detailed business plan later.

Writing a lean business plan follows a customer-centric approach. So, let’s begin by understanding a lean business plan outline.

Components of a Lean Business Plan

• Customer Segment
• Unique Value Proposition 
• Cost Structure
• Revenue Streams 
• Key Metrics
• Unfair Advantages

The problem statement talks about what problems your business aims to solve for potential customers.

First, try to understand what top problems are your product or service solving for your target market. Know that your business idea is not viable enough if it isn’t solving any practical problem.

Along with it, mention your customers’ pain points. The most efficient way is to figure out your ideal customer profile first, and then understand their pain points.

Discuss what are the solutions your customers are looking for and how your idea fits in their requirements.

While doing so, try avoiding jargon and any technical terms that will be hard to understand. Also, back your problem statement with evidence and facts instead of assumptions.

Existing alternatives

This is the second part of the problem section. In this section, mention the existing alternatives that are solving your potential customers’ problems.

The businesses solving the same problems are your current competitors. These alternatives are what customers are using or considering as of now.

Understanding these existing alternatives helps you identify how your solution can stand out and provide greater value to customers.

2. Customer segment

The key to writing this chapter is to understand your target market and separate them into various customer groups. Consider demographics, psychographics, and consumer behavior while bifurcating.

To identify target customers, ask yourself the following questions:

• Who are we creating value for in our business model?
• Who are our most important customers?

This way, you will be able to identify your most profitable segments too.

Once you’ve your customers, here are the various components to include in this chapter:

• Types of Customer Segments
• Mass Market
• Niche Market
• Diversified
• Multi-sided platforms/ markets

Creating a customer profile

The customer profile defines the customer segment more clearly for your company by assessing the customer’s pains and gains.

To understand customer pain points better, we can categorize them as follows:

• Undesired outcomes, problems, and characteristics
• Pain severity

Customer Gains: Customer gains are the results or benefits that customers want. Ideally, this is what your product or solution must provide. This is how we can categorize gains:

• Required Gains
• Expected Gains
• Desired Gains
• Unexpected Gains
• Gain relevance

Early Adopters

Early adopters are the customer section that is among the first customers to try out your product or services.

Since they are more in need than others of something to solve their problems, they will forgive the imperfections or flaws of the early releases. This would help you better test and collect the actual feedback for your solutions.

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3. Unique Value Proposition

Once you’ve identified your target audience, you should also pinpoint the strengths of your product or service that attract them.

In other words, how would you describe your business to target customers in just ONE sentence (possibly less than 200 characters long)?

A Unique Value Proposition is a sentence that tells why what you do is different from competitors and why that difference matters to customers.

This is a critical parameter in your plan and is hard to get right. It might take years of experience and a lot more market analysis to make that one sentence.

It usually combines:

• The target segment
• The key problem
• The key benefits the customers are going to get after having the product/service.
• The special and unique way you will deliver it

For example, Google’s USP is “Organizing the world’s information and making it universally accessible and useful” .

4. Solution

How would you solve customers’ problems? Outline a possible solution for each problem.

Describe your business idea briefly and in concise sentences that explain what the customer experience is going to be. Make sure you don’t go with the technical words here and keep it all simple.

We have already written a problem chapter. Now match your every solution with its associated problem from the problem chapter. Make a one-to-one association between the problem and the solution, keeping your product offering in mind.

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5. Channels

Once you know the solution, it is time to attract customers. List your inbound or outbound marketing strategy to spread your reach: How are you going to acquire your customers?

When your product is ready to solve customers’ problems uniquely, you need to speak loud so customers know that you have the solution for their problems.

Here are examples of some marketing channels: social media, paid online advertising, TV ads, PR, cold calls, Google Ads etc.

List all the possible channels you are going to use for your business, and how will you leverage them to spread the reach.

6. Cost structure

Now, this is one of the most important sections, as your potential investors or business partners will want to know about the costs.

Costs are necessary as they help you to identify how many customers you need to cover your costs.

The accuracy of costs depends on whether you have an existing business or the business is in just the idea stage. If your business is at the idea stage, you will have to make assumptions regarding cost structures.

Write this section last. At an early stage, you don’t even need to write down these numbers. You’ll have more clarity on cost figures once you implement your ideas.

7. Revenue streams

This slide of the lean startup plan template outlines how you will generate income for your business.

Start by listing all the sources of revenue. It could include the way you will charge as in through product sales, service fees, subscription model, or any other mode.

8. Key metrics

Identify the key numbers that indicate your business’s performance: these are the metrics you’ll use to monitor your progress.

Every business, regardless of its industry or size, relies on key performance metrics.

Define the customer actions you’ll track to measure your progress and evaluate your business performance. For example, some of the metrics you can track are:

• Customer acquisition cost (CAC)
• Monthly recurring revenue (MRR)
• Customer churn rate
• Gross profit
• Conversion rate
• Website traffic

9. Unfair Advantages

The “unfair advantage” is a single, clear, and compelling statement that states why you are different from your competitors and worth paying attention to. Do you have more resources, access to more patents, or better brand recognition?

This section is a little hard to describe. Many entrepreneurs make mistakes while defining this section.

It has to be about something that you already have, which cannot be copied or bought and would require a considerable amount of time for anyone else to build.

To understand your unfair advantage, ask yourself: why do I believe I have more chances to be successful than anyone else in my chosen business vertical?

For example: Tesla’s technological innovation in electric vehicles (EVs) and battery technology is a key unfair advantage. The company’s EVs offer superior performance, range, and charging infrastructure compared to traditional automakers.

Now as we know what all sections to include in a lean business plan, let us go further and see an example.

Lean business plan example

Below is an example of a restaurant lean business plan to have clarity:

Benefits of a Lean Business Plan

A lean business plan is an efficient and condensed business plan to draw investors’ attention to your business in its initial stage.

Some of the advantages of a lean business plan include:

• Simplicity: Only the main elements of a business are focused on a lean business plan, which makes it simple for readers to understand.
• Efficiency: A lean plan writing takes less time and resources than a traditional business plan.
• Actionable insights: It helps you track key metrics and performance indicators at one glance.

That’s it for today. We hope you found this lean business plan writing guide helpful. If you are still confused, you can always use a business planning software like Upmetrics, for both your lean and traditional business plan.

Build your Business Plan Faster

with step-by-step Guidance & AI Assistance.

Frequently Asked Questions

How many pages should a lean business plan be.

A lean startup business plan is also known as a one-page plan. So, as the name suggests, it should be one page only covering the main elements of a business.

What is the difference between a traditional business plan and a lean business plan?

A business plan is a detailed document showcasing everything about a business, including its goals, revenue streams, financial projections, funding ask, call to action, target market, and a lot more.

On the other hand, a lean plan is short, focusing on the most important parts of the business.

Where can I find free templates and resources for creating a lean business plan?

There are several options from where you can find a free lean business plan template. Here are some options:

• Upmetrics: It offers a free lean canvas that is easy to customize and provides other resources too for your business plan.
• Score: SCORE offers a variety of business planning templates, including lean plan templates, that you can download for free.
• SBA: The SBA website offers resources for small business owners, including business planning templates and guides.

About the Author

Vinay Kevadiya

Vinay Kevadiya is the founder and CEO of Upmetrics, the #1 business planning software. His ultimate goal with Upmetrics is to revolutionize how entrepreneurs create, manage, and execute their business plans. He enjoys sharing his insights on business planning and other relevant topics through his articles and blog posts. Read more

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The Tech World Fell for Lean Startup. Was That a Mistake?

It’s been 10 years since Eric Ries wrote ‘The Lean Startup’ — and we’re still debating the concept’s merits.

In 2014, Helen Walton and her co-founders faced two options. One was to draw up a business plan for their mobile casino game business in which players wagered real money. They’d take their time, get all their ducks in a row, secure a gambling license and hit the market with a robust launch.

The second was to quickly and cheaply build a stripped-down, freemium version of a game to test out and iterate upon until they had a product they felt really resonated with users.

It’s this latter option that was ripped from the pages of the lean startup playbook, a concept that had been in vogue among tech startups for several years. It’s the option they chose. And it’s the option that almost killed their company.

What Is Lean Startup?

After testing their game for several months — and seeing some improvements — Walton and her team eventually realized they were going to burn through all their cash making incremental tweak after tweak before even having a chance to overcome regulatory hurdles.

“That was a terrible idea,” Walton said of her decision to apply lean startup principles to her fledgling company Gamevy (now g.games ).

“We wasted a couple of years … learning totally useless lessons, when we should have spent [money] on getting our [U.K. Gaming Commission] gambling license.”

The company went back to square one. Walton insists it was nearly snuffed out, though, because of the initial decision to apply lean startup principles.

“Rather than focusing on the product, we should have focused on the particular market we wanted to be in,” she later reflected in an opinion piece. “Interestingly, a traditional business plan might have helped us focus on that far better than lean startup.”

Lean startup principles, which tech entrepreneurs Eric Ries and Steve Blank popularized in the mid-to-late 2000s, were codified in book form in 2011 when Ries wrote The Lean Startup . Since then, the methodology has functioned as a kind of de facto starting point for many tech founders .

With a decade of hindsight — and stories from entrepreneurs like Walton — it’s worth asking: should it be?

Related How Do You Know When You Have Product-Market Fit?

What Lean Startup Actually Means

In his book, Ries explains that the lean startup approach borrows and builds off of several previous management and product development concepts, including:

Lean manufacturing: A set of operational principles developed by Toyota that emphasizes things like a culture of continuous improvement and product development with little to no waste or interruption.

Design thinking: A process that applies empathy to end users, identifying their pain points and testing possible solutions.

Customer development: A framework taught by Steve Blank that focuses on understanding customer needs and testing products to see if they satisfy customer needs.

Agile development: A software product development framework that prioritizes the continuous, iterative, incremental development of products, even after they go to market.

For Steve Blank, the entrepreneur and educator who advised and invested in Ries’ startup IMVU, those last two concepts — customer development and agile development — are the twin pillars on which the lean startup framework is built.

In an article published in the  Harvard Business Review , Blank summarized the three key principles of the method:

Lean startups start with a series of untested “good guesses” instead of lengthy planning and research. They summarize their hypotheses using a business model canvas instead of writing a detailed business plan.

Lean startups quickly build minimum viable products (MVP) — barebones versions of products with limited features — and go out and ask potential customers for feedback, using the input to revise their assumptions, test again, and adjust or pivot.

Lean startups develop the product iteratively and incrementally instead of spending months or years building something that presupposes knowledge of the customers’ needs.

By applying these principles, startups can get up and running quickly and affordably — with the nimbleness and speed to make adjustments where necessary. With lean startup, managing a new technology company is supposed to feel more like riding a motorcycle than steering a cruise liner.

When Lean Startup Became Popular

The lean startup concept can be thought of, in part, as a reaction to a particular moment — the startup craze of the late 1990s that came crashing down in the early 2000s. At that point, venture capital funding for startups with world-changing ambitions cooled and risk-averse investors wanted to hear pitches for ideas that didn’t sound like a pile of burning cash.

Not only that, but as the web matured, and software services became more sophisticated and widespread, it became cheaper to develop new products and services. What had cost millions of dollars to bring to market just a few years earlier now only required hundreds of thousands to get up and running.

This recipe led some startup founders to eschew the traditional course of action — write a business plan, raise gobs of upfront capital, build the product, launch it and then sell it to customers — in favor of a business model that cut fat, moved fast and cost less.

Eric Ries was one such founder.

In 2003, he was a senior engineer for There.com, a company that had raised tens of millions of dollars and built its technology in stealth mode, but that was so beefy out of the gate it couldn’t adapt to a changing market.

So in 2004, Ries co-founded a new company called IMVU, which made a virtual avatar world. Determined not to make the same mistakes his previous company had made, he and his team took a bootstrap approach.

IMVU built MVPs and shipped them constantly. It ran experiments, talked to customers, measured what worked and what didn’t, and folded those findings back into its product development.

The company rode these principles to tremendous success, while There.com shuttered just a few years later.

By the next decade, lean startup principles were being published in entrepreneurship books and taught in entrepreneurship classes and startup accelerator programs across the world.

And not just because it was trendy. But because it seemed to work.

In 2018, a group of academics from Bocconi University in Italy conducted an experiment to verify a core idea of the lean startup approach — the emphasis on rigorous experimentation and quick pivoting.

They split 116 startups into two groups, teaching the first group how to generate and rigorously test ideas, and essentially letting the second group follow their guts.

The researchers found that entrepreneurs in the first group “ perform better, are more likely to pivot to a different idea, and are not more likely to drop out. ”

In short, startups that rapidly generate ideas, experiment on them and adjust have a greater chance of surviving. And in the wreckage of the dot-com crash, survival looked awfully appealing.

How Lean Startup Looks in Action

Geoff Wilson, president and founder of growth agency Three Five Two , has experienced firsthand the power of the lean startup method. Unfortunately, he had to discover it the hard way.

In 2008, Wilson founded a startup that provided a sports-themed virtual world for kids. He took the “fat startup” approach, raising millions of dollars of funding, partnering with big-name football coaches, spending two years building the platform’s technology.

But when he brought it to market, “it completely missed the mark,” Wilson told Built In. “It was an absolute failure.”

It turned out that the end users didn’t care much for the features that Wilson and his team spent months building; rather, they liked the last-minute throw-ins. Plus, the amount of time it took the company to get to market allowed for competitors to come along and technology to advance too quickly. Ultimately, the startup failed.

“For an entrepreneur who has limited resources, [lean startup is] really the only way to start and to become successful.”

So, soon after, when Wilson had the chance to advise his wife Kim Wilson’s startup, Social News Desk , he suggested it take the opposite approach.

It did. The product — a social media dashboard for newsrooms — began as a $50,000 MVP built in three months. It was iterated upon again and again based on early customer input. And a few years later, it was acquired by a Fortune 500 company for an eight-figure exit.

That was before Wilson ever read The Lean Startup book. But when he finally did, he saw that Ries’ framework “paralleled what [his] experience was.”

Wilson has founded a handful of companies — and advised many more — in the years since, always taking a lean startup approach.

“For an entrepreneur who has limited resources,” he said, “it’s really the only way to start and to become successful.”

Why Lean Startup Has Haters

Not everyone is enchanted by lean startup’s charms. And you’d be hard-pressed to find someone more skeptical of it than Keith Rabois.

“The lean startup is a dumb and bankrupt philosophy for mediocre people with mediocre vision and ambition,” Rabois told Kunal Mehta for his book Finding Genius .

Rabois, who has held executive positions at companies like PayPal and Square and led investments for startups like DoorDash and Stripe, explained that a tech founder’s job isn’t to ask users what they want, it’s to “paint a picture of a better world and then deliver that.”

In other words, lean startup puts an artificial ceiling on ambition. People don’t know what’s possible when you ask them what their pain points are. And nobody is going to change the world by showing customers an MVP and tweaking it based on their feedback. The thing founders should really do, Rabois tweeted , is “start with a vision and you WILL it into reality.”

Ben Horowitz, tech entrepreneur and co-founder of venture capital firm Andreessen Horowitz, has also pushed back against the popularity of lean startup.

In his 2010 blog post titled “The Case for the Fat Startup,” Horowitz argued that the job of any startup is to win the market and not run out of cash. And following lean startup principles is no guarantee of achieving either. In fact, it’s likely to land founders in what Horowitz calls “startup purgatory,” where companies have conservative burn rates but are forever small.

“Thin is in,” Horowitz said, “but sometimes you gotta eat.”

Ethan Mollick, an entrepreneurship professor at the University of Pennsylvania’s Wharton business school and author of the book Unicorn’s Shadow: Combating the Dangerous Myths That Hold Back Startups, Founders, and Investors , is by no means a lean startup hater. But, in the course of his teaching and learning, he has come across a few of the model’s shortcomings.

“What lean did was help us switch to an idea that experimentation and quick development is the key, and I think there’s really valuable insights there,” Mollick said. “But I also think the pendulum [has] probably swung too far one way.”

The danger, Mollick told Built In, is in treating lean startup as a one-size-fits-all method. Because in reality, there are some industries and contexts in which it shouldn’t be applied. In biotech, for example, you can’t give customers prototyped medical devices for experimentation. And in the case of Helen Walton’s real-money gaming company, there are necessary regulatory processes to slog through first.

And in general, Mollick said, “the more disruptive you’re trying to be, the less useful it is to talk to customers about things.”

“The more disruptive you’re trying to be, the less useful it is to talk to customers about things.”

Mollick referenced a couple of papers echoing the concern that getting fast feedback from customers might lead to incremental improvements, not radical innovations. Because people often distrust novelty, seeking early validation from them might tamp down ideas that sound weird at first but could actually change the world.

For his part, Wilson, the tech entrepreneur and growth agency founder, doesn’t buy the idea that the lean startup method necessarily caps ambition or curbs the generation of paradigm-changing ideas.

“It can certainly produce big unicorns,” he said, offering Facebook as a prime example of a massively disruptive company that got off the ground using lean startup principles.

Contrast the fate of Facebook with that of Quibi, the short-form video streaming service — which Steve Blank called “the antithesis of a lean startup,” and that went to market with a business plan and a $2 billion war chest before going belly up about six months later — and you’ll get a sense of why the argument regarding lean startup’s efficacy is still going strong.

Read Why ‘Build It and They Will Come’ Is a Lie

Where Lean Startup Goes From Here

For startup founders, choosing a business model doesn’t have to be a binary decision between lean or fat startups. (In fact, some are arguing for alternative approaches .)

But for Helen Walton, she’s confident leaving lean startup in the dust is the right move for her company g.games’ next chapter.

She and her team are about to go to market with multiplayer slot machine games, an idea they hatched a year ago. They’ve taken it slow — registering for patents, lining up partners, building out 12 games to launch at once.

“Slight overclaim here, forgive me,” Walton said, knowingly, before explaining her rationale. “I feel like we’re trying to be Edison. We’ve gone, ‘Hey, we’ve got this idea, we’ve got a light bulb.’ And rather than plugging it in, going, ‘Look everyone, isn't it cool? Wouldn’t you all like it?’ We’ve gone, ‘No, don’t show anybody, let’s go and build an infrastructure of power stations, and let’s cable the whole of a state before we switch on the first bulb.’”

It doesn’t sound like there’s much margin to iterate or pivot.

“No, there really isn’t,” Walton said. “But if we get it really right, we’ll be so successful.”

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What the Lean Startup Method Gets Right and Wrong

• Ethan Mollick

It puts a premium on customer experience, but undervalues strategic thinking.

The Lean Startup approach was an instant hit in Silicon Valley, as startups embraced this new experimental ethos. Indeed, the evidence strongly suggest that startups should engage in experimentation along the lines pioneered by the Lean Startup Method. But there are two problems with the Lean Startup approach: First, it pushes founders to “get out of the office” and talk to customers as quickly as possible. But the focus on getting fast feedback from customers to Minimal Viable Products makes startups prone to aim for incremental improvements, focusing on what customers want today, rather than trying to see ahead into the future. Second, while the questions Lean asks are useful — you should know who your customers are! — it doesn’t ask the most important one: what is your theory about why your company is going to win?

When someone finds out that I am an entrepreneurship professor, they tend to either ask me to listen to their startup pitch, or else they look at me quizzically and say: “But I thought entrepreneurship was all about improvisation. How can you teach entrepreneurship?” As a result, I have heard a lot of startup pitches (last year was blockchain; this year was CBD) but I also have thought about how to answer the bigger question: what can we teach founders to make their startups more successful? Fortunately, the last decade has given me a lot of valuable lessons I can share, and these lessons come from two different sources.

• EM Ethan Mollick is an associate professor of management at The Wharton School of the University of Pennsylvania.

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Lean startup: Meaning, examples, and more

What is a lean startup.

A lean startup is an entrepreneurial approach that prioritises customer feedback over intuition and flexible product development over traditional business planning. This methodology is centred on the concept of validated learning, a process where startups test their hypotheses about how they believe their business will succeed. The core principle is to develop a minimal viable product (MVP) — a basic version of the product that is good enough to satisfy early customers and provide valuable insights into how the product should evolve. This allows startups to optimise resources, minimise costs, and reduce the market risks associated with launching new products. By continually testing and modifying assumptions about their business model based on customer interactions, lean startups can adapt more quickly and find a sustainable model more efficiently. This approach is particularly suitable for startups with limited funding, where insights drive development, and adjustments are made as learning occurs. Entrepreneurs looking to adopt this method may benefit from exploring startup business loan options to support their ventures.

Benefits of the lean startup

The lean startup methodology offers several compelling benefits that can significantly impact the efficiency and success rate of new ventures. Here are some of the key advantages:

• Cost efficiency: By focusing on developing a minimum viable product (MVP) and iterating based on feedback, lean startups can avoid the high costs associated with developing features that do not meet market needs.
• Enhanced adaptability: Rapid iterations and constant feedback loops allow these startups to pivot quickly in response to changing market demands or customer preferences, staying more relevant and competitive.
• Faster time to market: Lean startups can bring their products to market more quickly because they focus on the core functionalities needed by early adopters, rather than perfecting a full-featured product at launch.
• Increased customer focus: Direct customer feedback is integral to the product development process, ensuring that the product evolves according to actual user needs and preferences, thus increasing the likelihood of product-market fit.
• Data-driven decisions: Emphasis on metrics and feedback helps in making informed decisions that are based on user behaviour and empirical data rather than assumptions and speculation.

These benefits combine to reduce the risks and resources needed in launching and scaling a new business, making the lean startup approach especially attractive in today's fast-paced business environment.

Requirements for lean startup

Adopting a lean startup methodology requires several foundational elements to effectively navigate the process of building a business under conditions of extreme uncertainty. Here are the essential requirements:

• Focus on validated learning: Startups need to prioritise learning over optimisation to validate their business hypotheses efficiently, which involves setting up experiments to test assumptions.
• Develop a minimum viable product (MVP): The creation of an MVP is crucial. It allows startups to launch quickly with a basic version of their product to begin the cycle of feedback and iteration.
• Customer feedback integration: Continuous collection of customer feedback is necessary to inform the ongoing development and refinement of the product.
• Agile development practices: Adopting flexible and iterative development processes helps in quickly adapting to customer needs and changing market conditions.
• Use of key performance indicators (KPIs): Lean startups must identify and measure KPIs that accurately reflect the success of their product in the marketplace to guide decisions.
• Strong team communication: Effective communication within the team is vital for quickly sharing insights and making rapid decisions based on new learning.

These requirements foster a culture of innovation and flexibility, which is essential for lean startups aiming to succeed in dynamic market environments.

Example of lean startup

A classic example of a lean startup is Dropbox, the file storage and sharing service. In its early stages, Dropbox employed a lean startup methodology by creating a simple explainer video instead of a fully developed product. This video outlined the product's intended functionality and was presented to potential users to gauge interest and gather feedback. The enthusiastic response confirmed a market need, leading Dropbox to proceed with further development. This approach minimised initial costs and validated the concept before large investments were made, demonstrating the power of building a minimum viable product (MVP) and iterating based on real-world user input.

Lean startup vs. traditional startup approaches

Lean startup and traditional startup methodologies differ significantly in their approach to developing new businesses:

• Speed and adaptability: Lean startups emphasise rapid prototyping and continuous iteration, allowing them to adapt quickly to changes and learn from customer feedback. Traditional approaches often rely on extensive upfront planning and a fully developed product before market entry.
• Resource allocation: Lean startups focus on minimal initial investment in the product and scaling after validating the market demand, whereas traditional startups may require significant capital outlay from the start.
• Risk management: The lean approach mitigates risk by validating assumptions early and frequently through customer interactions; traditional methods may encounter higher risks due to committing resources based on untested business plans.
• Feedback mechanism: Continuous customer feedback is integral to the lean process, shaping the product's development directly, unlike traditional startups where the product may be developed based on market research but less direct consumer interaction.

For startups looking to build a more structured initial approach, a detailed business plan can be crucial, especially when following traditional startup methodologies.

Main characteristics of a lean startup

Lean startups are distinguished by a set of core characteristics that define their approach to launching and growing in today's dynamic business environment. Here are the main features:

• Customer-centric development: Lean startups prioritise customer feedback, allowing them to create products that truly meet market demands through iterative testing and development.
• Minimum viable product (MVP): They focus on quickly developing an MVP to start the learning cycle, avoiding extensive features until market fit is proven.
• Validated learning: Each step in the development process is aimed at learning what customers really want, minimising the amount of time spent on unproductive directions.
• Flexible product development: Adapting to customer needs and market changes is a continuous process, and lean startups excel at pivoting their strategies based on this feedback.
• Data-driven decisions: Decisions are heavily based on data from market testing rather than conjecture or preconceived notions about what the market wants.
• Build-measure-learn loop: This fundamental feedback loop involves building out ideas, measuring customer reactions and behaviours, and learning whether to pivot or persevere in the current direction.

These characteristics help lean startups reduce risks and avoid the inefficiencies associated with traditional product launches and market entry strategies.

The lean startup methodology offers a pragmatic, cost-effective approach to launching a new business by emphasising rapid prototyping, continuous feedback, and iterative learning. This strategy reduces the risk and expense typically associated with starting a new venture. It encourages startups to innovate more swiftly and respond to market demands more effectively. For entrepreneurs considering this method, securing a business loan can provide the initial capital required to jump-start your lean startup journey, empowering you to focus on growth and customer satisfaction.

While care is taken to update the information, products, and services included in or available on our website and related platforms/ websites, there may be inadvertent inaccuracies or typographical errors or delays in updating the information. The material contained in this site, and on associated web pages, is for reference and general information purpose and the details mentioned in the respective product/ service document shall prevail in case of any inconsistency. Subscribers and users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/ service document and applicable terms and conditions. In case any inconsistencies are observed, please click on reach us .

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Frequently asked questions

An example of the Lean Startup methodology is Dropbox, which started by creating a simple video explaining their product idea to gauge user interest and validate the market demand before developing the full software. This approach allowed them to avoid extensive development costs and focus on enhancements based on the feedback received, rapidly iterating to improve the product in alignment with user needs.

The key concepts of the lean startup methodology include the creation of a minimum viable product (MVP) to start the learning process as quickly as possible and the use of validated learning to empirically test business hypotheses. It also emphasises the importance of agile adaptation through the Build-Measure-Learn feedback loop, which helps startups make fast decisions to pivot or persevere based on real-world data and customer feedback.

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The Lean Post / Articles / Understanding Lean Transformation

Executive Leadership

Understanding Lean Transformation

By Lean Enterprise Institute

May 1, 2024

Learn the critical dimensions of transformation with the Lean Transformation Framework, a proven, systematic approach toward achieving a lean transformation by resolving problems at every enterprise level, from executive-level strategy to frontline operations.

What is the Lean Transformation Framework? 

The Lean Transformation Framework is a proven, systematic approach to resolving problems at every level of the enterprise, from executive-level strategy to frontline operations. Whether you lead an established organization or a startup, you can use the Framework to address any troubling issue by answering its five questions. The questions guide you through the fundamental questions of purpose,  process , and people, which will help you to identify solutions that align with all three. 

They are as follows:  

• What is the  value -driven purpose? Or what is the problem to solve? 
• What is the work to be done (to solve the problem)? 
• What capabilities are required (to do the work to solve the problem?) 
• What management system — operating system and leadership behaviors — is required? 
• What basic thinking, including mindsets and assumptions, are required by the organization as a purpose-driven socio-technical system? 

These questions are fractal — meaning that the same questions apply whether working at the macro enterprise level or the level of individual responsibility. So, anyone at any level of enterprise — from the CEO to the frontline supervisor — can use the Framework. 

When using the Framework, it’s vital to understand how each question — and answer — relates to the others to maintain momentum toward achieving transformation. 

Here’s a little more detail about each question. 

What problem are we trying to solve?  

This question clarifies whether you’ve clearly defined your organization’s  True North  or value-driven purpose. If you make headphones, for example, have you specified your value proposition from your customer’s viewpoint in terms of quality, cost, and lead time? 

Then, what is your current situation versus that target? For example, if you make custom headphones to order and it takes one month to deliver, but your customers expect delivery in two weeks, that gap becomes your problem to solve. 

What is the work, and how do we improve it?  

Based on a quarter century of practical experience, LEI believes organizations must focus on improving the frontline work to resolve business problems and, ultimately, achieve their organizational purpose. So to solve the business problem clarified in Question 1, the Framework calls for closely analyzing, describing, and breaking down the work process to determine how to improve it. 

In the headphones example, you’d go to the  gemba , where the work of producing the headphones occurs, to study the work and ask: What, in the work process itself, is preventing us from achieving our objective of a two-week lead time? Is it design? Production? Logistics? Something supplier-related? Of course, you’d use lean practices and tools proven to help answer these questions, such as value-stream mapping,  standardized work ,  A3  problem-solving, and others. 

How do we develop our capability?  

Once we clarify the problem to be solved and the work-process improvements that will resolve it, we often find that we cannot make the necessary changes with our current capabilities. Continuing with our example, we may require new design, production, or logistics capabilities to improve the lead time to deliver our headphones in two weeks. 

Furthermore, a natural part of a lean transformation is developing the capability to transform. Across the organization, how capable of solving problems and continuously improving is each individual? Have we specified the skills we need and a plan to help everyone develop them? 

What management system and leader behaviors do we need?  

As we develop our people’s capability of improving their work processes, we will encounter problems in the management system. Discovering this is a natural by-product of this type of development. Issues with the management system often relate to how the organization is structured or leadership practices and behaviors. For example, if we want everyone to be capable problem solvers, what organizational structure is needed to build this competence? How do leaders at every level connect to the day-to-day work at the gemba? How does communication and review of the work occur daily, weekly, monthly, or annually to confirm we are achieving our objectives and to allow management to step in and offer support as needed? And what leadership behaviors are necessary to ensure that problems are quickly surfaced and resolved? 

What is our basic thinking?  

The final Framework question helps identify the fundamental thinking or mindset behind our lean transformation. While the example we’ve laid out may seem straightforward, it’s clear that one of our basic assumptions in taking lead time from four weeks to two is that, as a business, we will first and foremost focus our work on fulfilling the customer’s needs. And if you follow that same logic through our set of questions, you’ll see that another part of our basic thinking is that we will focus on increasing the value-added work. Also, we will show respect for the people doing the work by ensuring that every step of their work process adds value for the customer. So, as these few examples show, the answer to Question 5 becomes clear as we work through the transformation process by improving the work. 

Using this set of five questions, you can think through any problem at any level in the organization. Download the worksheet and try it!

Download the Lean Transformation Framework worksheet

Special note : Are you embarking on a lean transformation? Join our coach-led online course “ Understanding Lean Transformation ” to dive deep into the Lean Transformation Framework. Discover pitfalls to avoid and how to lead a successful transformation. The course runs from June 25 to July 23 . Register by May 11 to save $299. 

Discover pitfalls to avoid and how to lead a successful lean transformation.

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