SCHOOL OF MANAGEMENT STUDIES

UNIT – III – Crafting Business Models and Lean Start - ups – SBAA5105

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Introduction to business models; Creating value propositions - conventional industry logic, value
innovation logic- customer focused innovation; building and analyzing business models; Business
model canvas, Introduction to lean startups, Business Pitching.

BUSINESS MODEL: MEANING

A Business Model is a conceptual structure that supports the viability of a product or company and
explains how the company operates, makes money, and how it intends to achieve its goals. All the
business processes and policies that a company adopts and follows are part of the business model.
The term business model refers to a company's plan for making a profit. It identifies the products or
services the business plans to sell, its identified target market, and any anticipated expenses.
Business models are important for both new and established businesses. They help new; developing
companies attract investment, recruit talent, and motivate management and staff. Established
businesses should regularly update their business plans or they will fail to anticipate trends and
challenges ahead. Business plans help investors evaluate companies that interest them.

Elements of business model:

According to business researchers - Henry Chesbrough and Richard S. Rosenbloom, there are six
chief business models elements. And they are as follows,
• Value Proposition: Value propositions explain, in as few words as possible, what particular
benefit users get from a product or service and why you can provide it better than others.
For example, a restaurant might make its value proposition that it supports the local business
by only using locally sourced meat or vegetables. Customers choose that restaurant because
they wish to support local business, even at a higher price.
• Market Segment: Market segment is an element that overlaps with business plans; business
models must determine a tentative market segment for the product or service. Different
market segments can value a new product for very different reasons, meaning market
segment selection can radically change the development of the product. Some customers
may value cost savings, where others may pay a premium for performance.
• Value Chain: The business model must also define a general value chain. Business expert
Michael Porter describes the value chain as all the activities from receiving input materials

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 to construction and delivery of the finished product to end users, as well as marketing and
customer support.
• Profit Creation and Costs: The business needs to develop a clear idea of what method it
intends to use to create profit, such as licensing, renting or simply selling the product, as
well as the method for collecting money from customers. The model must also cover how
profit distribution occurs and a sense of what the market will bear.
• Value Network: The business model should account for how a business is situated within
an interconnected group of competitors and businesses that provide complementary
products or services. By understanding the composition and offerings of other members of
the network, the business can enhance value and demand for the core product.
• Strategy: Strategy, construed broadly for the purposes of business models, refers to the
various ways that a business can establish a competitive advantage in the marketplace.
Businesses can take one of two main approaches to creating a competitive advantage: cost
or differentiation. The cost strategy entails delivering equivalent products and services for
less. Differentiation calls for the business to deliver superior products or services, but
usually at the cost of serving a limited market segment.

VALUE PROPOSITION – CONCEPT

A value proposition is a promise of value to be delivered, communicated, and acknowledged. It is

also a belief from the customer about how value (benefit) will be delivered, experienced and
acquired. A value proposition can apply to an entire organization, or parts thereof, or customer
accounts, or products or services. Creating a value proposition is a part of business strategy.

Kaplan and Norton say, "Strategy is based on a differentiated customer value proposition.
Satisfying customers is the source of sustainable value creation." Developing a value proposition is
based on a review and analysis of the benefits, costs, and value that an organization can deliver to
its customers, prospective customers, and other constituent groups within and outside the
organization.

It is also a positioning of value, where Value = Benefits − Cost (cost includes economic risk).

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Elements of value proposition:
• Newness: Some value propositions satisfy an entirely new set of needs that didn't exist
before. We often see this in the technology world (did we ever know that we needed mobile
phones this much? More recently, we have seen it with the growth of crowd funding and
alternative finance as the banks' ability to lend has been constrained.

• Performance: Faster or more reliable performance is a common way to create value.

Technology relies on this to keep us buying the latest model. Can you deliver your service
faster or more reliably than your competitors?

• Customization: Tailoring products and services to a customer's specific needs creates value
as there is a sense of the solution being perfectly suited to their needs and problems. In
recent years, the concept of mass customization has gathered pace with co-creation gaining
importance. This is where a customer (or user) can tailor how a product works or looks to
meet their own requirements.

• Getting the job done: Very often, people will pay to move a task that they are not skilled
in, but know they need, off their desk. This is the classic stimulus for outsourcing. The
arrangement allows customers to focus on their core business activity without having to
build and pay for their own function in-house.

• Design: Design is increasingly important, both in personal life and business. People will pay
extra for something because it looks or feels beautiful, or because it works particularly well.
Apple has built its business by paying as much attention to design as it does to the core
function of its products.

• Brand/status: Admit it; we all do it - paying that little bit extra for the right logo because of
the way it makes us feel about ourselves.

• Price: Offering a similar product at a lower price is a common way to create competitive
advantage. Often looked down on as a strategy, many low-cost airlines have built extremely
successful businesses by unashamedly under-cutting the market and offering flights for the
lowest possible price. In other markets, free is becoming the new normal: free newspapers,

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 free social media platforms - these rely on making money elsewhere in the value chain by
leveraging the value of their readership or users.

• Cost reduction: Helping customers to reduce their costs is an important way to create
value. Closely aligned to outsourcing and getting the job done, more recent examples
include the rise of cloud computing, which relieves buyers of the need to buy and maintain
software themselves.

• Risk reduction: Customers value reducing the risks they incur in life or a specific purchase.
Insurance is the obvious expression of a value proposition that is centred on risk reduction.
Other businesses can introduce risk reduction into their value propositions by offering
money-back guarantees and service level agreements.

• Convenience and accessibility: In an increasingly fast paced world, life is all about
wanting to be able to run our lives and our businesses anytime, anyplace, anywhere (Martini
anybody?). The more convenient and accessible you can make your product or service, the
more value will be ascribed to it. Providing your services online, offering an out-of-hours
support service, being on-site are all ways of offering more convenience and accessibility
than your competitors.

• So, what is the bundle of benefits that creates value for your customers? Do you
understand them and do you properly represent them in all aspects of your marketing? If
the answer is no, give yourself time out to think about it; do some research if necessary:
it's important.

Importance of a Value Proposition:

The development of a value proposition is a vital part of a company’s business strategy. Since the
proposition provides a company with a method to influence the decision-making of customers, it is
frequently displayed on the company’s marketing materials, such as a website.

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The value proposition is a powerful tool to drive sales and build a customer base. Additionally, a
perfect and compelling value proposition can advance the effectiveness of the company’s marketing
strategies. Generally, it is regarded as the most effective and wide-reaching marketing activity.

How to Create a Value Proposition:

As already determined, the perfectly tailored value proposition can become a huge success factor
for a company. However, the creation of a powerful proposition is a challenging yet rewarding task
for every business. Below, we have listed some tips that will help you to create an effective one:

1. Know your customers: Before creating your value proposition, you must analyze the market
and potential customers. Identify your target customers and target market segment to understand
their desired benefits.

2. Understand your costs and benefits: Identify and assess the benefits delivered by your
company and its products or services, along with the costs incurred to provide them. It is important
to do this because the value to your customers is essentially the difference between the benefits and
costs of your product or service.

3. Don’t forget about your competitors: After the analysis of target customers and your own
company, evaluate the competitive landscape in the market. Determine the strengths and
weaknesses of your major competitors and identify ways you can differentiate your business from
them.

4. Be clear and concise: Don’t forget that an effective value proposition is clear and concise. Your
target customers must quickly grasp the message you want to convey. It should not exceed two or
three sentences.

5. Design is king: Make your proposition visible and appealing on all marketing materials (e.g.,
website). Remember that if you have created a powerful value proposition, but no one can see it,
the effect of the proposition will be zero!

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What makes a good value proposition?

• Clarity! It’s easy to understand.

• It communicates the concrete results a customer will get from purchasing and using your
products and/or services.
• It says how it’s different or better than the competitor’s offer.
• It avoids hype (like “Never seen before!” or “Amazing miracle product!”), superlatives
(“best”) and business jargon (“value-added interactions”).
• It can be read and understood in about 5 seconds.

HOW TO WRITE VALUE PROPOSITION:

• . Identify all the benefits your product offers.
• . Describe what makes these benefits valuable.
• . Identify your customer's main problem.
• . Connect this value to your buyer's problem.
• . Differentiate yourself as the preferred provider of this value.

What is the Value Proposition Canvas?

The Value Proposition Canvas is a tool which can help ensure that a product or service is positioned
around what the customer values and needs.

The Value Proposition Canvas was initially developed by Dr Alexander Osterwalder as a

framework to ensure that there is a fit between the product and market. It is a detailed look at the
relationship between two parts of the Osterwalder’s broader Business Model Canvas; customer
segments and value propositions. The Value Proposition Canvas can be used when there is need to
refine an existing product or service offering or where a new offering is being developed from
scratch.

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The Value Proposition Canvas is formed around two building blocks – customer profile and a
company’s value proposition.

Customer Profile:

• Gains – the benefits which the customer expects and needs, what would delight customers
and the things which may increase likelihood of adopting a value proposition.
• Pains – the negative experiences, emotions and risks that the customer experiences in the
process of getting the job done.
• Customer jobs – the functional, social and emotional tasks customers are trying to perform,
problems they are trying to solve and needs they wish to satisfy.

A customer profile should be created for each customer segment, as each segment has distinct
gains, pains and jobs.

Value Map:

• Gain creators – how the product or service creates customer gains and how it offers added
value to the customer.
• Pain relievers – a description of exactly how the product or service alleviates customer
pains.

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• Products and services – the products and services which create gain and relieve pain, and
which underpin the creation of value for the customer.

Achieving fit between the value proposition and customer profile:

• After listing gain creators, pain relievers and products and services, each point identified can
be ranked from nice to have to essential in terms of value to the customer. A fit is achieved
when the products and services offered as part of the value proposition address the most
significant pains and gains from the customer profile.
• Identifying the value proposition on paper is only the first stage. It is then necessary to
validate what is important to customers and get their feedback on the value proposition.
These insights can then be used to go back and continually refine the proposition.

Steps for using the value proposition framework effectively and efficiently:

• Jot down all the products and services in the portfolio which combine to make up
your value proposition.
• Describe how the value proposition contributes to eliminate the targeted customer’s
pain points.
• Describe how the value proposition contributes a positive result for the targeted
customer.
• Ultimately all three elements; products and services, pain relievers and gain
creators should be ranked according to their relative importance to the targeted
customer.

Value innovation:

Value innovation is the implementation of upgrades or new technologies designed to help a

company differentiate its products or services while lowering costs. Value innovation is a
process in which a company introduces new technologies or upgrades that are designed to
achieve both product differentiation and low costs. The changes implemented through value

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 innovation create new or improved elements for the product or service, but also result in cost
savings by eliminating or reducing unnecessary aspects during the product lifecycle.

Conventional strategic logic and value innovation differ along the basic dimensions of strategy.
Many companies take their industry's conditions as given; value innovators don't. Many
companies let competitors set the parameters of their strategic thinking; value innovators do not
use rivals as benchmarks. Rather than focus on the differences among customers, value innovators
look for what customer’s value in common.

Conventional Logic versus Value Innovation:

Conventional strategic logic and the logic of value innovation differ along the five basic dimensions
of strategy:

• Industry assumptions: while conventional logic takes industry conditions as given, value
innovators challenge them
• Strategic focus: Conventional logic leads companies to compete at the margin for
incremental share by focusing only in building advantages regarding their competitors.
Value innovators analyze the competition but do not use them as benchmarks. Instead, focus
on dominating the market by offering tremendous leap in value
• Customers: value innovators do not segment the market, they focus on the commonalties in
the features that customers value
• Assets and capabilities: Unlike the majority of companies which define business
opportunities based on which assets and capabilities they have, business innovators assess
opportunities without being constrained by their actual condition
• Product and service offerings: Innovators do not limit their selves by the products and
services that already exist in the market. They try to solve customer needs by giving them
alternatives to the ones which already exist in the market.

Customer focus innovation: Customer-focused innovation involves

(1) Developing, manufacturing, and marketing new products that meet customer needs at a faster
pace than the competition; and

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 (2) A focus on inserting the “voice of the customer” into the design process to better capture
customer expectations and preferences.

Lindic has developed a PERFA framework to evaluate this concept of value proposition in regards
to innovation.

Performance (P), Ease of use (E), Reliability (R), Flexibility (F), and Affectivity (A).
performances of innovations or new goods or services offered to customers is a result of a
superior company's offering in terms of quality, technical performance, features and ability to
meet customer needs and demands. Ease of use refers to the degree to which a person believes
that using a particular system or product will be effort-free (e.g. the ease of search and
acquisition, usability, personalization, service, and support). Reliability is defined as “the ability
to perform the promised service dependably and accurately”. Flexibility is perceived as
necessary in order to maintain the fit of an organisation and a changing environment. It describes
a firm's ability to reallocate and reconfigure its organisational resources, processes and strategies
as a response to environmental changes. Affectivity addresses the feelings or emotions
associated with working with a company or using its products and services.

Business model innovation:

Business model innovation is the development of new, unique concepts supporting an
organization's financial viability, including its mission, and the processes for bringing those
concepts to fruition. The primary goal of business model innovation is to realize new revenue
sources by improving product value and how products are delivered to customers. The type of
innovation that is most relevant for an organization at a particular point in time is a function of
the most important questions that the organization is asking itself or is addressing.

Questions such as:

• How can we reach our customers more effectively?

• How do we make our service more affordable for a larger customer segment? Is our
product easy to use?

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 • What issues are clients facing with delivery?

WHAT IS A BUSINESS MODEL CANVAS?

The Business Model Canvas, developed by Alexander Osterwalder, is a visual representation of

current or new business models, generally used by strategic managers. The Canvas provides a
holistic view of the business as a whole and is especially useful in running a comparative analysis
on the impact of an increase in investment may have on any of the contributing factors.

The Business Model Canvas gives people a common language through which they can evaluate
traditional processes and bring innovation into their business models.

THE 9 BUILDING BLOCKS:

The Business Model Canvas categorizes the processes and internal activities of a business into 9
separate categories, each representing a building block in the creation of the product or service.
These categories represent the four major aspects of a business; customers, offer, infrastructure,
as well as financial viability.

1. Customer Segments: The total customer pie is divided into segments based on the manner in
which an organization’s products or services address a specific need for the segment. The
customer segment is an essential part of an organization’s business model and is key to ensuring
that the product features are aligned with the segments characteristics and needs.

To carry out effective customer segmentation, a company must first know its customers, both
through their current and future needs. Then the organization must list its customers in terms of
priority, including a list of potential future customers. Finally, the company should do a thorough
assessment of its customers by understanding their strengths and weaknesses and exploring other
kinds of customers who may benefit the company more if they are to focus on them.

Various customer segments are as below;

Mass Market: An organization opting for this type of customer segment gives itself a wide pool
of potential customers because it feels that its product is a relevant need amongst the general
population. A potential product for such an organization could be Flour.

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Niche Market: This customer segment is based on highly specific needs and unique traits of its
clients. An example of an organization with a niche customer segment is Louis Vitton

Segmented: Organizations adopting the segmented approach create further segmentation in their
main customer segment based on slight variations in the customer’s demographics and
resultantly, their needs.

Diversify: An organization with a Diversified Market Segment is flexible in the iterations of its
product or service tweaking it to suit the needs of segments with dissimilar needs or traits.

Multi-Sided Platform/ Market: This kind of segment serves customers who have a relationship
to each other, i.e. blogging sites need a large group of active bloggers to attract advertisers. And
they need advertisers to create cash flow. Hence, only by creating a pull with both segments will
the blogging site be able to have a successful business model

2. Value Propositions: An organization’s value proposition is the combination of products and

services it provides to its customers. Osterwalder stated that these offerings need to be unique
and easily differentiated from competition. Value propositions can be divided into two
categories:

Quantitative: this stresses the price or efficiency of the product or service

Qualitative: this value proposition highlights the experience and results the product and its use,
produce.

The value proposition provides value through a number of attributes such as customization,
performance, “getting the job done”, brand/ status, design, newness, price, cost and risk
reduction, accessibility, as well as convenience/ usability.

When creating the product’s value proposition, the first question an entrepreneur must ask
himself is, what problem he is solving through his offered product or service. Then one needs to
look into how the product, service or overall experience can be improved so that it provides
greater value than the competition. Finally, it is imperative to identify the core value that your
business provides. One way to identify this value is for an owner to specify what he/ she wants
customers to remember about their interaction with the company.
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3. Channels: The medium through which an organization provides its value proposition to its
customer segment is known as a channel. There are various options for channels available to an
organization, and the selection is based on the channel that is the quickest, most efficient with the
least amount of investment required. There are two basic kinds of channels; Company owned
channels such as store fronts or Partner Channels such as Distributors. A company can opt to
choose either one or employ a combination of both.

For an entrepreneur, the first step in dealing with channels is to identify the customer channels.
Touch points with customers can be limited or diverse depending on company strategy. Then he/
she need to evaluate the strength of the channel by conducting an SWOT analysis on the channel.
Finally, the company can identify and build new customer channels.

4. Customer Relationships: An organization must select the kind of relationship it will have
with its customer segment in order to create financial success and sustainability. Customer
Relationships can be categorized as follows;

Personal Assistance: In this kind of relationship the company interacts with the customer
directly through an employee who provides the human touch by assisting the customer presale,
during the sale and even may provide after sales services.

Dedicated Personal Assistance: This kind of relationship is characterized by a very close

interaction between the customer and the company through a dedicated representative who is
assigned a set of clients and is personally responsible for the entire experience the customer has
with the company.

Self-Service: Self-Service places the onus of the customer experience on the tools the company
provides for the customer to serve him or herself.

Automated Services: These are customized self-service relationships where the historical
preference of the customer is taken into account to improve the overall experience.

Communities: In today’s electronic age creating communities of clients allows organizations to

communicate with them directly. This allows for an enhanced client experience because the

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community allows clients to share their experiences and come up with common challenges and
solutions.

Co-creation: The customer has a direct hand in the form the company’s product or service will
take.

For an entrepreneur, the priority is to identify the type of relationship he/ she has with the
customer. Then the value of the customer must be evaluated in terms of the frequency of his
expenditure on the firm’s product and services. Loyal customers are relationships that the
company should aim to invest in as they will yield steady revenue throughout the year.

5. Revenue Streams: A revenue stream is the methodology a company follows to get its
customer segments to buy its product or service. A revenue stream can be created through the
following ways;

Asset Sale: the company sells the right of ownership over the good to the customer.

Usage Fee: the company charges the customer for the use of its product or service.

Subscription Fee: the company charges the customer for the regular and consistent use of its
product or service.

Lending/ Leasing/ Renting: the customer pays to get exclusive access to the product for a time-
bound period.

Licensing: the company charges for the use of its intellectual property.

Brokerage Fees: companies or individuals that act as an intermediary between two parties
charge a brokerage fee for their services.

Advertising: a company charges for others to advertise their products using their mediums.

When setting up revenue streams, it is important to recognize that an effective price for the
product and/or service will be arrived at through the process of elimination. Different iterations
of prices should be listed and evaluated. It is important, in the end to take a break ad reflect on
possible avenues open to you as a business.

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6. Key Resources: These are the assets of the organization fundamental to how it provides value
to its customers. Resources can be categorized as human, financial, physical and intellectual. For
an entrepreneur, it is important to begin with listing your resources. This gives you a clear idea of
what final product or service your company needs to create for the customer and which resources
are dispensable, resulting in cost savings for your company. Once the final list of resources is
available, the company can decide on how much it needs to invest in these key resources to
operate a sustainable business.

7. Key Activities: Activities those are key to producing the company’s value proposition. An
entrepreneur must start by listing the key activities relevant to his/her business. These activities
are the most important processes that need to occur for the business model to be effective. Key
activities will coincide with revenue streams. Now it is important to evaluate which activities are
key by adding or removing some and evaluating their impact.

8. Key Partnerships: To create efficient, streamlined operations and reduce risks associated with
any business model, an organization forms partnerships with its high-quality suppliers. Key
partnerships are the network of suppliers and partners who complement each other in helping the
company create its value proposition. Partnerships can be categorized as follows;

• Strategic alliance between competitors (also known as competition),

• Joint ventures and

• Relationships between buyers and suppliers.

An entrepreneur must begin by identifying its key partners followed by making future
partnership plans. This can be done through an evaluation of the partnership relationship to judge
which characteristics of the relationship need improvement and what kind of future partnerships
will be required.

9. Cost Structure: This defines the cost of running a business according to a particular model.
Businesses can either be cost driven i.e. focused on minimizing investment into the business or
value driven i.e. focused on providing maximum value to the customer.

Following are some traits of common cost structures;

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Fixed Costs: costs that remain the same over a period of time

Variable Costs: as the name suggests, these costs vary according to a variance in production

Economies of Scale: costs decrease as production increases

Economies of Scope: costs are decreased by investing in businesses related to the core product.

The first step for an entrepreneur is to obviously identify all costs associated with the business. A
realistic understanding of the costs of the business is one of the hallmarks of a good business
model. After identification, it is important to list all the costs on the canvas, so they are visually
present and then create plans for each cost. Some costs may be decreased through certain
measures while others may go up if you decide that an investment in a particular section will
result in future gains.

WHY TO USE THE BUSINESS MODEL CANVAS:

Visual Thinking: The tool allows for easy, visual representation for decision makers to ponder
upon. The tool provides a neat breakdown of the major considerations impacting the business and
also makes clear the direction the organization is taking through its business model.

Iterate Quickly: If a poster sized of the canvas printout is taken, it can be used in combination
with sticky notes for executives to evaluate current and potential tweaks in the business model
and their impact.

Grasp the relationship between the 9 blocks: The Business Model Canvas allows the executive
team to understand how the 9 building blocks relate to each other and the different ways these
relationships can be changed to increase efficiency or effectiveness. An opportunity
or innovation can be spotted through the use of this tool.

Short and Succinct: The tool encourages teams to keep their suggestions short and simple
enough to fit on post-it notes.

Easy to circulate: The tool allows easy access and sharability. Pictures of the completed canvas
or simply physically passing it around so people can grasp its gist as well as add to it, if need be,
make the Canvas a very portable and convenient tool.
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THE DEFINITION AND ORIGINS OF THE LEAN STARTUP:

The Lean Startup model takes its name from the Toyota manufacturing revolution as lead by
Taiichi Ohno and Shigeo Shingo. They transformed Toyota into a flourishing global company by
focusing on the following principles:

• Drawing on the knowledge and creativity of individual employees

• Shrinking batch sizes

• Utilizing just-in-time production and inventory control

• Accelerating cycle times

This approach highlighted the difference between value-generating behavior, and waste –
principles which the Lean Startup method carries across to the context of entrepreneurship. Ries,
therefore, firmly believes that startup success is not necessarily about having a great idea, or even
being in the right place at the right time; it is about following the right processes. Consequently,
the Lean Startup model is based on the following:

• Fast cycle times

• Focusing on what the customer wants (without asking them first)

• Using scientific approaches to make decisions

Thus, the Lean Startup business model is a novel approach to the development and innovation
of new products which focuses on speedy iteration, customer insight, creative vision and sizable
ambition, simultaneously.

Five principles of Lean Startup:

1. Entrepreneurs are everywhere and the Lean Startup approach can work in any size
company, even a very large enterprise, in any sector or industry

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 2. Entrepreneurship is management. “Entrepreneur” should be considered a job title in all
modern companies that depend on innovation for their future growth.
3. Validated learning. Startups exist to learn how to build a sustainable business. This
learning can be validated scientifically by running frequent experiments that allow
entrepreneurs to test each element of their vision.
4. Build-Measure-Learn. Turn ideas into products, measure how customers respond, and then
learn whether to pivot or persevere
5. Innovation accounting. We need focus on the boring stuff: how to measure progress, how
to set up milestones, and how to prioritize work

Here are three steps entrepreneurs can take to begin building a lean startup: Find, Execute, and
Validate.

1. FIND the Business Idea: When choosing a business idea to execute with the Lean Startup
Methodology, it is important to consider whether or not the problem that your product will solve is
important enough for customers to want to purchase it. Finding a business idea can be tricky, so it is
important to pay attention to problems people are facing in everyday life. Customers must be
actively searching for a solution to the problem in order for your product to gain traction.

2. EXECUTE the Business Idea: Next, you will build your product – your Minimum Viable
Product (MVP). The MVP is a version of the product you wish to build that will allow your team to easily
collect the most data about your potential customers and their feedback on the product as possible.
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Some proponents of the Lean Startup Methodology also suggest taking a “Kickstarter Approach”
with your product – that is, begin selling your product before it is finished being built in order to
create brand awareness and drive up interest in your product while raising funds for your Lean
Startup.

3. VALIDATE the Business idea: Product validation is a key step in building a successful Lean Startup.
In this step, it is time to experiment with your business idea in the real world. Test your MVP with real
customers in the marketplace – early adopter or otherwise – to see if your idea is viable and to gather
information that you can analyze. Use this data to decide if you should continue to build your
product, tweak your product, or pivot your business strategy.

If the results from testing your MVP in the marketplace are mostly positive, continue to build your
product using your original strategy while incorporating feedback from testers. If the results from
testing your MVP in the marketplace are positive and negative, tweak your product and/or
business strategy in order to make your product better meet the wants and needs of your customers.

If the results from testing your MVP in the marketplace are mostly negative, it is time to pivot your
product and/or business strategy. This will require a dramatic shift in your method and work to
adapt your vision to meet the wants and needs of your customers. In some cases, mostly negative
feedback will suggest that a Lean Startup should exit the marketplace altogether.

BUSINESS PITCHING

The term “business pitch” has become as popular as the term “startup.” A pitch is essentially a
business plan that one presents verbally to potential investors of a business. A shorter summary of
the complete pitch is an elevator pitch. The startup owner has to clearly explain the business
opportunity to the investors, so that they can make the most appropriate decision.

Essentials of business pitch:

• Industry analysis

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 • Customer needs
• Marketing strategy
• Business model
• Overview of the competition
• Risks
• Implementation plan
• Financial projection
• Financial needs

Here are 10 necessary steps to create a winning pitch for your business.

1. Time span: The pitch should be clearly explained to the investors in a short time. You
should know that you only have a few minutes to sell your business idea. This is a do-or-die
situation, which requires the utmost composure.

2. Make the presentation realistic: Presenting a realistic picture of the future prospects of the
business is preferred. You have been running the business with your own funds up until
now, so you have had your share of successes and failures. Your projections must be based
on those experiences and must sound absolutely realistic.

3. Savings attitude: One of the most important qualities of a startup founder is financial
control. Having an understanding of where each and every penny is being spent in the
business will add to your brownie points. You have to make the investors know that you
have a grip on the business and its operations. They should feel that you are a dependable
leader and are passionate about your vision.

4. The business opportunity: The most important aspect of pitching for your business is to
highlight the business opportunity and how are you going to tap it. Your business is out
there to fill gaps, but it is the size of the market and its affinity to the product that will fetch
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 you the investor’s trust. Highlighting the opportunities and challenges would help you put
forth your arguments more assertively.

5. Understanding of competitions: Understanding the competition is important for every

business owner, which must be showcased while presenting the business pitch. An in-depth
competition analysis must be presented and you must highlight how your product stands out
and has better future prospects, as compared to others.

6. Marketing strategy: Knowing your marketing plan is another very important aspect of
pitching your business. Your goal is to build a market for your products and services. The
strategy has to be clearly explained to the investors, so they know how you are going to
position the product in the market.

7. Target audience: Being focused about your business and knowing who exactly you wish to
sell to be important for the business. This lets you earn the investors’ confidence so they
know that you are going to reach out to a tangible audience and achieve the desired
profitability.

8. Focus: The more focused your approach, the higher your chances will be of getting the
desired amount of funding. In your pitch, you need to communicate the precise plan of
action, and how you will use it to achieve the desired results. You also need to be specific
about the amount of funding you require.

9. Create a multi level pitch: A multi-level pitch helps you divide the pitch into shorter and
longer versions. The shorter versions help in explaining the basics. The longer version helps
to explain the details and how the plan is going to be executed.

10. Get team participation: A business leader must always take his or her team along with
them. This adds to the confidence of the audience. You should encourage team members to

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 participate in the pitch process by planning out the speaking slots for them. A strong team
showcases the ability of the business to grow and provide the desired return to the investors.

Making a successful business pitch to your investors may seem challenging, but using the right
approach will surely bring you supporters.

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