[MVB] Minimum Viable Business
A framework for product innovators to build high-growth enterprises!
What is a STARTUP?
A startup is an experiment to build proof; proof for solving a serious problem at scale both effectively and profitably;
What is the role of a STARTUP FOUNDER?
A Startup Founder has to build PROOF;
PROOF for BIG BUSINESS potential; proof for solving A BIG PROBLEM at scale, with a business model that is profitably scalable!
Startup Founders — unlike small business owners or entrepreneurs building conventional enterprises, should focus more importantly on building a scalable enterprise, an enterprise that has the potential for growth, impact and profits.
A Startup Founder has to build proof for BIG BUSINESS potential; proof for solving A BIG PROBLEM at scale, with a business model that is profitably scalable!
We call this proof every startup’s Minimum Viable Business (MVB) milestone, proving viability not of a small profitable business but a profitably scalable business.
MVB is the smallest size/scale business that earns revenues predictably (revenue per time period) and repeatably (operating the same plan consistently), and is achieved within the shortest time and using the lowest cash.
Building this proof is a process of validation;
validation of the claim to solve the problem worth solving for a very large number of customers (Proof-of-Product);
validation of the viability of the operating model and revenue model through achieving consistent and predictable revenues (Proof-of-Business);
validation of the readiness of the business model to scale profitably thereby becoming attractive for venture funding(Proof-of-Scale);
Every startup has to prove viability — viability not of a small profitable business but a profitably scalable business;
Every new business (company) is NOT a Startup!
What is BUSINESS MODEL?
Business Model describes the approach for HOW a business makes profits! It’s the story…
What is BUSINESS PLAN?
Business Plan estimates for HOW MUCH profit the business shall make in a time period! It’s the screenplay…
So which new business (company) is a startup? Only that new business (company) which has the need to build proof for its Business Model.
And that is because the approach or method by which it aims (but actually claims at this stage) to earn profits has not been done before, and as a result the proof doesn’t exist.
Every business (company) has many elements of its ‘profit making story’ such as, problem statement, technology & product, target customer/market, distribution & sales etc. If a new business (company) enters a market/sector wherein existing businesses (companies) have these exact same/similar elements then the proof that these elements can come together to make profits already exists. Such a new business (company) doesn’t have to build proof and therefore is NOT a startup.
On the other hand, if a new business (company) enters a sector/market wherein any or all of the critical elements of the story are different from what already exist(s) then the new business (company) should first build the proof that these elements can collectively operate to deliver profits. Only such a company IS a startup.
Startups explore (validate) a Business Model before they execute a Business Plan!
A framework for Business Planning & Strategy for Startups
To support startup founders in their proof building efforts, we have developed the MVB framework that offers a set of concepts, methods, and tools which founders can use to build viable businesses in quick time with less cash, and thereby making their startups attractive for early-stage investments.
Business planning is more important than the Business Plan — a document that investors expect startups to write but they don’t read!
Business planning is more important than the Business Plan — a document that investors expect startups to write but they don’t read! A lack of this awareness leads to entrepreneurs reusing business plan templates and considering them final and binding. Whilst this does much less harm to entrepreneurs building small businesses or enterprises in the conventional sense, this can spell doom for startup founders bringing to life an innovative tech, product or business idea.
Also widespread is the myth that the process of business planning requires highly specialised skills, is very complex, and only required for large corporates. Whilst analytical rigor and structured approach are much needed in business planning for startup founders too, the process or method and the contents of business planning have to be much less complex. Rather than ignore business planning due to its complexity, what startup founders have to look for is a process that is effective, simple to adopt, and effective too. MVB from Forge is an answer to that search.
Business planning is about setting a course for the future, making choices and committing to actions. The soundness of a Business Plan is in the clarity of purpose, focus on goals, in how robust are the choices made and the actions taken.
The MVB framework offers a set of methods and tools built using the MVB methodology, aimed at enhancing the outcomes of the planning process. These methods and tools offer innovators and startup entrepreneurs a simple yet effective, light-weight yet rigorous, and analytical yet visual approach to business planning and business strategy.
While there is growing interest in entrepreneurship in India, many startup founders lack the basic skills required to make a ‘business’ out of their ideas. FORGE’s programs are structured to address this fundamental need, and to inculcate ‘entrepreneurship skills’ for both first generation startup entrepreneurs as well as for students, educators and researchers.
Over the past 15 months 500+ startup founders have attended the MVB bootcamps, workshops, and seminars that FORGE has organised with several partners in the ecosystem, and have been received very well by the audience.
What startup founders that attended our MVB BootCamps have to say!
For more complete version of testimonials from startup founders, you may play the videos from a consolidated playlist on our YouTube channel:
Appendix: Lots more on Validation
Only that new business, which attempts to successfully implement an innovative idea that ultimately creates economic value, is a startup. Very simply put a business model is a configuration of entities/resources/activities designed and operated to create economic value — value created is then shared between the different constituents in an equitable manner proportionate to their contribution to the process of economic value creation — this includes suppliers, manufacturers, the innovator business, the investors and the customers (buyers).
In other words creating economic value in an innovative way does become an attempt to generate a new business model — although the degree of innovation in the business model can be incremental (sustaining) or radical (disruptive).
An innovative idea to build a hardware connected device that solves an unsolved problem or solves a partially solved problem completely in a very affordable and convenient manner, is naturally a new (and innovative) business model because the target customer, the product offering, or the value proposition for starters are new.
An innovative idea — to use tech to make the business process and operations of an existing service business or to completely re-engineer the entire business model, is most definitely a new (and innovative) business model. Any business earns profits (not margins) by earning revenues in a predictable and sustained manner and by keeping total costs lesser than the revenues. Earning revenues predictably and consistently is the first step before becoming profitable.
And for a startup it is most critical to first validate this new (innovative) business model before setting ambitions to build a profitable and a scalable business.
Validate why?
Because there are assumptions in this new (innovative) business model
that are unproven, causing ‘model risks’. And with these ‘model risks’ it is almost certain that the business plan developed by the startup to execute towards revenues, profits and growth will fail to achieve its planned business goals with the planned investment (cash) and within the stated timeframe. Usually when that time comes (the end of the runway) the startup is left with nil cash and there is no fuel left to run a second race.
Validate what?
The fact that this new (innovative) business model is indeed viable, and that it is practical and feasible to execute a business plan towards achieving high growth in a profitable manner. Achieving viability is a 2-part exercise:
Part-1: The business must earns revenues in a consistent and predictable manner. The business knows how much revenues it can earn in a certain time period (day or week or month) and the consistent method to earn the revenues can be performed (operated) repeatedly.
Part-2: In addition the revenues should recover the costs involved in operating the business (and to thereby earn the revenues), and when this happens the business is on the path to achieving firstly operating break-even and then operating profits (usually measured on a monthly or quarterly basis).
Validate how?
By achieving ‘repeatable revenues’ from a minimum of number of
customer orders (sales transactions) in reasonably quick time and with as less cash (investment) as possible.
Achieving ‘repeatable revenues’ validates the basic assumptions in the business model namely, the demand for the product, the ability of the startup to satisfy the demand, and the willingness of the customer to buy and use the product. In doing so the startup also discovers the basic operating plan for the supply and demand side of its business and understands the activities, resources, costs, people, partners, channels etc.
MVB is a business operated at a minimum scope and size wherein it is reasonable (based on facts & data) to conclude that the key assumptions underlying the new (innovative) business model are proven beyond doubt.
MVB is the smallest size/scale business that earns revenues predictably (revenue per time period) and repeatedly (operating the same plan consistently);
MVB is achieved with the least cash and in the appropriate shortest time possible;
At this stage it is practical to then execute a business plan, with requisite investment (capital) towards achieving ‘aggregate profits’ in a sustained manner.
However with a new business that is building and scaling up a proven business model (it is not a startup), there are no ‘model risks’ and it can directly develop and execute a business plan towards revenues, profits and growth.
In FORGE.FAST — the business accelerator program, our focus is in continuously assessing each startup for its ‘readiness to execute’. On building a MVB with repeatable revenues the startup is considered ready to now execute a Business Plan to achieve aggregate profit.
Until the MVB is achieved, we help each startup to explore a higher potential business model, to diagnose which key assumptions of the business model require validation and to validate the business model with the least cash and in the shortest time.
Originally published at www.forgeforward.in on July 28, 2015.
