Starting A Business Workbook - Hadley
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Table of ContentsOverview3Workshop 1: Business Idea6Workshop 2: Activities, Resources, and Partners 11Workshop 3: Market Potential16Workshop 4: Marketing18Workshop 5: Measuring Viability24Workshop 6: Making a Profit28Workshop 7: Making an Impact34Workshop 8: Executive Summary38Business Canvas List422
OverviewThis workbook is part of the Hadley series Startinga Business. It will help you complete a businesscanvas for your own business idea.Founder StoriesThe Starting a Business workshop series frequentlyrefers to businesses featured in the Hadleyworkshop series called Founder Stories. These areengaging and inspiring interviews of successfulentrepreneurs, hosted by Paul Earle, principal ofEarle and Company and faculty member at KelloggSchool of Management. Listening to a few may giveyou valuable insight for your own business idea andcanvas.Workbook OrganizationEach workshop section in this workbook includesthe following: Key Questions: These are reflection questionsyou can answer for yourself when youcomplete the workshop and its workbooksection.3
Key Terms: These are important business termsto become familiar with as you document yourbusiness ideas. Activity: These questions prepare you to fill outthe business canvas sections for the workshop. Business Canvas: Your answers to thesequestions also transfer directly to thecorresponding section of your business canvas.Business CanvasThe business canvas is a simple framework thatcontains all the essential building blocks of abusiness plan. This diagram of eleven boxes canalso be organized as a list.This workbook is a PDF form. You can completeboth a large print Business Canvas List and a smallprint layout diagram of your business canvassimply by answering the Business Canvas items inyour workbook. When you use the text entryboxes, your answers also appear automatically inthe Business Canvas List and the layout diagram atthe end of the workbook. Likewise, any edits toyour Business Canvas List will automatically4
appear in the corresponding workbook section andthe layout diagram.Each text box has a size limit that matches itscorresponding area in the canvas layout diagram.Staying within the size limit helps ensure a concisepresentation of your business plan.You can use provided links to navigate from theBusiness Canvas item questions to your large printBusiness Canvas List, and back. The layout diagramis a very visual layout, and it is not screen readerfriendly. To view it, just scroll down from yourBusiness Canvas List. You can print and present thelayout diagram to potential funders or othersinterested in your business.Instructions for printing your Business CanvasLayout Diagram are provided at the end ofWorkshop 7, after you have fully completed yourcanvas.Now, if you have already viewed Workshop 1:Business Idea, proceed to the Workshop 1 section ofthis workbook.5
Workshop 1: Business IdeaKey QuestionsThese questions don’t need answers in writing. Bythe time you finish listening to Workshop 1 andworking through the workbook content, you’ll havethe answers to these questions for yourself. What problem is solved by the product orservice offered by Schmidt's Naturals oranother business from the Founder Stories? What problem is solved by the product orservice offered by my business? What are the features that make my businessdifferent from others? What are the customer benefits of myproduct or service? What Value Proposition statement describesmy business? You would fill in the informationin parentheses:6
To (my target segment) my company offers(product or service offering), in order to(benefit to the customer). My company cando this better than others because of (thethings that make my business different). What value proposition describes Harry’sRazors?Key TermsValue proposition: a statement that describes whoyour customer is, what your business offers, whyyour idea or business is different from others,and how your customer will benefit from yourideaLong interview: a conversation with a potentialcustomer or someone who may experience theproblem you are thinking aboutTarget segment: the group whose needs, behaviorsand traits drive all your marketing, sales, andoperating decisionsActivityThese questions can get you thinking about yourown business idea before you enter information into7
your Business Canvas. You can answer them bytyping into this document or by writing them downsomewhere else. (Note the number of charactersallowed. 350 characters allowed in first box.)1. What problem is your business solving?2.If customers buy your product or service, whywill they be better off? (400 characters)3.Use your answers to complete the followingvalue proposition statement for yourcompany. You can revise or completelychange it at any time. The statement has two8
sentences. Fill in the information suggested inparentheses to personalize the valueproposition statement for your business idea.To (my target segment) my company offers(product or service offering), in order to(benefit to the customer). My company cando this better than others because of (thethings that make my business different). (350)Business CanvasItem 1: You’ve had a chance to think about theproblem your business solves and the valueproposition describing your business. Enter yourValue Proposition from Activity question 3 inthe following text box. Or you can write it inanother way that fits your situation. Justremember to describe your target segment,9
the benefits of your product or service, and whyyour business has the best idea or can do it thebest way. (350)Whenever you enter new information in a BusinessCanvas section of the workbook, you may want tosee how your answer fits in your canvas. Use thelink to the corresponding part of your BusinessCanvas List at the end of each Business Canvassection to take a look. You can return to where youleft off in the workbook by selecting the return linkin the Business Canvas List.Connect to your canvas list here.10
Workshop 2: Activities, Resources, andPartnersWhat Does My Business Actually Do?Key Questions What are the key activities of the businessesdescribed in the Founder Stories? What are the key activities of my business?Key TermsKey activities: the main activities you need to bedoing as you run your businessSupply chain: the flow of goods and services,including all processes that transform rawmaterials into final productsWhat Does My Business Need?Key Questions What are the key resources of the businessesdescribed in the Founder Stories? What are the key resources of my business?11
Key TermKey resources: the physical and intellectualresources you need to run your business, forexample, physical space, machinery,transportation, or worker trainingPartners: Who Does My Business Need?Key Question Who are the key partners for the success ofmy business?Key TermsAlliance network: a collaboration between two ormore firms that band together on a loose, noncontractual basisBrick-and-mortar: a traditional business servingcustomers in a buildingActivityImagine yourself with a business that is up andrunning. If it’s an online business with a website,you’ll be receiving orders, updating your website,packaging, and shipping. If it’s a storefront business,such as selling shoes, you have a facility to12
maintain, workers to train, products to buy andstock, payroll, and marketing on the Chamber ofCommerce website. All of these activities fall intoone of the categories of manufacturing, researchand development, supply chain and distribution,and marketing and sales.Now think about your business idea. Whichactivities are needed to make your businesssucceed? Consider the resources that a businessmight need. Outside funding? Learn specific newskills? Hire outside help? Physical space, machinery,or transportation? What key resources are neededby your business? Who are the key partners thatyou need to work with your business?13
Business CanvasThe next items will also enter into your BusinessCanvas.Item 2: List up to 5 Key Activities in the followingtext box. Press enter after each activity tostart a new line. (45 characters each line.)Item 3: List up to 5 Key Resources the same way.14
Item 4: List up to 5 Key Partners the same way. (70)You’ve completed three more sections of yourbusiness canvas. Connect to your canvas listhere.15
Workshop 3: Market PotentialKey Questions Who are the target customers of Harry’s orthe other businesses whose founders wereinterviewed by Hadley? Who are the target customers of mybusiness? What is the total market of my business? What are the customer segments my businesswants to reach?Key TermsCustomer segments: the groups of people whomay be interested in buying your product orserviceTotal addressable market: the value of sales toeveryone who buys a product or service likeyours; the largest size your business could everbeTop down: a way to calculate your total market,using research from market analysts16
Bottom up: a way to calculate your total market,by multiplying your product’s or service’s priceby the total number you could actually sellActivityIn the next workshop, you’ll fill in the customersections of your business canvas. For now, thinkabout how many people you can realistically expectto buy your product or service. Use the informationin this workshop to help you estimate the size ofthe total market nationally for a product or servicelike yours. Remember that you can use the topdown method, using a web search for marketinformation, or the bottom up method, where youestimate the value of your total market. Then you'llhave to think about how many of these people willbe in YOUR customer segment. You’ll learn how todescribe the customers of your business in the nextworkshop. Be sure to write down the numbers thatrepresent your total market size and your customersegment in number of people and in dollar value.You'll enter them in your canvas in the nextworkshop.17
Workshop 4: MarketingCustomer Demographics and PsychographicsKey Questions Who are the customers of Harry’s or one ofthe other businesses from the FounderStories? Describe them using demographicsand psychographics. Who are the customers of my business?Describe them using demographics andpsychographics.Key TermsDemographics: the age, gender, education, or otherdetails that describe your customersPsychographics: the attitudes, opinions, and valuesthat describe your customersChannels: How Do I Reach and Sell to My PrimaryTarget?Key Questions What channels are used to reach thecustomers of Schmidt’s Naturals or anotherone of the Founder Stories businesses?18
What channels are used to reach thecustomers of my business?Key TermChannels: the ways your customer connects to yourproduct or serviceCustomer Relations: What Level of CustomerService Do I Want to Provide?Key Questions What customer relations strategies are usedby a business like Starbucks? What customer relations strategies are or willbe used by my business?Key TermCustomer relations: a plan to get, keep, and growcustomersActivity1.Think of some of your real or potentialcustomers. What are their demographics? Arethey women or men, married or single, youngor older, middle-class or affluent? Where do19
they work and what education do they have?Consider their ethnicity, income, social class,marital status, parental status, andgeography. Describe two different customersof your business, using demographics. (500)2.Now think of the same two customers, real orpotential. What are their attitudes, opinions,and values? Describe two different customersof your business, using psychographics. (500)20
Business CanvasItem 5a: Start the Customer Segments section bycalculating and entering your totaladdressable market through the top down(Google search) or bottom up (average unitprice times number of units) approach. Enteryour opinion of whether that market is bigenough for your business goals. (150)Item 5b: Add to the Customer Segments section byentering a description of your target21
customer in terms of demographicsand psychographics. (200)Item 6: Complete the Channels section by selectingone of the four broad channels (online directto consumer, online partnership, brick-andmortar direct to consumer, or brick-andmortar partnership) and explaining why it’sthe best choice for your business. Use 1 or 2sentences. (160)Item 7: Complete the Customer Relations sectionby entering 1 or 2 sentences explaining how22
you’ll attract new customers and engage withexisting customers online or in store. (140)You’ve now completed three more sections of yourbusiness canvas: the Customer Segments, Channels,and Customer Relations sections, which are on theright-hand side of the layout diagram. Connect toyour canvas list here.23
Workshop 5: Measuring ViabilityKey Questions What were the fixed and variable costs ofSchmidt’s Naturals when it was a startup? What are the fixed and variable costs of mybusiness?Key TermsCost structure: an explanation of how much it willcost to start and operate your businessFixed costs: the expenses that stay the same nomatter how many units you produceUnit cost: the amount it will cost you to produceone unit of goods or servicesVariable costs: the expenses that directly dependon the number of units you produceRaw materials: the ingredients from which youmake your productBusiness CanvasItem 8a: What are the fixed costs of your business?Look at your key activities, key partners, andkey resources to help you think about your24
fixed costs. Consider rent, interest payments,real estate, equipment, utilities, and salaries.For just the two or three largest fixed-costitems, use Google to estimate the cost indollars to your business. Enter your list offixed costs and their dollar amounts in thecost structure section. You can also add thenames of some lower cost items for whichyou don’t yet have a dollar estimate. Add allof the fixed costs to get the total fixed costs,which you’ll use again in a moment. (90)Item 8b: Make a list of the variable costcomponents, and provide a briefdescription of the largest variable costs.For instance, if raw materials comprise thelargest percentage of your variable unitcost, explain why that may be the case.Now assign a value for one unit of eachrelevant category (raw materials, labor,25
etc.). For a business like Harry’s, this wouldinclude the cost of one handle, onecartridge, and the labor to assemble it. Addthe amounts in the categories to calculatethe variable cost per unit. (100)Item 8c: Multiply the variable cost per unit by thenumber of units to get the total variable cost.(40)Item 8d : Add the total variable cost to the total fixedcosts to get your total costs. Divide that sumby the number of units to get the total costper unit. (40)26
You’ve completed the Cost Structure sectionof your business canvas, which is on thebottom left side of the layout. Connect toyour canvas list here.27
Workshop 6: Making a ProfitRevenue Streams: How Will My Business MakeMoney?Key Question How will my business make money?Key TermRevenue stream: a source of cash from customersThe Price of My Product or ServiceKey Question At what price will I sell my product orservice?Key TermsUnit cost: average cost per unit soldUnit profit margin: your business’s profit oneach saleBreakeven point: the point in time when yourrevenues equal your costs28
Target price: the unit cost divided by one minus thepercent profit margin. See the following formula:target price (unit cost)/(1 % margin)Business CanvasItem 9a: Use this list of revenue streams to help youdescribe your revenue stream on your canvas.Direct sales: customers pay you directly for aproduct or serviceSubscription: customers pay for a membership touse the product or serviceAd-based: you give away your product or servicefor free, and collect revenue from advertiserswho want to reach your customersServices: you don’t charge for your product itself,but charge for installation, customizing it forcustomer, or usageFreemium: you give away your product or servicefor free, but charge for additional features oradded benefits (e.g., games for your phone)Licensing: someone else sells the product or serviceon your behalf, paying you a licensing fee (e.g.,Doritos collects a licensing fee when Taco Bellsells the Doritos Locos Taco)29
Rental: you don’t sell the product or service, butcharge for rental (e.g., Zipcar)Choose the best revenue stream for your businessby selecting one or combining two from theprevious list. You can even design a new revenuestream if you need to. In the following text box,enter 1 or 2 sentences to explain why the revenuestream makes sense for your business. (150)This information goes into the Revenue Streamssection on the bottom right of your canvas layout.Connect to your canvas list here.ActivityYou have been exploring who your customers areand what you have to offer to them. But even the30
best idea has to be supported by the financialstructure of the business if you're going to succeed.The next three questions address your financialstructure. In the Business Canvas section thatfollows, enter the results of your work from thisactivity.1.Find out what a reasonable profit margin isfor products or services in your industry. Youcan do this by searching for industrybenchmarks through a Google search oranother method. Once you have your profitmargin, calculate your target price for yourproduct or service by plugging in yourvariable unit cost and margin, written as adecimal, into the following formula.target price (unit cost)/( 1 profit margin)2.Calculate your breakeven point. First identifythe price per unit and variable cost per unit.Calculate dollar margin per unit. Dollarmargin per unit price per unit variablecost per unit. Breakeven point total fixedcost / variable cost per unit.31
3.Your breakeven point is the point at whichyour total costs equal your total revenue. Howlong will it take you to serve that manycustomers? Remember, this is not meant tobe exact, but an estimate to test theworkability of your plan and financials.Business CanvasItem 9b: In the following text box, enter your targetprice and a brief explanation of why it makessense. This information will be added to theRevenue Streams section of the canvas. (80)32
Item 9c: Enter the number of years it'll take you tobreak even into the following text box to putit into the revenue streams section of thecanvas. (40)Now that you’ve entered your revenue stream,target price with explanation, and your breakevenpoint, you’ve completed the Revenue Streamssection of your business canvas, which is on thebottom right of the canvas layout. Connect toyour canvas list here.33
Workshop 7: Making an ImpactPurpose Statement: What Is My Brand?Key Question What is the purpose of my business?Assumptions: What Needs to Be True for MyBusiness to Succeed?Key Question What are the key assumptions of mybusiness? (Which parts of my business arethe most original or untested?)Key TermsPurpose statement: statement that generates anemotional response, creates loyalty for yourbrand, and can serve as a guide to yourfuture decisions.Key assumptions: assumptions you are makingmust be tested out before you can be sureyour business will succeed34
Business CanvasThe purpose of your business and your keyassumptions are the last two items that you’ll beentering into your business canvas. For example,Harry’s purpose statement might be tothoughtfully create a quality shave at a fair price,for every man.Item 10: Complete the Purpose Statement section ofthe canvas by constructing a purposestatement for your business. Remember, thepurpose statement should be no longer thana few phrases or a full sentence, and it shoulddescribe “why” your business exists, how itpositively impacts your customers and theworld. (150)35
Item 11: Complete the Key Assumptions section of thecanvas by writing down the one to three keyassumptions for your business that must betrue for your business to be successful. Thesekey assumptions likely relate to the mostinnovative parts of the business models andare what you should test first when launchingyour company. (160)With these last two items, you’ve completed all 11sections of your business canvas. Connect to yourcanvas list here36
Printing and Saving Your CanvasAn easy way to find your Business Canvas List inthe future is to use the link at the end of the tableof contents. When you need a print copy of yourcanvas in the list and layout diagram formats, justprint the last 8 pages of the workbook. Now is agood time to save a copy of either or both the listand layout diagram of your business canvas. Save itagain whenever you make any changes to it. Go tothe beginning of your Business Canvas List. Reachout to your learning expert if you have questionsabout printing and saving your canvas.Next StepsYou’ll refer to your Business Canvas List when youcreate the executive summary for your business in thenext workshop. When you want to share yourbusiness idea with a friend or with a funder, yourbusiness canvas and executive summary will give afull picture of your business idea. And to enter theNew Venture competition at Hadley’s ForsytheCenter for Employment and Entrepreneurship, you’llneed both the canvas and the executive summary. Sobe sure to continue to the next workshop and writeyour executive summary.37
Workshop 8: Executive SummaryKey Question How can I use an executive summary topresent my business plan?Activity: Creating the Executive Summary ofYour Business PlanThe executive summary is a one-page descriptionof your company’s mission and operations. Everyexecutive summary should contain six sections: (1)the goal, (2) the problem, (3) the value propositionand target customer, (4) the business model andoperations, (5) the team, and (6) what’s next.Create your executive summary in a separatedocument by following these steps from theworkshop:1.Complete the goal paragraph of theexecutive summary by writing out what yourcompany does and why you’re doing it. Whatproduct or service are you delivering andwhat mission does delivering it well help you38
achieve? To do this, complete the followingtwo statements:The product or service my company deliversis .By delivering this product or service, Iachieve this mission: .2.Complete the problem paragraph bydescribing briefly the problem you’re trying tosolve. You can do this by completing thefollowing phrase sentence:The problem my idea solves is which is anissue because .3.Complete the value proposition and targetcustomer paragraph. The paragraph shouldstart with the full value proposition statementin your business canvas: “To (my targetsegment) my company offers (product orservice offering), in order to (benefit to thecustomer). My company can do this better39
than others because of (the things that makemy business different).” Then, explain why thespecific consumer target was chosen bydescribing how they experience the problemyou outlined and how large a group thesegment is.4.Complete the business model andoperations paragraph by explaining whatyour company does and how it makes money.Just write one or two sentences summing upthe Key Activities section of your canvas.5.Complete the team paragraph by describingyou and your team’s relevant background andpassions. Explain why you’re uniquelyqualified to start and run this company.6.Complete the what’s next paragraph byexplaining what you plan on doing to movethe business forward in the next three to sixmonths and what resources or help you’relooking for, if any. Your learning expert canhelp you with this paragraph as needed.40
Congratulations! You’ve reached the end of theWorkbook for the Starting a Business workshops.Be sure to save a copy of the workbook and theglossary in your business files.41
Business Canvas List1. Value PropositionReturn to Workbook2. Key ActivitiesReturn to Workbook42
3. Key ResourcesReturn to Workbook4. Key PartnersReturn to Workbook43
5. Customer SegmentReturn to Workbook6. ChannelsReturn to Workbook44
7. Customer RelationsReturn to Workbook8. Cost StructureReturn to Workbook45
9. Revenue StreamsReturn to Workbook10. PurposeReturn to Workbook46
11. Key AssumptionsReturn to WorkbookReturn to Table of Contents47
Business Canvas Layout DiagramKey PartnersKey gmentPurposeKeyAssumptions
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the business canvas sections for the workshop. Business Canvas: Your answers to these questions also transfer directly to the corresponding section of your business canvas. Business Canvas The business canvas is a simple framework that contains all the essential building blocks of a business plan. This diagram of eleven boxes can
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