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Feasibility studies, Business plans,

Business model canvas, Lean Start-up:
Are they synonyms, alternatives or
can they be linked?
Dr. Henrietta Onwuegbuzie

Technical Note

Dr. Henrietta Onwuegbuzie prepared this technical note as an aid to instructors in the classroom. This technical
note should not be used in any way that would prejudice the future use of the technical note.

Copyright © 2019, Lagos Business School. This publication was developed through field research. No part
of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted
in any form or by any means – electronic, mechanical, photocopying, recording, or otherwise – without the
written permission of Lagos Business School.
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Introduction
In recent times, there have been several debates among academics and practitioners,
regarding the usefulness of business plans as against the business model canvass and
the more recent Lean start-up methodology. Some see the three tools as synonyms,
while others see them as alternatives and therefore argue in favour of one or the other.
Indeed, several arguments support ditching voluminous business plans for the more
succinct business model canvas. While others have more recently began to advocate for
replacing both, with the lean start-up methodology. These arguments suggest that one
or the other of the three tools are better for start-ups.
This note however presents a different perspective from the above arguments. It
proposes that all three tools are useful, and can be applied to a higher or lesser degree
at the different phases of a venture. The note explains the difference between the three
tools and how they can be applied at the different phases of any business to help it grow
and thrive. It also makes a connection between lean start-up, the business model canvass
and the business plan. We will start by explaining how each of these tools work and
how each one can complementary the other tools to work better.

Business plans
A business plan is an action plan for executing a business idea. However, before writing
an action plan, you want to be sure that there is a market for the idea you have. In other
words, you want to be sure that enough people are willing to pay for your product or
service, before providing it on a commercial scale. The tool to help you verify this before
you start writing the business plan for execution of the idea, is the feasibility study. The
feasibility study represents the trial stage, where you ask questions to your identified
target market and if possible offer samples of the product or service to get customer
feedback. The feasibility study helps you refine your initial idea because you get
comments from customers that help you understand appropriate pricing, product
sizing, demand size, and other modification of features that may have been suggested.
The information gained at this stage helps improve your initial offering as you now
have a deeper understanding of customer needs. This feasibility study can also be
understood as your lean start-up.

Lean start-up
Lean start-up, simply refers to starting small or starting lean, which is sometimes called
bootstrapping. Every business idea can be scaled down. For instance, you can start a
restaurant or a hotel by cooking from your kitchen and delivering to your first
customers, who may be friends and friends of friends who work around your
neighbourhood. Eventually, you can make enough money to hire delivery boys, who

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can sell your food on bicycles or buy a delivery truck to sell take-away. Over time, you
will make enough money to rent a place to start an eat-in restaurant. The experience you
gather while selling take-aways, will help you run this successfully enough to evolve
into a restaurant or hotel, if that is your goal.
Lean start-up therefore tends to be a safer way to start, because it is easier to adjust your
offering, when you have produced only small quantities. It is also a less expensive way
to start, because if customers want something different or a modification of what you
are offering, you can easily sell out the initial stock and incorporate customer
suggestions in the next batch. If it’s a service and you realise customers want more than
you initially proposed to offer, you can easily print a new batch of fliers that includes
what customers are asking for and the old fliers that may need to be condemned, would
be few, compared to if you had printed large quantities. This lean-start-up stage, which
we said can be considered as a way of doing a feasibility study, is an important prelude
for writing the business plan.
The business plan is an action plan, for the purpose of starting and running a business
that is set-up to offer goods or services to others (the market). To do this efficiently on a
regular basis, there is a need to plan, hence we write a business plan. To write a good
business plan you first need to be sure that there is a market opportunity, and this is
verified through the feasibility study or lean start-up. Indeed, an apprenticeship
position, may also be a good way to learn about the market or carry out a feasibility
study, before being able to write a good business plan. Once it has been established
through the feasibility study, that there is a market opportunity (people are willing to
pay for your goods and services), and you have understood how customers want the
product/service, where most of your customers are located, acceptable pricing and how
to get your products/service, you now have enough information to write a good
business plan to scale your business in a sustainable way.

Business model canvas

The business model canvas provides the skeleton (framework), which the business plan
fleshes out with additional information. The business model canvas provides a snap
shot of the company’s value proposition, and on one hand, explains how it will deliver
value to its customers, and on the other hand, how it will create the value
(product/service) to be delivered. It also defines how it will capture value (make
money). While the business model canvas summarises how an organization creates,
delivers and captures value, the business plan explains the steps through which each of
the components of the business model canvass will be achieved. At the initial stage of a
start-up, the business model canvas may suffice, but as the business seeks to scale, it
will need the guidance of a well written business plan (action plan).
The business plan is a comprehensive plan that starts with a mission, vision and values
statement. The mission tells you why the business exists; the need it is meeting or its
purpose. Without a “Why”, it is very easy for a business to lose focus on delivering
value, as it drifts into the common error of focusing only on profits, and will eventually
lose customers. Customers embrace businesses that give them value, over those that
just want their money. The vision statement on the other hand, determines what the
company wants to look like in future, in other words, where the business is headed. For
instance, if you eventually wish to become a publicly quoted company, it means you
have to keep your financial records impeccable from the start, and make sure all tax
obligations are met as at when due. It also means you have to be seriously customer
centric, so that you don’t only retain existing customers, but attract more.
The values statement imprints the guiding principles for everyone working in the
business. It is important for every business leader to be clear from the start about what
they will do and what they will never do. Ignoring this can lead to having a defective
culture that eventually ruins a business. For this reason, Peter Drucker, the father of

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Management as a field of study, aptly noted, “Culture eats strategy for breakfast”. It is
almost impossible for strategy to work in an unhealthy culture. If for instance, the
entrepreneur is corrupt and the staff take after him, all the processes in the business will
be compromised. For example, the supply process in the company will have a lot of
bloated costs of inputs, as staff connive with suppliers to increase the cost of goods
supplied, and later pay the difference to the staff, who in turn commits to making sure
the supplier continues to be the preferred choice to make supplies to the company. As
the cost of supplies are inflated, and customers are made to pay higher prices for the
goods. This may lead them to begin searching for less expensive alternatives, and
eventually the business will die, even if they had the best product. It is therefore
important that the entrepreneur, not only takes a stance on values, but that it is also
communicated to all staff in the business. Further, that there be rewards for those who
exemplify it and punishment for those who do not comply. The values statement sets
the tone for the culture of an organization, and this has significant impact on employee
performance, and the overall business performance.
The business plan also captures more operational issues like your legal status,
management plan, operational, human resource, marketing and financial plan. In
addition, it captures risks and mitigants to enable you predict risks and think of how to
mitigate them.
In spite of the useful information contained in the business plan, most people use it
wrongly. They think that they must implement everything as it is written in the plan.
This is wrong. The prevailing circumstances in the market should dictate the actions to
be taken. The business plan is only a guide, that helps one understand the entire value
chain of the business and therefore helps one make better decisions in the process of
running the business. Knowing the content of the business plan, should enable you
know how to adjust it to fit the prevailing market situation. The market is in constant
flux, so once your business plan is written based on the market context at the time of
writing, it becomes obsolete for the coming prevailing market situation, but is still useful
as a guide, and should be used as such. It is not to be implemented word for word,
without regard to current realities. Obviously, there will be aspects that remain valid
for years, but we must be flexible about modifying plans, processes or offerings should
the need arise. For instance, there may be a new technology or app, that shortens your
processes or that could render your offering useless. For example, a cassava plantation
was set up by an entrepreneur, for the purpose of producing and selling processed
cassava known as Garri. The entrepreneur eventually met someone who exports cassava
leaves, which he had been throwing away, and has now gone into the business of
exporting cassava leaves, which he never even knew could be consumed, and so was
not included in his business plan. He eventually also learnt how to generate electricity
for his farm, using the waste from his farm, and today, all his production process has
changed from depending on the national grid and generators, to being powered
internally. These new ideas were not contained in his business plan, but have since been
incorporated into his business processes. New ideas and opportunities appear in the
course of running a business and an entrepreneur should find ways to incorporate these
without losing sight of the knowledge provided by the business plan, which helps
him/her understand what the impact of any changes on the entire value chain of the
business. The new ideas or modifications can eventually be incorporated into the
business plan, which in a sense should be a living document, that is updated as the need
arises.
One should therefore not feel constrained to doing only what is contained in the
business plan, because it will not make business sense. Many people feel business plans
are not useful, because while they can see what makes sense to do, they feel they are
compelled to follow what is in their business plan, and this is not what they should do.
As businesses evolve, new business plans can be written to capture new ideas and
processes or the old business plans can be updated to fit prevailing market realities.

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A good business plan also serves as a communication tool to attract good staff that may
at first appear unaffordable. Showing them the plan, helps them understand the vision,
and if they buy into it or believe it stands a strong chance of being successful, they may
be willing to take a pay cut while working to realise the full potential of the business. A
good business plan can also help convince potential investors or bankers should
additional equity or loans be required. More importantly, it helps to guide the activities
of the business and reminds it of its mission, vision and guiding values, which are some
of the hidden tools that give meaning and direction to business leaders, to run a
successful and sustainable business.
The above explanation shows that all the tools lean start-up, feasibility studies and
Business plans are all useful tools that can be applied at different points in the life of a
business to ensure viability, success and sustainability.