The last two boxes in the Lean Canvas are Income and Expense. From a canvas point of view it is meant to get you to be thinking about the key factors involved in your business. However, the point of the Lean Canvas is to built the foundations of your business model. To get your model to a sufficient level of detail that you can use it over time, you build a cashflow projection. Each of the details of your startup that are critical to the business process will show up in this spreadsheet.
Each box of the Lean Canvas provides assumptions and critical factors for your business model and they will form the basis of your cashflow spreadsheet. As you run your business, you will want to compute and recompute how your business model as represented by the spreadsheet matches up with the actual results that you see in your business. You will want to do this on a weekly basis.
Looking at the graph above, we see a business that is subscription business, which has very limited expenses and which has a 15% growth rate as the basis of this chart. The ongoing expenses over whelm the income for a long time. While we see the income starting to turn the corner, this business will be cashflow negative for more than 3 years.
However, small changes in growth rate can change the experience dramatically.
This next graph is the same company, but with a 25% growth rate each month. This is a company , which is a 10X company, but in order to survive, it will need to take $200,000 in outside funding.
With this new cash infusion, the company is able to remain solvent, at least in this model. However, if the growth rate was higher , with just a 30% per month growth rate, that same company would not need to take outside money at all.
The small differences in revenue and the growth rate of the revenue can make substantial differences on the lifespan of your company. Digging into the details of the consequences of your assumptions will be vital to your progress.
There are several key factors you need to work with:
- The initial amount of cash you bring to the company
- The point at which you run out of cash. Which is determined by your Burn Rate. This company has a one year Runway
- The point at which you get to cash flow positive.
- And the point that you break even.
Spend the time to build and then regularly revise your cashflow projection for your startup.