1.Introduction to the Lean Startup: CORONA Friend

A lean startup is an approach followed by entrepreneurs founding and running a new company or a new product. The method is to create a product, test it at a smaller scale, and then develop the product to be distributed to a broad market. The argument in favor of the lean startup is that entrepreneurs who feel they have great ideas invest in their startups without practically measuring or acknowledging the market demand for their product. The result is that they reject it altogether by the time they give their products in the customers hands (Osterwalder et al., 2014). Furthermore, it is not always because their product is miserable; rather, it can be due to specific considerations that only customers and practical action could make them realize. Hence, an approach like a leanstartup is suggested in such cases that save entrepreneurs from investing heavily into a startup or a product that will fail. Therefore, in a lean startup, entrepreneurs prepare a minimum viable product (MVP) distributed to a shorter range of the market to test its acceptability and profitability (Ries, 2011).

On such principles, CORONA Friend is developed. It is a mobile application that currently targets older people aged 5565. Through the app, these older people can buy groceries and pharmaceutical products. In addition to that, CORONA Friend will entertain these people through Zoom video chat or by making a short physical visit. This document is the business plan for this mobile application for the next three years.

2.Business Objectives

2.1 BreakEven

Each business has some fixed costs, as well as variable costs. As the name suggests, fixed costs do not change by increasing the business activity; however, the variable costs fluctuate with the changes in the level of business activities. When the income equals the total of these two costs, the business is said to have reached a breakeven point (Osterwalder & Pigneur, 2010). For the CORONA Friend, the fixed costs will be as follows:

 

Category

Fixed Costs per year for three years

Administrative Expenses

5000

App Maintenance Costs

3600

Marketing Costs

6400

Total

22000

On the other hand, the variable costs for the product will include the commission given to the delivery person and shipping costs. Each person hired to deliver the order will be given £1.5 for a single order, and the shipping costs will be £1.5 per order. Hence, the variable cost is calculated to be £3 per order delivered to the customer. The delivery charges for groceries and pharmaceutical products will be £5 per delivery. The breakeven is given below:

With fixed costs of £22000 per year, and variable costs of £3 per order delivered, the point where the revenue line (orange) intersects the total costs (fixed plus variable costs) line (yellow) is the breakeven point. The number of orders that should come through to reach the breakeven is 11000 orders in a year.

2.2 Sales Revenue for Three Years

The sales revenue means the revenue gathered from the delivery charges taken from the customers. The projected sales revenue for the three years 2021, 2022, and 2023 is shown below:

2.3 Revenue and Costs

Each sale (order delivery) will be charged at £5, and the variable cost will be £3 per order delivery. Thus, the fixed costs for one year are £22000, and these stay the same for three years. Hence, the revenue is shown below:

The costs against these revenues will be as follows:

2.3 Profit for Three Years

Profit will be calculated by subtracting the total revenue collected from the total expenses, and it is projected as follows:

2.4 Operating Margin

The operating margin for the first three years is projected as follows:

2.5 Why is the Startup Financially Viable and Profitable?

The pandemic has caused older people to purchase groceries and pharmaceutical products more than other items because their closed ones are away, thus creating strong demand. Plus, it takes £300 to maintain a developed mobile application in the UK. The delivery region will be short, meaning only a specific radius (not more than 50 miles) will be covered in the first three years of operation. The petrol costs are approximately £1.323 for one liter. The motorbike can cover a radius of 50 miles in one liter; hence, a shipment cost of £1.5 is estimated. Furthermore, a delivery person can take £1.5 per order within a 50mile radius. Therefore, the business is profitable.

3.Value Proposition Canvas (VPC)

The value proposition canvas is used to ensure that a startup is offering exactly what the customer needs and values. When starting, most businesses make the mistake of relying on assumptions. They have not thought about the specific identifiers of customers needs and what they value the most in any service (Osterwalder et al., 2014). Although most entrepreneurs have an idea about what they want to do, aligning those concepts with the customer segments characteristics still alludes to them (Osterwalder & Pigneur, 2010). Hence, a value proposition canvas is used, which consists of two parts. The first part (on the right) shows the customer segment, their pains, what they want to do, and their gains as a result of doing those jobs. The second part (on the right) is the value map, which explains how the startup caters to those specific details mentioned on the left side about the customers (Ries, 2011). For example, the VPC for the startup CORONA Friend is shown below:

3.1 Minimum Viable Product (MVP)

A minimum viable product is the version of a new product that allows the startup to collect the maximum amount of validated learning from the customers with the least effort. Here, validated learning means a form of information, analysis, or insight that can be trusted, because its source is none other than the main customers of the business (Osterwalder et al., 2014). For example, CORONA Friend is targeting older people aged 55 and over; hence, the validated learning will come from the responses of this segment of customers only. Such knowledge is collected by first introducing a viable product. Then, each possible product testing includes some features that can be offered to the customers. These start from the bare minimum that a business can offer, but the customers would expectantly deny (Ries, 2011).

At last, a decision is taken on the sort of features that the products version should have that would capture the most value from the customers. This version includes a raw form of just about everything that a startup plans to do (Osterwalder & Pigneur, 2010). The minimum viable product will have the following value and benefits for the customers for the CORONA Friend application.

3.1.1 Value in Pounds

The mobile application CORONA Friend will be used to get home delivery services for groceries and pharmaceutical products. The service charges for one delivery will be £5.

3.1.2 Benefits Included

For £5 delivery charges, the customers would be able to order their necessary grocery items and drugs prescribed to them by their doctors, and these will be delivered to their homes. The problem that these people face is that there is no one around them, due to lockdown and social distancing policy, to take care of their needs. These older people have been suggested to stay at home by the local administration, or their loved ones are visiting them to ensure no spread of the virus. However, groceries and drugs are still required, and these benefits will be provided by the minimum viable product offered in the form of this mobile application.

3.1.3 Validated Learning through MVP

It is validated that older people have suffered badly due to the lockdown and badly require these services. However, the MVP needs to understand how comfortable and easy it is for them to use the application and what could be changed in the app in terms of design and options to facilitate these customers better.

3.1.4 Channels to Gather the Validated Learning

Zoom application will be primarily used to collect the validated learning. The initial customers will see an option on their screen telling them to submit their feedback by contacting an agent through video chat. The older people will give details about design, layout, or options they feel should be part of the CORONA Friend application. Furthermore, these customers can also ask for a personal visit by a team member to guide them on any issue related to the app, or just a type of visit to entertain them with some random gossip to ensure their overall wellbeing.

4.Business Model Canvas (BMC)

Business model canvas is used to assess a businesss assets and critical activities, plus the sources of revenue. It helps strategize around some core activities, focus on crucial income streams, or improve relations with key partners (Ries, 2011). There are a total of nine different elements that can be included in the business model canvas. For the CORONA Friend, the BMC is as follows:

4.1 Key Partners

CORONA Friend will deliver orders by partnering with different grocery stores located in the area and some pharmacy stores. The selection of these stores will be completed considering the range of needed products, and it will be ensured that the final list of these provides the necessary items in one purchase to the customers. It means that, ideally, every grocery item or a drug that customers would want to purchase would be provided by at least one of the attached partners.

4.2 Key Activities

Since the business will use a mobile application, the management will be involved in maintaining the application. It includes ensuring that there are no bugs or any slacks in the activity. In addition to that, a necessary action regarding the app maintenance and update will be to identify the features that need to be improved or added, for example, related to layout. The other set of activities include the delivery of these orders made through the app. Through riders hired on a commissionperorder basis, these orders will be delivered for a fee of £5 within a 50mile radius.

4.3 Value Proposition

When the older people are ignored the most, the highest value for them is the availability of necessary goods and services (Li & Mutchler, 2020), which their loved ones would otherwise provide. Hence, the CORONA Friend will propose home delivery of essential groceries and drugs as value to them.

4.4 Customer Relationship

Older people have suffered miserably at the hands of the virus and need a supporting hand. Thus, the business will become that supporting hand for them through building and maintaining a positive and friendly relation with these older people.

4.5 Customer Segment

Customer segment is already specified to be the older people aged 55 or above, who the pandemic and subsequent lockdown have influenced.

4.6 Distribution Channel

All services of CORONA Friend will be delivered through the mobile application in the first phase. However, there is also a plan to receive orders through social media platforms. As far as the physical delivery of these orders is concerned, they will be delivered via the motorbike delivery riders.

4.7 Cost Structure

There will be petrol costs, riders commission, administrative expenses, marketing costs, and app maintenance costs. The budgeting will be done on a quarterly basis and, at the end of the year, a report will also be put together, detailing the profit and loss and actual costs throughout the year.

4.8 Revenue Source

For the next three years, the revenue will come from the service charges taken from the customers.

5.Business Development Plan

5.1 Growth Opportunities

The old population is growing in the UK. According to a 2020 statistic given by the website Statista.com, 938.7 thousand people live in the UK aged 55 or above (Statista, 2021a). In terms of the number of people, it is the biggest age group in the UK. It means that there is ample opportunity for the business to grow.

The use of social media is also increasing by the day. As of January 2020, there are 45 million active social media users in the UK (Statista, 2021b). Although people aged between 25 and 34 still make the largest group of users, the number of older people using the platform is also increasing (Kemp, 2020). Hence, there are marketing opportunities that come through social media. Initially, social media will be used to target old age people to show them the app and how they conveniently order what they want from the app. In the second phase, customers would give their required personal information through social media as well. The reason to take the social media orders in the second phase is that in the first phase of testing, the goal is to evaluate the app and its usability for the desired customers.

5.2 Financing Plan

The business has started during the Covid19 with equity financing, meaning that the founder has funded the apps development. Moreover, for the next year (2021), the founders initial funds will be enough to cover the expenses. However, as other marketing channels will be used, and more options of products and partners will be tested, and services will be expanded to other regions, a loan will be taken from the bank. The loan amount will be determined as per the analysis of the actual results of the third quarter of 2021. If the results are approximately the same as the projected ones, the loan amount will be £100000. However, if there are too many losses, the loan amount will be increased to £125000, but not more than that. The loan amount would stay the same (£100000) even if the financial results got better than projected by the third quarter of 2021.

5.3 Promotional Plan

The business promotional plan consists of the following initiatives:

  1. Growth into other cities
  2. Offering competitive prices of grocery items
  3. Making contracts with grocery stores and pharmacies to get a commission for a sale made through CORONA Friend.
  4. Developing strong content to entertain and motivate the elderly on social media platforms

It is recognized that the UKs population of older people is rising, and it is also a fact that the pandemic has impacted them. It is not easy to say that their life will be back to normal once the lockdown is lifted (Richardson et al., 2020). Even if it is, to an extent, the presence of someone like a CORONA Friend will always be welcomed. The pandemic has highlighted some things the most for this age group: they are heavily dependent on people near them to do their most basic tasks, like getting groceries and drugs (Li & Mutchler, 2020). Hence, there is even scalability potential in the business.

Different grocery stores and pharmacies play the role of partners to CORONA Friend. The relationship with them will be vital in delivering nonstop and quality services to customers. One crucial aspect is the prices of the grocery items and drugs that customers. If customers get better prices than the closest alternative they have, they will likely continue with the order (Ries, 2011). Hence, in the coming years, the growth will be focused on finding ways to reduce prices for the customers.

At last, a significant part of creating a positive difference for the older people is also to give them energy and hope (Richardson et al., 2020). It will be done by producing motivational content that will be delivered via social media.

5.4 Recruitment Needs

The goal is to hire people aged 19 to 55, especially those affected by the pandemic the most, or those looking for a career start. An ideal worker for CORONA Friend must be empathetic and friendly towards the elderly and acknowledge that these people are left most vulnerable (Li & Mutchler, 2020). As the business will grow in other cities, the plan is to hire from the local population to ensure the availability of these riders nonstop to deliver orders.

5.Critical Evaluation of the Plan: Identifying Challenges

The described plan details all things that are necessary for the specific business model of CORONA Friend. However, certain challenges cannot be ignored. These challenges include the usability of the app for older people. It must be remembered that older people are not the most comfortable ones with mobile technology. Hence, they can find a lot of difficulty in completing their order request (Belleflamme & Neyson, 2021). They can even ask someone close to them over the phone to do it for them. So then, whether the marketing should also focus on individuals who have older people in contact with them, such as their grandfather, etc. Another challenge is the population density of the UK. Since initially, the business will serve people within a 50mile radius in Manchester, which can be a challenge to the projected sales. For example, the population density of the UK is 281 km2. It means that 11000 people can live within a 50mile radius (Statista, 2021a). Hence, marketing will need to be effective and efficient within that population to keep a consistent flow of orders.

6.Summary

During the Covid19 lockdown phase, the older people inside the UK have been badly influenced. They are mostly alone, without any loved ones by their side. It leads to a question, how can they get the grocery items and drugs, the necessities for them. Hence, a mobile application, CORONA Friend, is developed to provide the home delivery services of these items. This app will initially offer home delivery within a 50mile radius inside Manchester and then in other cities after three years, when it is projected to be finally profitable. Social media will be used to market the app and then receive orders by getting customers to fill in the personal details over there. Funding will be improved for the second year by £100000 through a bank loan, given all projections are correct. The prices offered via the app will be anchored based on the competition, which shall be accomplished through deals with stores. At last, challenges of technology penetration and familiarity among older people, and population density of the UK, will need to be addressed along the way.

Reference List

Belleflamme, P. and Neysen, N., 2020. A Multisided Value Proposition Canvas for Digital Platforms. CORE.

Belleflamme, P. and Neysen, N., 2021. A Multisided Value Proposition Canvas for Online Platforms. Journal of Business Ecosystems (JBE)2(1), pp.114.

Carter, M. and Carter, C., 2020. The Creative Business Model Canvas. Social Enterprise Journal. Vol. 16 No. 2, pp. 141158

Dudin, M., Kucuri, G., Fedorova, I., Dzusova, S. and Namitulina, A., 2015. The innovative business model canvas in the system of effective budgeting. Asian Social Science11(7), pp.290296.

Heid, A.R., Cartwright, F., WilsonGenderson, M. and Pruchno, R., 2021. Challenges experienced by older people during the initial months of the COVID19 pandemic. The Gerontologist61(1), pp.4858.

Kemp, S., 2020. DIGITAL 2020: THE UNITED KINGDOM. Available at: https://datareportal.com/reports/digital2020unitedkingdom [Accessed on July 7, 2021]

Li, Y. and Mutchler, J.E., 2020. Older adults and the economic impact of the COVID19 pandemic. Journal of Aging & Social Policy32(45), pp.477487.

Ojasalo, J. and Ojasalo, K., 2018. Service logic business model canvas. Journal of research in marketing and entrepreneurship. Vol. 20 No. 1, pp. 7098

Osterwalder, A. and Pigneur, Y., 2010. Business model generation: a handbook for visionaries, game changers, and challengers (Vol. 1). John Wiley & Sons.

Osterwalder, A., Pigneur, Y., Bernarda, G. and Smith, A., 2014. Value proposition design: How to create products and services customers want (Vol. 2). John Wiley & Sons.

Philip, J. and Cherian, V., 2020. Impact of COVID19 on mental health of the elderly. Int. J. Community Med. Public Health7, p.2435.

Pokorná, J., Pila?, L., Balcarová, T. and Sergeeva, I., 2015. Value proposition canvas: identification of pains, gains and customer jobs at farmers markets. AGRIS online Papers in Economics and Informatics7(665201645080), pp.123130.

Richardson, S.J., Carroll, C.B., Close, J., Gordon, A.L., O’Brien, J., Quinn, T.J., Rochester, L., Sayer, A.A., Shenkin, S.D., van der Velde, N. and Woo, J., 2020. Research with older people in a world with COVID19: identification of current and future priorities, challenges and opportunities. Age and ageing49(6), pp.901906.

Ries, E., 2011. The lean startup: How todays entrepreneurs use continuous innovation to create radically successful businesses. Currency.

Statista., 2021a. Population of the United Kingdom in 2020, by age. Available at: https://www.statista.com/statistics/281174/ukpopulationbyage/ [Accessed on July 7, 2021]

Statista., 2021b. Social media usage in the United Kingdom (UK) statistics & facts. Available at: https://www.statista.com/topics/3236/socialmediausageintheuk/ [Accessed on July 7, 2021]

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