The Business Model Canvas, or BMC, helps entrepreneurs take those first wobbly, bug-eyed steps toward being a company. It helps them get past giddiness over EBE – Earnings Before Expenses – and to think pragmatically. That means learning to sell profitably and to grow revenue – skills that are almost never innate.
The company that developed the BMC, Strategyzer, describes it as “a strategic management and entrepreneurial tool. It allows you to describe, design, challenge, invent, and pivot your business model.” The BMC has nine components, represented in an organized array of stacked boxes of different dimensions: Key partners, Key activities, Key resources, Value proposition, Customer relationships, Channels, Customer segments, Cost structure, and Revenue streams. Don’t yawn. This is solid, nuts-and-bolts MBA stuff.
The BMC has worked well for me, and I like using it for young and sassy clients. Startups can be fraught with frenetic ideation, and this nifty schema keeps everyone on the same page – or canvas. And when the caffeine is abundant, energy is high, and conversations are flowing like the Spring flood, just using the name, Business Model Canvas, brings gravitas and focus into the meeting room. That alone makes this tool extraordinarily valuable. The BMC allows plan-tweaking and reshaping, while its reassuring structure reminds entrepreneurs that every great idea must be coordinated elsewhere on the canvas.
In the BMC, there’s a place for everything, and everything in its place. Well, almost. Wonderful as it is, the BMC has a hideous weakness: it can’t stop a horrible premise. Simply adding a tenth box to accommodate Premise would ameliorate the Achilles heel on an otherwise capable model. A recent controversy involving a Seattle-based startup, SwanLuv, poignantly reminds us why an ethical, well-intentioned premise matters before jumping full-bore into launching a company.
In December, 2015, SwanLuv promised aspiring newlyweds the opportunity to have a dream wedding. The value proposition, as entrepreneurs like to say, was that SwanLuv would fund up to $10,000 toward the nuptial celebration – a hefty chunk of G’s toward the $31,213 average cost of a wedding. Giving people what they want seems a reasonable litmus test for a nascent business idea. And Want, they did. The capital W is not a typo.
The fine print? “If your union crumbles, at six months or 25 years, you must pay [SwanLuv] back — with interest,” according to a December, 2015 article in The Washington Post, This Startup Bets $10,000 that Your Marriage Will End Badly. In essence, the business model required “someone’s breakup would fund someone else’s future nuptials.” And SwanLuv had up to 25 years to claw back the money! How’s that for a start-up premise? As Scott Avy, Founder and CEO of SwanLuv described it, “we’re a casino for marriage.” Possibly the most honest elevator statement I’ve ever seen. But I question whether Avy could stomach looking in a mirror as he honed it to five words.
SwanLuv’s concept spread across social media like wildfire, and Avy rode the publicity wave. On talk shows, he crowed about receiving “hundreds of emails telling me how meaningful this is.” Then, not even 60 days after The Washington Post article published, SwanLuv’s offer imploded. On Monday, February 15, 2016, SwanLuv announced that “actually, no – it would not pay for a single ceremony. Instead, it would let friends and relatives pay for it, providing a crowdfunding platform similar to GoFundMe,” The Post reported in a follow-on article (A Website Offered to Pay for Weddings. Then It Came Time to Write the Check).
In a 2016 version of Qu’ils mangent de la brioche (Let them eat cake!), Avy explained away SwanLuv’s policy change as “adjusting our funding pattern.” In a statement, he wrote, “Due to overwhelming demand (nearly $2 billion at $10,000 per couple) and unanticipated legal regulations/restrictions in the lending space, rather than pull out, we came up with a tool we believe still helps couples with their wedding financing.” This entrepreneur could certainly benefit from a webinar on compassion.
Not surprisingly, SwanLuv’s Facebook page, which had accumulated more than 20,000 Likes since December, 2015, reflected wrath from those who had entrusted the company with their dreams. Many comments are painful to read:
“They should be ashamed of giving couples hope and dashing them to pieces. Hope this company goes down the tubes.”
“I only have 4 months left until the wedding and we can’t afford ANYTHING.”
Here, I humbly disagree with Oscar Wilde, who said, “the only thing worse than being talked about is not being talked about.” In this situation, I’d much rather not be talked about.
One SwanLuv victim, Precious Pruner, posted a tearful 7:30 video on YouTube. “I was hoping to use some of the money to pay for my mother and three little brothers to fly to Michigan for my wedding,” reads one of the notes under her video. Her post has received a paltry 438 views (as of March 8, 2016), but watching this video should be mandatory for every startup team. It should be required in the curriculum for every college entrepreneurship program, and in every startup incubator. The message: a bad business premise can create tragedy. So, entrepreneurs: Put away your spreadsheets, flowcharts, cash-flow projections, and marketing automation plans for a moment. Stop, and listen to a real-life person describing what a misguided business premise, once executed, means to her. Something to think about before skipping over Premise, and diving into Value Proposition. It doesn’t matter which planning tool you use.
Jeff Reid, Founding Director of the Georgetown University Entrepreneurship Initiative, sees SwanLuv’s failure as tactical problem. He says that SwanLuv could have launched with good intentions, and that it collapsed before it could deliver on the promises. “There’s a line you don’t want to cross,” he said, “in terms of over-promising.”
He misses the point. Over-promising is not the issue. Swanluv’s warped business premise is. Before the planning boxes are populated with great ideas, before a crisp value prop has been created, and especially, before prospective customers are engaged, entrepreneurs need to ask – and answer – “is the premise for this venture ethical and well-intentioned?”
“The percentage you’re paying is too high-priced/
While you’re living beyond all your means/
And the man in the suit has just bought a new car/
From the profit he’s made on your dreams”
– lyrics to the iconic song by Traffic, Low Spark of High-Heeled Boys, produced 45 years ago in 1971. The more things change, the more they remain the same. Except today, “the man” probably doesn’t wear a suit, and could be a woman.
Had SwanLuv’s founders, mentors, and financial backers considered the pain inflicted by their “casino for marriage” premise, the company might not have taken flight.