A business model is a map of how a business operates. It outlines who the company serves and how it provides value to these people, as well as the financing details, which can make the document quite extensive. However, the Canvas business model allows you to define these different components on a single page.
The Business Model Canvas (BMC) is a strategic management tool that enables you to visualize and evaluate your business idea or concept. In this way, this business model is superior to the traditional business plan, which extends over several pages, as it offers a much easier way to understand the core elements of a business.
To fill out your business plan:
- The right side of the Canvas is used to discuss the market in which you will operate (external factors beyond your control).
- The left side of the Canvas is used to discuss your business operations (internal factors that are mostly under your control).
- The center of the Canvas is where you should describe how you will provide value to your customers and make money.
- The bottom is where you will describe the operational costs of your business and ways you intend to acquire funding or monetize your business.
BENEFITS OF THE CANVAS MODEL
The Business Model Canvas is a visual representation of your business model. It helps clarify the complex relationships between different aspects of a business so you can identify key opportunities and challenges at a glance.
The BMC provides a quick overview of the business model and is devoid of unnecessary details compared to the traditional business plan. Its visual nature makes it easy to reference and understand for anyone. It’s easier to edit and can be easily shared with collaborators and stakeholders.
The model can be used by large corporations as well as start-ups with just a few employees. It clarifies how different aspects of the company relate to each other.
You can use the model to guide a brainstorming session on the effective definition of your business model.
HOW TO USE THE CANVAS MODEL
The Canvas has nine blocks:
- Customer Value Proposition (what you will sell)
- Customer Segments (to whom you will sell)
- Channels (how you will reach your customers)
- Customer Relationships (how you will keep them coming back)
- Revenue Streams (what they will pay you)
- Key Resources (what is needed to make the business work)
- Key Partners (who can help you make sales and keep customers coming back)
- Key Activities (what the business does every day)
- Cost Structure (how much it will cost to run the business)
Customer Value Proposition
This is the foundation of your business model. It describes what you plan to do for your customers – your value proposition. It should be unique and different from your competitors in terms of what you offer, how you deliver it, and at what price.
Customer Segments
This block represents the groups of people or businesses you are trying to reach and sell your product or service to – those you want to pay the most attention to. Segmenting your customers based on similarities such as geographic area, gender, age, behaviors, interests, etc., gives you the opportunity to better meet their needs by customizing the solution you are providing to them.
Customer Relationships
Every company wants to create loyal customers. One way to do this is by developing different types of relationships with your customers – serving them in the best possible way, on their terms. The ways you can create this relationship with your customers include:
- Online Communities
- Personal Assistance
- Automated Assistance
Channels
Channels are how a customer engages with your business. They are the ways in which they can connect with you and become part of your sales cycle. These help inform your customers about your product or service and deliver your value propositions to them. Channels can also be used to enable customers to purchase products or services through you, as well as to get support from you after the purchase.
Revenue Streams
A revenue stream is a way to convert your value proposition or customer problem solution into financial gain. Pricing your business to cover the cost of your solution while charging enough to account for the pain of purchase can help you earn more money. There are several ways to sell your product or service, some of them include:
- Product Sales
- Subscription Fees
- Service Fees
- Customization of Products/Services
- Premium Products or Services
Key Resources
Here you will list the key inputs or resources you need to create your value proposition. There are various types of key resources, such as:
- Human Capital: Employees to help with your business
- Physical Space: If your business requires physical space
- Assets: Computers, desks, phones, internet, etc.
Key Partners
Key partners are the companies with which you work to get things done. You may need resources or specialized knowledge that your key partners provide. Examples may include:
- Non-competitors: For example, if you have a restaurant and need to buy products more efficiently and affordably, it would be good to align with a local store to purchase what you need.
- Creating a cooperative business with a partner.
Key Activities
The activities that make up your business or product are the connection point between the value you offer and your customer’s needs.
Cost Structure
After defining the key activities of your business model canvas, you can assign a cost structure. Make sure that each activity has its own budget line, so you know how much money you need to make a profit.
Cost-oriented companies focus on minimizing costs as much as possible. Value-oriented companies focus on providing maximum value to the customer.
CONCLUSION
As mentioned in this blog, the Business Model Canvas is a much more agile way to define the most important points for your business. It helps you focus on developing your company and provides a visual “map” of what your new venture is all about. Additionally, it is easy to use and adapt.
This model is also excellent for companies planning to expand and create a product. The Canvas model is a trend in the creation of businesses and products.
