The Business Model Canvas is excellent for strategic business idea mapping and management, providing stakeholders the opportunity to better understand, test, and improve upon ideas, plans, and strategies. The tool is a one-page document that shows how the various parts of a business work together for success. You can sketch anywhere, either on a whiteboard or notepad.
If done right, completing one should take no more than 15 to 30 minutes. This guide helps make the process straightforward.
Why do you need a business model canvas?
- To quickly paint a picture of what a business idea looks like.
- It allows you to better understand your business, while at the same time creating a roadmap as to how it best incorporates into your business.
- It helps you envision your ideal customer (or customer profile) and how best to reach them.
- It allows you and your team to get a clear plan on what the business will likely be.
How to use it
The Value Proposition is vital to any business or product. It is the basic concept of the exchange of value between your business and your customer/clients. You bring value to your customer, usually by solving a problem or relieving them of their pain. In exchange, your customer provides you with value, usually by paying money, but not always. Sometimes, they provide you with valuable input regarding your product or act as a referral source, etc.
Questions you should ask when defining your business/product:
- What problem am I solving?
- Why would someone need a solution to this problem?
- What is the deciding motivator for this problem?
One good way to approach this for your customers is by looking at your customer segments and figuring out where your product/service solves their problem, based on Maslow’s Hierarchy of Needs. If you are running a B2B business, you are a key partner in your clients achieving their Value Proposition for their customers.
Dividing a customer base into groups who are similar in specific ways, such as age, interests, gender, and spending behavior is called Customer Segmenting.
What to consider when determining your Customer Segments:
- Who is your target audience?
- Who will show interest in your value proposition?
- Are they another business?
- If yes, what do they do?
- Or are they individuals or consumers?
- Does your value proposition appeal to a specific gender? Age category?
- Are there identifiable behaviors, likes, dislikes that are common to individuals to whom your value proposition appeals?
Another thing to measure and understand is the size of your market. You should have an estimate of how many people there are in the Customer Segment. A great way to understand your customer is to create buyer personas for each of your Customer Segments. You can read the guide to create a Buyer Persona here.
Customer Relationship is the way a business interacts with its customers.
How do you meet and communicate with them? What are your channels of communication?
Some examples are:
- In-person (one-to-one)
- Third-party contractors
- Events (one-to-many)
You can create a User Journey Map of your customers as they interact with your business. This will help define the points of engagement between you and your customers and the modes used to relate to your customers.It will also help you define your mode of operations as a business.
Channels are the pathways through which your customer comes into contact with your business and becomes part of your sales process. This falls under the marketing plan for your business.
Some questions to ask when identifying the channels to reach your customers are:
- Where are your customers?
- Are they on social media?
- If yes, what platform are they predominantly on?
Examples of channels:
- Social media
- Public speaking
- SEM (Search Engine Marketing)
- SEO (Search Engine Optimisation)
- Engineering as marketing
- Viral marketing
- Targeting blogs
- Sales and promotions for commissions
- Existing platforms
- Unconventional PR
- Social advertising
- Trade shows
- Content marketing
- Community building
- Offline advertising (billboards, TV, radio)
Understanding how to reach your customers is so essential to your business.
The Key Activities of your business/product are the actions that your business takes to accomplish the value proposition offered to your customers.
Questions to ask:
- What actions will the business undertake to achieve the value proposition for the customer?
- What are the resources used?
- How long does it take to take such actions?
- What expertise do you need to deliver?
- How will the product/service be distributed?
- Technical development?
- What is the strategy for delivery?
Key Resources means the resources your business requires in order to conduct business.
These resources are needed practically to undertake the action/activities of your business:
- Office space
- Hybrid work capabilities
- People (staff)
- Internet connection
Key Partners are the relationships your business establishes with other businesses to make sure your business model is successful. One of the best ways to develop partnerships is to look at processes, tools, services, and products that are needed to deliver your value proposition to your customers. Then, you can search for partners (other businesses or individuals) that can deliver some of those items, saving you from having to develop them.
We recommend you listen to Why Helping Your Competitors is a Great Business Strategy (podcast) by Shawn Khorrami.
Your business cost structure is the monetary cost of operating as a business.
Questions to ask:
- What does it cost to achieve your business’s key activities?
- What do your key resources and partnerships cost?
- How much does it cost to achieve the value proposition for your customers?
- Are there additional costs to running your business?
- What are the legal requirements to operate your business?
- Does your business have insurance?
- What are other overhead, fixed, and variable costs associated with your business?
- Are you including the monetary value of your time as a cost? What would it cost you to hire you?
- What is the opportunity cost to run your business?
Revenue Streams are the way your business converts the value you offer and solution to the customer’s problem into financial gain. It is also essential to price your business according to the pain of purchase for the pain of solving the problem for your customer. But how do you gain revenue?
There are many different revenue models here:
- Pay per product (pay per view)
- Fee for service
- Referral feeds
- Equity gain
Tools to Use