In this article, you will find a complete guide for new and existing business owners that will help you understand a Business Model Canvas and any important facts that you should know.
The Business Model Canvas is a strategic management and planning tool that can be used as a template for developing new business ideas, documenting existing business models, and understanding the impact of potential changes on an organisation.
A business model canvas template is a strategic planning template which business owners can use to:
A business model canvas is convenient for a business owner – especially one that has just started their venture; it can also be an excellent tool for all internal stakeholders.
The canvas is different from a business plan, which tends to be a much more in-depth document.
A canvas template can be used to simplify a business plan in easy-to-scan, condensed form.
A business model canvas is designed to describe ‘why’ and ‘how’ your company delivers value to the market.
It will typically be developed and refined over time as entrepreneurs seek a proper understanding of what they’re doing and the problems they are trying to solve for their customers.
The canvas is also helpful to map out existing business models, no matter how new your business is.
It’s great for illustrating new business models for startup companies, as it helps organise ideas around your most important activities and functions.
It could even be useful for long-established companies who want to go back to basics.
You can map out a business model canvas template on a vast surface (like a whiteboard or a large piece of paper), so everyone can sketch and discuss ideas about your business.
There are many benefits to putting together a business model canvas template, some of the most common are as follows:
Although keep in mind - the business model canvas template is not a static document. It should be reviewed over time, as all the factors can change periodically in your business or industry.
In essence, a business model canvas should include an outline of a company’s purpose, customers, partners, costs and revenue streams.
This is because there are four main areas of any business or venture:
There is no absolute rule about how these concepts should be detailed in a business model canvas but they are generally broken down into 9 specific parts which are then drawn into 9 ‘boxes’.
There are generally 9 parts, or “building blocks” that make up an effective business model, these are meant to capture the essence of why your business exists, and how to seeks to achieve its goals.
The blocks were formulated in 2005 initially by Swiss entrepreneur and business theorist Alexander Osterwalder.
These blocks provide a useful outline for any type of venture whether you are an SME, freelancer, or large corporation.
The 9 blocks are as follows:
1. Value Proposition – this refers to the principal value that you’re providing to your market. It’s basically what you’re trying to give your customers and what burning problems you are trying to solve.
When figuring this out, you’ll need to offer something different to satisfy the demands of your customer segments (more on this below)
2. Key Activities – this refers to what the most important ‘activities’ are you are doing to execute your value proposition (discussed above).
Here, you’ll need to think specifically about what sets your company apart from others, and also think about how you are different from your competitors.
This should be framed in terms of your customer relationships, channels and revenue streams (which we discuss below).
3. Key Resources – what certain resources or assets are integral to delivering your value proposition? Basically, what kind of firepower will you need to solve all your customers’ problems?
This ‘firepower’ can be human, intellectual, financial or physical.
If you’re a photographer, will you need several types of cameras, lighting or tripods to capture the best photos you can take for your clients?
4. Key Partners – identify who are the most important suppliers in your supply chain, and how they will work with you to achieve your ultimate value proposition.
This is about putting together that ‘dream team’ to deliver the best value to your customers.
5. Customer segments – this refers to your ‘target’ or your ‘ideal’ customer – specifically who you are trying to create value for.
You’ll need to think about who your most important customers are, what their deepest desires are, what their darkest fears are and – basically – what keeps them up at night.
There are different types of customer ‘segments’, some of which include a:
6. Channels – this is how you will deliver your value proposition to your customers. Through billboards? Facebook, Instagram or TikTok ads? Radio? Word-of-mouth referrals?
7. Customer relationships – you’re going to have to identify the precise kind of relationship you want with your customer.
To do this, you’ll need to figure out how you will get a customer, how you will keep them and how will you grow your revenue from existing customers (without losing them!). Some examples include a:
8. Cost structure – these are the most important financial costs you will incur while operating your business model.
9. Revenue streams – this is the part every business loves: exactly how you’re going to get your money.
Here, you’ll need to think about how you will gain revenue, what your pricing strategy will be and how you’re going to accept payment.
Now that you have a basic understanding of a business model canvas and how it is used, you can utilise this to focus on your business mission and ensure you are on track.
If you are thinking of starting a business, you can use this to map out your business idea before committing to a detailed business plan.
It’s important to get creative but also deeply focus when thinking through your canvas, as this will ultimately shape how your business operates into the future.