What is a «business model canvas»?
And how it can help entrepreneurs in planning.
The vast majority of startups’ founders do not have the time and relevant knowledge to compile business models and business plans. « And this is normal, not even scary. There is an affordable and convenient solution», wrote the president of the Vasyl Khmelnytsky foundation K.FUND, the head of the School of Small and Medium Business Lidia Pashchuk in her book
« Ukrainian Dream. I am an entrepreneur! ».
The «business model canvas» developed by Alexander Osterwalder and Yves Pinier will help.
The business model canvas is a very handy strategic management tool to describe, formulate, and paper a business model of a startup, project, and even an existing business.
This tool is not a magic wand or an exceptionally successful technique, but it can help to quickly, on one page, represent the main business processes in the future enterprise, which will be part of the business model. It is not difficult and not a pity to rewrite such one page in case of changes. And they will definitely happen. The question is how you will react to these changes.
What does a «business model canvas» look like?
It consists of nine blocks.
- Value proposition – what value you offer to the market, what is your product or service. In this block, you should focus on the main, minimally viable product. You should not go into details, they can change.
- Consumer Segments – who are the customers, identify the general groups of these target segments.
- Customer relations – how will you attract and retain customers, build their loyalty?
- Channels – how do consumers find out about you (communication) and how will you deliver products (distribution)?
- Key actions – how to find a way to consumers and make a profit? What actions are needed to implement the business model?
- Key resources – what do you need for a successful business model? It can be funds, staff, equipment, raw materials, knowledge.
- Key partners – potential and existing partners of the startup, which organizations, individuals are ready to influence positively or are already involved in the project?
- Cost structure – what actions, activities, purchases will be spent, what amount is needed for the project, startup, etc.
- Income and cash flow flows – where are the funds expected to make this model a business model? I often ask startups where the money and profits are in their projects. Unfortunately, it is not always possible to get an answer. Therefore I advise to think especially of this block, instead of to wave away, then everything will be.
These blocks can be grouped into specific groups, including:
- value proposition;
- infrastructure (resources, key actions, partners);
- customers (segments, communication channels, customer relations);
- finance (cost structure and revenue streams).
How to work with the «business model canvas»?
Developing a «canvas» will be most effective if you work on the blocks in a certain sequence:
- Segments. Work on the canvas should begin with the definition of consumer segments. Identify the segments that can bring the most profit.
- Value proposition. An elevator speech tool could be useful here.
- Income flows. Where do you expect revenue from? If you order or perform any actions for free, do not forget about it, because it is also money.
- Channels. How do you communicate with the consumer, how do you deliver the products to him?
- Customer Relationship – how do you build and maintain customer relationships?
- Key actions. What should be done and what will you do every day to make the business model work?
- Key resources. Who and what is needed for the business model to function?
- Cost structure. What will you spend the money on? This block should reflect key actions and resources, as they will require investment.
Earlier K.Fund wrote what a business plan is and when it should be made.