Owning a business can be time-consuming, frustrating, and amazing. Yes, all three of those things wrapped into one. There will be days when you have fabulous ideas and days when everything you consider flops. We want to share a concept that will allow you to have more good days than bad. That concept is the business model canvas.
The business model canvas is a simple solution that will allow you to create or improve your business model. It also makes it easier to create a business plan and ensure your business moves in the right direction.
So, what do you need to know about the business model canvas??
What is the Business Model Canvas Exactly?
The business model canvas is a one-page document. The goal of this document is to allow you to visualize your actual business idea. Nine boxes feature the core elements of your business on this one page. It is so much easier to keep track of those nine boxes than it is to read pages upon pages of a regular business plan.
We would love to say that we created the business model canvas. But that honor goes to Alex Osterwalder and Yves Pigneur. They first shared it in their book, Business Model Generation.
How to Create the Business Model Canvas
As we mentioned above, there are nine boxes on the business model canvas document. Those nine boxes include the following elements:
- Customer Value Proposition
- Customer Segments
- Channels
- Customer Relationships
- Revenue Streams
- Key Resources
- Key Partners
- Key Activities
- Cost Structure
Filling out the business model canvas is as simple as adding the information you discover through your ideas and research into the correct box. Some boxes may be emptier than others at first and that is okay. The goal is to ensure the information is accurate. So, don’t throw random data in them that you can’t back up. Unless of course, you add that you must verify the info before using it.
Let’s go a little more in-depth about each one of the elements in the business model canvas.
The 9 Elements of the Business Model Canvas
Customer Value Proposition
The problem your product or service is solving for the consumer is the building block of your business model. And it needs to be addressed within your value proposition.
The customer value proposition of your business should always be different from the ones used by your competitors. We also recommend finding a way to make your product or service stand out, especially if there is something similar already available.
To put this into perspective, here is an example:
Your company is currently manufacturing and producing an item that three other businesses are currently selling. To provide the best customer value proposition, and ensure you outsell your competitors, you should make your item stand out.
You can do this in many ways. If your item is made from better material, share that with your customers. Make sure you explain why the material is better. (Lasts longer, provides better results, etc).
Maybe your item is designed differently and works better. Simply look at what you are selling and make sure people understand why your item is better than anything else out on the market.
Customer Segments
The customer segments element includes your target audience. You know, the people you are trying to sell your service or products to. There are multiple ways to determine your target audience. You may do this according to where they live, their gender, their age, or their interests. Or you could use a combination of them all. You may even focus on the entire population if your product or service can be useful to everyone.
A tip in many industries is to target a niche that is not too broad and not too small. By targeting a niche, it will be much simpler to understand who your target audience should be.
Channels
As a business owner, you will need to determine how you want to reach your customers. Business communication is always done through channels. Your channels, like your website and social media accounts, are always an excellent option.
You can also choose partner channels for communication. Those channels could be a partner-owned website or even a retail website, depending on your business.
Customer Relationships
There are multiple ways you can cultivate relationships with your customers. When a business first opens, they normally connect with its customers in a personal way. Whether in person or via email or phone calls. You wouldn’t need to do this yourself. You could hire a customer service representative to do this task for you.
Some businesses even offer automated services or an online community, so customers can find the answers they need faster.
An even better option for building lasting customer relationships is attending trade shows. These shows allow you to talk to potential, and even current, customers for more than a minute. It is an excellent way to learn what they think about your product or service. More importantly, it allows you to learn what other problems or concerns they may have, so you can find a solution. Your solution may lead to another amazing product launch in the future.
Revenue Streams
One of the most important things you must consider as a business owner is how your business is making money. Some business models follow transaction-based revenue, while others focus on recurring revenue. The former includes one-time payments, and the latter is ongoing payments for the same services.
There are numerous ways your business can make money. In your business model canvas, you should write down whether you are using asset sales, usage fees, subscription fees, renting, or another option for generating income.
Your options should be clear and concise, so there is no confusion about where the business’s revenue is coming from.
Key Resources
Running a business is not a one-man/woman show. It takes a village to run a business, even if you are the only employee in the beginning. As you are starting, you will want to tap into many key resources. These resources will allow you to keep things moving smoothly, as your business grows.
There are many types of resources to consider. Financial resources can provide you with cash or a line of credit. Intellectual resources can help you apply for copyrights, and patents, or assist with branding.
Physical resources may be necessary if your business requires equipment, a building, or even storage for inventory. And finally, there are human resources. The people you can turn to when you are ready to have a meltdown. It may be another employee or simply a friend or family member who wants to see you succeed.
Key Partners
Key partners are different from resources. The partners you work with could include suppliers or other companies. Each partner will assist you while you are growing your business. The goal of your partners is to minimize your risks while helping you obtain the resources your business needs.
Key Activities
When you create your business model, you should list all the tasks you must complete to ensure success. The tasks you choose should focus on production, problem-solving measures, and your platforms. Skipping over one of these categories can create disastrous results.
While having a basic task list can be helpful in this category, it is better to then list subtasks. Those subtasks will ensure you don’t forget a step halfway through the process.
Cost Structure
Operating a business can be costly. Therefore, you need to evaluate your cost structure carefully. It is best to keep costs down where possible, while still focusing on the value of what you are providing to your customers. Of course, then you must charge your customers accordingly, so you can cover your expenses and make a profit.
It’s a fine line that can be difficult to balance, especially in the beginning.
You may be thinking that all these elements are great, but who has the time to figure all that out?? Well, taking the time is necessary if you want your business to be a success sooner than later. We currently offer Business Budgeting services and we will be offering Business Classes soon. These are both excellent options for learning what you need to know without the hassle of figuring it all out on your own.
Do you want even more reasons as to why you should utilize the business model canvas for your business?
The Reasons Why You Should Utilize the Business Model Canvas in Your Business
- The business model canvas is so much easier to read and understand than pages of information on a traditional business plan.
- It is simpler to edit.
- Sharing the business model canvas with partners and employees is easy.
- Shows how different aspects of your business are related.
- Allows your brainstorming sessions to be more efficient, so you can clearly define your business model now and in the future.
If you haven’t utilized the business model canvas for your business yet, give it a try. You will be surprised at how much simpler it is to grow your business when you can see your entire business model on one easy-to-read page.
