Business model canvas. You have heard that one before but what exactly does it mean? What are the key activities involved? How do you create one?
I am sure that these are just some of the questions on top of your head. But no need to worry because we’ll have the business model canvas explained in this article and you can download a free business model canvas NOW. So, are you ready to begin? Let’s go!
1. What is the business model?
When you’re first starting a business, one of the most important parts of the process is planning. Although it can be tedious, you’ll want to take the initial time to determine what you’ll be selling, who your customers will be and how your business will make money. This is where the Business Model Canvas comes to play.
You’ll want to select a business model and incorporate this design into your planning and research as Nerdwallet correctly explains
A business model is an outline of how a company plans to make money with its product and customer base in a specific market. A business model explains four things:
- What product or service a company will sell.
- How it intends to market that product or service.
- What kind of expenses it will face.
- How to turn a profit.
Because there are so many types of businesses out there, business models are constantly changing. There is no one-size-fits-all model that can be applied to every business.
2. What does a business model contain?
Business models can vary in form and function, however, they all consist of the same basic components.
Business models aren’t just about income, you also need to consider many different factors such as production costs for example in order to get the full picture.
Certain components you’ll want to keep in mind are:
- Value proposition: A feature that makes your product attractive to customers.
- Target market: A specific group of consumers who would be interested in the product.
- Cost structure: A list of the fixed and variable expenses your business requires to function, and how these affect pricing.
- Resources: The physical, financial, and intellectual assets of your company.
- Revenue model: A framework that identifies viable income sources to pursue.
- Revenue streams: The multiple ways your company can generate income.
- Profit margin: The amount your revenue exceeds business costs.
These are just some of the things that make up a business model, and they are likely to change as your business matures.
From the outset, you may not have a clear idea of what each of these components will look like for your business.
As you write your business plan, however, they will become more evident and your model will provide a vision and direction for your business idea. To this point, although your business model will inform your operations, it won’t solidify your business strategy in stone — as you progress, you’ll be able to change and adapt your strategy based on your learnings.
3. What is the business model canvas
The Business Model Canvas is a tool that enables you to visualize, design and update your business model as you go.
It helps you identify key elements of your business, so you can develop a clear view of your value proposition, operations, customers and finances to decide where you need to focus your time and attention as you start your online business.
Plus is it only one page long, so you can easily share it with others to get feedback and update as you go? And on top of that, you won’t lose your nerves or hair while doing it.
So now that we explained what the business model canvas is, you might be wondering what is the purpose of having one.
A business model canvas provides a general overview of the business model and enables companies to visualize and analyze their strategy.
This includes updating the model as the company evolves, such as changes in the market, new streams, or expansions as Uigstudio explains
The business model canvas provides the central, common source of knowledge through which each department can add their unique input from their respective domains.
It is a template that defines the business – specifically, how each section interacts with the others. For example, understanding the value proposition, the target customer and the channels through which they are engaged all need to be analyzed together, not just in individual vacuums. And if you need your Free business model canvas template you can download it right on this page.
Alternatively, the business model canvas can be used by organizations to plan, assess or execute new models altogether. In this way, the canvas highlights the key essentials and ensures that no vital factors are forgotten. If the canvas is incomplete, then the respective strategy is also incomplete.
4. 9 Key Activities In Business Model Canvas
So we talked about the definition of the business model canvas, but now you must be wondering what it contains. The Business Model Canvas consists of nine essential key activities, as we explained in our blog post “The Business Model Canvas Explained”
1. Customer Segments
The first step is to understand who your customers are. Who are you resolving a problem for, or fulfilling a special need? You need to understand them well. What do they need, want, like, and feel? I would advise you before you start filling this in, to do some market research around your customers’ needs so you are crystal clear on your customer’s needs and wants, so you can tailor your business around resolving their problems and challenges.
2. Value Proposition
So if you have done some market research about your customers, you should know all about what they are struggling with, and what their problems and challenges are. This will help you get clear on what value you are going to deliver to the customer. What problems and challenges are you helping to solve? And what things do you have to offer them for a customer to pick you over your competitor?
Channels are all about where you are communicating with your customers. What platforms are you using to reach out to them? Do you have a website, e-commerce store, social media profile, or email marketing platform? Write them all down here. And remember you don’t need to be active on all of these platforms. Choose the ones that work the best for you and your customers.
4. Customer Relationship
Customer relationships will help you get clear on what type of relationship you have with your customers? How do your customers interact with you from the moment they get interested in your offer, to the time they make a purchase? Is the communication strictly online, is there a dedicated person or a team to manage your customer relationships.
5. Revenue Streams
This is all about how your business makes money. What are your customers willing to pay for and how does that add up to your revenue? For instance, if you are a coach, are you offering online training materials, 1:1 coaching sessions, for your services? How are you planning to make money with your business!
6. Key Activities
Key activities are related to your value proposition. What are the key things you need to do in your business in order to deliver the best possible value to your customers? If you are a business coach, problem-solving and customer service will be the key activities you want to focus on to make your customers happy.
7. Key Resources
What resources does your company require to bring your business to life? Do you need physical resources like buildings, vehicles, or machines? Or do you need intellectual resources around building your brand, proprietary knowledge, or creating partnerships? Or do you need human resources to manage your business, or maybe financial help in terms of cash or credit?
8. Key Partners
Key partners are the relationships that you have with other businesses that will help you deliver value to your customers? What external partners do you need to perform your key activities? If you are selling physical products, who are your key suppliers?
9. Cost Structure
Cost structure will help you define all the costs and expenses that your business will incur. Are your costs fixed or variable? You should ask yourself how do your key activities drive your cost structure? If there are any cost components that are not directly linked to your key activities, I would go back and see if these costs are really necessary.
There you have it. That is what a Business Model and what a Business Model Canvas is, as well as how you can take advantage of the business model canvas for your business.
Before you go, I have something to offer you. An example of the business model canvas. This one-page business model template makes it EASY to bring your business idea to life! And the best part? It’s completely free! Yes you read right, your very own free business model canvas.
Grab a copy of the business model template and know what you need to focus on to start the business of your dreams TODAY!
Get the Free Guide to Quickly Define And Visualize Your Key Business Activities!
It’s Your Turn.
Now, I’d love to hear from you.
Have you already created a Business Model Canvas for your business or is this the first time you are doing this? Were you aware of what a business model is or is this the first time you heard about it?
Let me know in the comments below or feel free to contact me.