Have you ever heard of the Business Model Canvas? If not, don’t worry, I’ll explain it to you! The Business Model Canvas (BMC) is a tool that helps you visualize and design your business model, identify key elements of your business, and develop a clear view of your value proposition. It is a one-page document that helps you focus on the essential components of your business without overwhelming you with unnecessary details.
But here’s the thing: how do you manage the metrics of the Business Model Canvas? In this article, we’ll discuss the key metrics of the Business Model Canvas for different types of businesses. So buckle up and get ready to learn!
First things first, let’s understand how to set the right metrics. Most entrepreneurs focus on their industry vertical, such as Healthcare, FinTech, BioTech, and so on. However, the correct way to think of metrics is how you plan to charge your users. Depending on your business idea, your product will fit into one of seven business models that we will analyze in this article.
1. Enterprise-Based Business:
This business model sells software or services to other large businesses like Facebook, Google, etc. The predominant focus of this model is on contracts, and the key metrics to track include the number of bookings, total customers, and revenue.
2. Saas (Software as a service) Based Business:
This business model sells subscription-based licenses for a cloud-hosted software solution. The key metrics to track in this model include Monthly Recurring Revenue (MRR), Annual Recurring Revenue (ARR), Gross Monthly Recurring Revenue Churn (Gross MRR Churn), and Paid Cost to Acquire Customers (Paid CAC).
3. Subscription-Based Business:
Similar to a SaaS model, this business model targets B2C customers and offers a cheaper monthly subscription. The key metrics to track in this model are Monthly Recurring Revenue (MRR), Compound Monthly Growth Rate (CMGR), MRR Churn, and Paid CAC.
4. Transactional-Based Business:
This business model charges a fee for each transaction. The key metrics to track in this model are Gross Transaction Volume (GTV), Annual Recurring Revenue (ARR), Gross Margin, and Paid CAC.
5. Ad-Based Business:
This business model generates revenue through advertising. The key metrics to track in this model are Monthly Active Users (MAUs), Monthly Revenue per User (MRPU), Cost per Acquisition (CPA), and Lifetime Value (LTV).
6. E-Commerce Based Business:
This business model generates revenue through online sales. The key metrics to track in this model are Gross Merchandise Value (GMV), Conversion Rate (CR), Average Order Value (AOV), and Customer Acquisition Cost (CAC).
7. Sharing Economy-Based Business:
This business model enables people to share resources, skills, or time. The key metrics to track in this model are Gross Booking Value (GBV), Take Rate, Net Promoter Score (NPS), and Churn.
Now that you know the key metrics for each business model, it’s essential to avoid some common mistakes. For instance, don’t confuse bookings with revenue, don’t measure CMGR as a simple average, and primarily use ARR and ARRR interchangeably, among others.
In conclusion, understanding the Business Model Canvas key metrics is crucial to the success of your business. By keeping track of these metrics, you can make informed decisions and adjust your business model as needed. So go ahead and give it a try!