Embarking on a business venture is exhilarating yet seldom effortless. Initially deceptive in simplicity, it swiftly reveals multifaceted layers demanding profound contemplation. The array of considerations and avenues to traverse can swiftly overwhelm. Consequently, a structured approach becomes imperative, often initiated by crafting a comprehensive business model canvas. This foundational tool offers clarity, enabling strategic navigation through the intricate journey of entrepreneurship.
What Is a Business Model Canvas?
Not to be confused with a business plan, the business model canvas is a cruder, more candid version of a business plan. In fact, it may very well be the predecessor as most successful business plans actually originate from a well-crafted business model canvas.
Functioning as a strategic compass, it spotlights vital business components, fosters informed operation, and steers towards a positive trajectory. The construction of a comprehensive business model canvas entails skillfully addressing demanding inquiries, thereby facilitating the meticulous identification, insightful analysis, and strategic optimization of pivotal facets, ultimately paving the path to sustainable success.
It was conceptualized by Swiss business specialist Alexander Osterwalder and Belgian computer scientist Yves Pigneur, and is now regarded as one of the most critical tools for building a new business, as well as for upgrading an existing one.
When to Use a Business Model Canvas?
The idea of a business model canvas seems very simple but it is remarkably multifaceted and can in fact be used for numerous applications. A lot of business managers now use a business model canvas template to upgrade their existing business strategies or create new ones that will take the business forward. Many aspiring business owners also use a business model canvas template to lay out their ideas for more efficient planning and eventual implementation.
A slightly less common way of using a business model canvas template is when you want to read into your competitors. Instead of creating your own business model, you can then make one for your top industry rivals. Also, while it is meant for summarizing the key elements of a business, it can work just as well for analyzing a product.
What Are the 9 Parts of the Business Model Canvas?
No matter which business model canvas template you end up using, all of them would include the 9 parts of the model, as determined by Osterwalder and Pigneur.
It is impossible to run a business on your own, even for a sole proprietorship. There will always be other entities involved, like vendors and suppliers, advisors and mentors, distributors and delivery service providers, accountants and lawyers – the list goes on. All these are your key partners for your business.
These are all the vital activities that must be carried out so that you can achieve the ultimate goal of your business. These activities are mostly done by you, although your key partners might also have a critical role in some of them. Some of the typical activities are procurement of supplies or raw materials, design and production of products, distribution to various sales channels, and so on.
A key resource is anything owned or controlled by your business that is instrumental in its success. This would include machinery and equipment, formulas and patents, and other business assets that are used in any of the operations. Even your personnel or staff are considered key resources to your business. The list is not confined to tangible items either, because things such as experience and expertise are also among the key resources of a business, and are in fact among the most important ones.
Many would say that value propositions are the highlight of the business model canvas template, and they won’t be wrong. Value propositions are what you hope to give to your customers. It is based on this single element that strategies are created and business operations are executed. In identifying the core value proposition of your business, you need to figure out what problem you wish to solve for your customers or which of their needs you wish to fulfill.
These are all the interactions between your business and the customers. Some businesses are more hands-on in delivering their services, which creates more interactions with the clients and often on a deeper level. Others are not as involved and simply make their services or products available, and let the customers take their pick.
The channels in a business model canvas template pertain to the means by which your business delivers its value propositions to the clients. These are usually composed of a network of multiple parts working together to ensure that the customer’s demands and needs are adequately met.
While some businesses have a very specific target market, most actually serve a broad range of clientele. In the customer segments section of the business model canvas template, you must list all the types of customers that you aim to serve.
We now come to the financial aspect of the business. Cost structure refers to all the expenditures of the business and how they are addressed. This is largely dependent on whether your business is cost-driven, where the focus is to minimize costs, or value-driven, where the focus is to maximize value.
The revenue streams are the sources of cash flow for your business or simply put, where the money comes from. Not that there could be more than one revenue stream. In fact, a good business model canvas template would have several revenue streams in order to maximize business income. It is also this section that covers the payment methods that your business accepts from customers.
Benefits of Using a Business Model Canvas
Using a business model canvas can do a business a lot of good, although some think it is a redundant process and go directly to creating the business plan. But if you take the time to use a business model canvas, here are some of the valuable benefits that you can enjoy.
Stay Focused on Core Value
Dozens of things can affect the course of a business. While all these things do have an impact, some of them can distract you from what is really important. In using a business model canvas, one of the elements you would identify is the core value proposition, and that is exactly where your focus should be.
Have Structure and Flexibility
A business model canvas template puts all your ideas into an organized format, giving structure to a lot of brilliant but chaotic ideas. At the same time, the model also allows for flexibility, letting you make necessary adjustments if changing situations call for it.
The business model canvas template allows everyone involved in the business to be fully aware of everything in the operation of the business. This makes for a better understanding of all the concepts and processes, and allows for more informed team discussions that can further improve the business model.
How to Use the Business Model Canvas Template
It is actually very easy to use the business model canvas template – the challenge lies more in thinking of what to put into each of the sections of the template. Here at Boardmix, our business model canvas template has a single-page layout that clearly shows all the 9 key elements. On the top part of the template, we have the first 7 elements in our list, with the value proposition appropriately in the middle spot. The lower part is reserved for the cost structure and revenue streams.
Simply drop in your ideas as they come into the appropriate boxes. You don’t have to think of them sequentially. Just let the ideas flow and the business model canvas template will take care of presenting them in an orderly fashion.
FAQs about the Business Model Canvas
What is a business model?
A business model is a tool used for identifying and illustrating all the key elements of a business. It is frequently used as the basis of the business plan.
What is the purpose of a business model canvas?
The business model canvas aims to provide a visual representation of the key elements of a business, which is useful for starting a new business or improving an existing one.
Why is a business model canvas important?
A business model can help management come up with new and better strategies to boost performance. It can attract investors and top talent into the company. It can also serve as motivation to everyone involved in the business.