Ever wondered how you can translate your business idea into a visual canvas that captures all the aspects of the business, whilst making it easy to explain? Well, the Business Model Canvas is your best bet. Business Plans are increasingly becoming obsolete because young entrepreneurs need a working canvas where they can tweak their business model as they test their product on the market. A 20-page long document would not just cut it. And here is where the magic of the Business Model Canvas lies.
According to Strategyzer, the developers of the model, a Business Model Canvas is a strategic management and lean startup template, for developing new or documenting existing business models.
The business model canvas is shown below;
It is a visual chart with elements describing a firm's or product's value proposition, infrastructure, customers, and finances.
How to fill in a Business Model Canvas
The steps below outlines how the model should be tackled, starting from the customer segment, ending with the cost structure;
Customer Segments – This is the segment of customers that your product or service wishes/targets to serve. This should be the top 3 segments that bring in the most revenue
Value Proposition – What value does your product/service give the above segments? What sets you apart from the competition?
Revenue Streams – This is the revenue streams of your business. E.g. Sales of Product x, Fees from Service Y, ad revenues, commission? Etc.
Channels – How do you deliver your product to the customers?
Customer relationships – How do you communicate with your customers?
Key Activities – What are the key things you do on a day to day basis to run the company? E.g. for a farming business, daily activities could be watering plants, feeding the farm animals etc.
Key Resources - The people, knowledge, means, and money you need to run your business.
Key Partners – These are partners that you can’t do business without. This does not include suppliers
Cost Structure – Based on your key activities, resources and partners, draw out your business expenses.
The business model canvas is a working model and needs to be adjusted based on the market and operational data. Only when you have put your business through the market test, is when you can comfortably say you have a stable canvas.
Why is a Business Model Canvas Important?
A business model canvas succeeds where a business plan fails. It is focused, concise and adjustable and reduces the risk of a business failure. Businesses, in this era, need to adjust their model very quickly in order to survive the high level of competition. A business plan is too bulky to give you the luxury of quick changes. Another thing the Business model Canvas assist with is the capability to launch into the market and track the major aspect of the business on a one-page canvas.
Conclusion
If you are a new business, trying out your idea in the market, the business model canvas is a great tool to visualize your business. Imagine a wall with your entire business model pasted on it, giving you a visual perspective of your business every time you pass by. For young entrepreneurs, a business model canvas is not something you can afford to pass by.
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