Have you ever tried to start a business without preparation? Without an idea? With 0 skills? Without knowing your target? We advise you not to do it if you have a project of creation. To get you started, we’ve decided to talk to you about the business model canvas. Come on, we’re not going to string beads 🦪 today.
Business model canvas : Definition
We’re going to start directly with the basics. A business model canvas, what is it? Just like the Business Plan, it is a document 📄 that will allow you to put everything related to the business model of your company. Writing a business plan is an important step in the creation of your company. In fact, through a single document or page (which can be collaborative), you are going to be able to define your objectives and priorities. Of course, this relevant document is visual since at a glance, you will have access to all the information of your so-called business model. This document will be particularly useful 💡 when creating your business and one will find information such as:
- Your key partners.
- Your key business.
- Your value proposition.
- The costs of the structure.
- Your revenue sources.
- Your customer segmentation.
- Your different communication channels.
- Key resources.
- Your customer relationship.
Don’t worry, these are concepts that we will discuss throughout the article and we will explain what to put in each of the points listed above.
In this part of the business model canvas, we will try to understand who are the strategic people ⚡ in the realization of your project. Those who are part of the key partners are essential because they are the ones who are going to provide you with what you lack internally. When your company can’t provide all the key activities of the project, you are going to have to bring in outside people who are going to fill your missing need.
This can be a cotton supplier if you are a sock manufacturer 🧦 for example (because you don’t harvest cotton for example). But there are other (other than suppliers) key partners such as:
- Banks (you may need a loan).
- An accountant (if you don’t have one in the company).
- A developer (or any other external provider).
- One or more partners.
- Collaborators ❤️ (they may have an indispensable resource for your business).
The key activity in the business model canvas
In this section, you will have to fill in everything that you think is important for the proper functioning of your project. It’s about highlighting the actions you’re going to put in place to make your value proposition shine (don’t worry, we’ll come back to this in a moment).
And if there are skills in your core business that you are missing, you can add them in the key partners 🗝️. Of course, everything is related since your key activities depend on the key resources (in case you need suppliers to sell your little socks). You can define your key activity as well as the activities you are going to subcontract, specifying it of course.
It is in this block that you will have to highlight the activities that characterize your company and that therefore also create value for your customer.
The value proposition
If you are in the business creation, have you ever asked yourself :
- What makes my product appeal ❤️ to my customer? Or will appeal to my future customer?
- What’s the little extra thing that sets me apart from the competition?
- Am I solving a particular problem?
- How can I create value?
If you’ve never thought about these questions, maybe it’s time to stop and stop everything. In business creation and when you make a business model canvas, your value proposition must give all the information about the value you put in your product. This is what you will deliver to your leads. With the value proposition, you’re going to do some psychology to understand your customers. You put yourself in their shoes and create value for your product. To do this, you’ll need to:
- Understand the customer’s needs.
- Know the customer’s environment.
- Understand their frustrations.
- Know what your customers expect.
If we have to give you an example for your value proposition, we can offer this one. Let’s say you want to market an electric vehicle 🚗. Your value proposition could be a higher range than any electric vehicle known to date. You stand out from your competitors and address a potential point of frustration which is battery charging and you are innovative ( creating value).
The costs of the structure
No surprise, the title means exactly what it says. In this section, we will put everything related to the cost of your structure, of your business. If you pay attention to the different sections of the business model canvas, you know that there will be costs for each category. You will have to fill in all the budgetary information related to your project in this section and make a forecast. So what are we going to put in this box. Here are the answers:
- The costs 💰 of equipment (computer, machine…).
- The rent if you have premises or offices.
- The cost of vehicles (if you have any).
- The cost of your communication.
- Repairs (you have to foresee it).
- The salary of your employees.
- The internet connection.
- Your purchases 🤑 with your suppliers.
- The loan repayment.
- Your various insurances.
You need to keep in mind that you will need to note your fixed costs, that is, costs that will not change (such as rent and salaries) and identify your variable costs. As the name implies, the cost is variable and this can include the purchase of raw materials and expenses that vary according to quantities.
Sources of revenue in the business model canvas
Let’s not lie, if you start a business, it is not only for the pleasure of doing it. You certainly want to get paid, to generate income for all the people who work with you, therefore to earn money. In the “Source of income” section of the business model canvas, you will fill in the money flows that correspond to the turnover of your business.
It is important to show both your sources of revenue and your cost structure so that you can estimate your gross profit. Therefore, you will have to specify what type of structure you are, what type of payment you will implement and what is your business model (low-cost? Subscription? Freemium?…). There are several categories for your revenue sources:
- Advertising (you can sell visibility to a company for example).
- Subscriptions or leasing (you set up an offer that the user will be able to pay on a given frequency).
- Microtransactions (for example, buying an application on your cell phone or a weapon in a video game).
- Hourly rate ⌚ (you offer a service based on demand and charge by the hour).
- The flat rate for usage (such as data consumption on your cell phone).
- Commissions (such as affiliation for example).
There are many others, it only depends on you and the business model of the company you want to set up.
Yes, even in the business model canvas, you are asked to know your target and your customer segment and to make a small persona (well almost). In fact, without going into detail, you will be able to clarify your ideal customer type. You will have to put in this box the typical profiles that represent your customers. We’re going to talk about your core ❤️ of target but also the different profiles that represent your target. In order to help you understand your customers, you need to consider several criteria:
- Everything related to age, gender, location, marital (or family) status, employment… These are known as “socio-demographic criteria”.
- You should also think about criteria concerning your client’s tastes, habits and lifestyle. You can use questionnaires and feedbacks if you need in-depth information about your existing customers.
- In this last point, you will focus on the behaviors of your customers. You will ask yourself how they buy (on the internet (on a marketplace for example)? In a physical store?)), what are their buying habits and frequency. In fact you focus on what the customer likes about your product (price, design, functionality, value for money…).
We will give you an example of customer segmentation: Let’s say you sell fruits and vegetables 🍎. Your customers can be businesses that want to have fruit every week, small grocery stores, but also individuals. They are part of your customer segmentation.
No catch, this is the part of the business model canvas where you will have to decide how you will reach your customers. You will therefore enter all the elements of your communication plan to communicate (without Sherlock) but also to sell. What’s important in this part is that you’re going to have to detail all the actions you’re going to put in place to reach your target 🎯. So this will include:
- Promote your company’s offer.
- Choose the channels where you will broadcast your message to find your customers (videos, social networks, emailing…).
- The message you are going to set up to reach your customers.
You can quite opt for organic advertising (not paid, such as SEO) or conversely go for paid advertising (Google Adwords for example) but you can also combine the two. Know that using social networks (like Facebook and LinkedIn) can be a great idea if you want to grow. You can also use word-of-mouth as well as show up at trade shows or fairs if your business lends itself to it.
It is important to know your key resources when you start a project. These different resources can be :
- Intellectual 🧠(like copyrights, patents or even trademarks).
- Material (we are talking about physical resources such as machines, computer equipment, your stocks, a management tool…).
- Human (these are your employees with all the necessary skills to develop your offer).
- Financial (this is everything that counts for the management of your project, you must gather bank loans, contributions, guarantees, crowdfunding, cash flow…).
Now you are probably thinking that some of these elements are found in other boxes that we have made in our business model canvas. However, we are going to nuance them a little here. You will have to note what is essential to the smooth running of your business and group together everything that is essential to the functioning of your project. To give you a concrete explanation, the key resources will give you the means to deliver your offer to your users.
The customer relationship
The last point that we will address in the design of a business model canvas is the customer relationship. Acquiring customers, yes, that’s good ✅ but you also have to think about retaining your customers. So how will you go about maintaining the relationship with your existing customers?
Even if you’re in the early stages of your project, it’s important to look into it. The customer relationship strategy is an essential part of your marketing strategy. Of course, as you can imagine, in order to properly respond to the relationship to be maintained with your customers and future customers, you must know them. This section is therefore linked to the customer segmentation that you filled out beforehand.
For example, if your target is on the Internet and in particular social networks, it is certainly worthwhile to focus on this particular channel. Among the channels that you can use for customer relations, here are those that you can use:
- The social networks.
- The chat…
And of course, you are going to have to decide how to maintain that relationship 😻:
- By the self-service which aims to promote the autonomy of your customer (we can thus say that the communication exists only little in this case. We can take as an example the FAQs in which the customer 💰 will be able to find the information he needs by himself).
- Dedicated personal assistance. Some emailing companies offer their biggest clients to have a dedicated business manager. He will be available according to the terms of the agreed contract (for example from Monday to Friday from 1pm to 6pm).
- Co-creation (influencers use a platform (usually digital) by sharing their own content).
- Individual service with the use of call centers, chat or email for example.
- Communities where customers will meet together to discuss issues, this is done on social networks.
Business model Canvas template
As you may have guessed, the business model canvas will allow you to transcribe on a single page, a single document, all the data necessary for the proper functioning of the economic model your business. Startups, small businesses as well as large ones can make a business model canvas at any time according to their needs. Alright, now that we have seen in detail each point of this business model canvas, maybe you want to know what it looks like? Well, we’ll show you that right now.
Of course, you don’t have to do it exactly like this, you can present them differently if you feel like it.
What tools should I use to make a Business Model Canvas?
You don’t need to have an ultra-sophisticated tool to make a business model canvas. You can just take a sheet of paper and a pen and put this document together. Of course, nothing prevents you from using tools 🔨 that can be found online such as :
- Google Document.
- And of course other online sites, we found one right here.
During this article, we were able to see how to elaborate ✒️ the business model canvas as well as the different tools that one could use to create it. Making a business plan takes time and the business model canvas has a prominent place in it.
This document is set up so that you can formalize, model and develop a profitable model for your project and know your ecosystem well. There are a multitude of business models, economic models and it all depends on what you want as a business model. In the business model canvas, we can understand that certain categories can be grouped together. For example, the key resources will be closely related to the key activities as well as the key partners.
This document can give you the information you need to know if you are in a competitive sector, if your products are innovative 💡or if you need to evolve its model. Another important thing, this document is part of your market research too (so business plan yes) and in this market research you will need to have the necessary information about your business (which seems normal) but also about your competitors.
FAQ of the article Business model canvas
Building a business model is not always easy, especially when you’ve never seen one in your life. In this FAQ, we will discuss some topics that could help you in the development of your business model.
The importance of the persona
You still can’t get away from defining your customer. A persona is a portrait of your ideal customer 💰 but also a portrait of all the customer segments you may have. You will need to define:
- The age.
- The location of your persona.
- His/her job type.
- His/her tastes.
- Their consumption habits.
- Your customers’ buying behaviors.
- Their pain points.
This will help you know how to acquire them and then how to retain them ❤️ as your project progresses.
Why make a business model canvas?
Thanks to the business model canvas, you will be able to know the whole of your economic model, and all that in one single page, one single document or canvas. Of course, nothing is set in stone and you can change or refine the model you have set up.
This document is very suitable for the creation of a project or simply for the development of a product line that you do not have yet, or even a new service. Putting a strategy in place allows you to know if the actions you have defined are good ones and thus helps you move forward in the right direction.
This document can be collaborative as it can also be used by anyone who works with you on the said business project.
Lean Startup Method
Have you ever heard of the lean startup method? You should know that this term was developed by the American Eric Ries, who established a well-known agile method to launch your business by minimizing the costs at the start of it. You will go through 3 distinct steps:
- The construction phase.
Here, you will have to set up the MVP (nothing to do with video games if there are little geeks 🤓 around here) which is the minimum viable product. This means that your product won’t be finished, but it will just be finalized and ready to go to market. Basically, you put the first version of your product with the main features and you can start marketing it. Don’t waste your time on the aesthetics of the product, you need to launch it as soon as possible (but make sure it is viable) and choose one of the distribution channels adapted to your business.
- The measurement phase.
After you have implemented your solution, you will want to improve it. And here, it’s all about meeting your users to understand what they really want from your offering. Here, the company must meet the needs of its customer segments. This is the time to be in the exchange 🥰 with your users and take all opinions whether they are constructive or not.
- The learning phase.
Ok, that’s it, you’ve collected your feedbacks. Now you’ll have to make decisions and implement improvements based on your customers’ recommendations. Of course, recommendations that you can make with the time you have. So you can remove features, add features or just improve them based on the feedback you get. Once this is done, you can go back to step 1, the construction phase, test the model and iterate.
You now know everything about the business model canvas, make good use of it.