The business model canvas is like a roadmap for your business’s or product’s success. It’s a visual way to break down all the key elements that make your company tick, like your value proposition, target customer, and channels. The business model canvas is the perfect tool for analyzing and updating your strategy, getting everyone on the same page, and planning out new business models. Think of it as a one-stop shop for organizing all the important information you need to develop and launch your product. You can create a business model canvas for your existing business to gain more insight or for a business you are planning to launch.
Elements of a business model canvas
Although there are some variations depending on the type of business, the classic business model canvas comprises eight core areas that, together, give shape to your business model:
Customers are essential for a business to be able to turn a profit. To learn more about your customers, consider their current and future needs, as well as their demographics, likes, and dislikes. It is also helpful to consider other factors regarding their relationships with similar businesses. Think about any additional segments that could benefit from your product or service to highlight the future direction of the business.
In a business model canvas, you must clearly outline the company’s unique products and services, otherwise known as the value proposition. A company should offer something original that stands out from the competition. It should highlight benefits that distinguish the company, such as quicker service, more efficiency, or better quality for a cheaper price. There are two ways to categorize these values: quantitative or qualitative. Quantitative values refer to the types of benefits that are quantifiable for the consumer, such as speed or price. Meanwhile, qualitative values are more abstract and cannot be counted, like a great experience with customer service.
In this section, your canvas covers the different types of relationships you have with your customers. Here you describe how your customers can find your business, how you maintain relationships with them, and where the business will grow its audience from there. Think about all the different touch points between your business and your customers, whether in-person interactions, email, social media, etc. Customer relationships include personal assistance, self-service, and communities. Personal assistance refers to customer service or any other way of providing tailored service to specific customers. And while self-service or automation does not include interaction with the customer, you can still personalize the experience with tailored recommendations based on browsing history. Finally, when operating within a certain niche, establishing a community of like-minded people brings customers together based on their shared interests. The type of relationship a business has with its customers will depend on the services provided and the customer’s needs.
Revenue streams are the diverse channels that generate income for a company. In a business model canvas, a company’s income should be represented and detailed through its revenue streams. Commonly, the different streams of income a business could have included asset sales, subscriptions, leasing or lending, white labeling, licensing, or advertising. Although these revenue streams can change, a business should be able to regularly keep up with, review, and optimize them as the market evolves.
Resources are essential assets needed to run a business and provide the customer with value. And like many of the other elements, your resources can come in many forms. Pinpoint key resources to lay out in your business model, whether they are human resources, financial resources, physical assets (such as offices or warehouse space), or intellectual property. Your business model should be able to identify what is available and what will be needed for your business to be successful. You can refer to previous channels through which the business operated to decide what elements would benefit from creating a sustainable business model.
Similar to the key resources, you should consider what is needed to develop the value proposition and ensure its success. The key activities are the actions needed to guarantee that the business model is effective. For example, the key activities can include sourcing a development company or marketing and advertising to raise awareness.
It is very unlikely for a company to manage on its own; partnerships are needed to sustain a business for the long term. The primary partnerships your business should consider are with distributors, suppliers, your existing customers, and “coopetition,” i.e., competing businesses that you can collaborate with to gain mutual benefits. Of course, these partnerships may change over time as a business grows. You and your partners may grow closer or farther apart. Either way, be sure to make a note of it in the business model.
Understanding the costs of a business and how these costs are important for a business to be able to generate profit. The cost structure is divided into two parts: fixed costs, which are easy to determine, and variable costs, which can change depending on different factors. Likewise, economies of scale and scope can decrease costs as the business expands, and the importance of understanding these variables is to provide a realistic overview of costs for the company both now and in the future.
Why should I use a business model canvas to develop a product roadmap?
A business model canvas serves as your product roadmap; it is a helpful reference for your business plan, covering everything from the main mission statement to the detailed outline.
The model canvas approach helps you map out your ideas; the format allows you to brainstorm freely and get out all the main ideas, making it easier to focus on the highlights when creating the project roadmap.
You can update them as you go along
In the world of business, things change fast. Cost estimates, key partnerships, and customer relationships are all factors that can evolve and change over time. A business model canvas is a way to showcase your strategy, and is not as reliant on minuscule details; its brevity allows you to be flexible and update the document as changes arise.
Visual representation of your business
Business model canvases are an inherently visual representation of your business plans. Mapping out your ideas on one sheet helps you visualize all your ideas, make connections, and find gaps more quickly.
Benefits of a business model canvas
They are focused
Businesses need a blueprint that can describe how to get their services and products to their customers. By mapping out an effective and clear outline, a business can transform itself into a profitable enterprise that can sustain itself through thoughtful and intentional planning.
They are concise
The business model canvas is the straightforward and succinct sheet that defines your business. And even though you could certainly expand on it going forward, it is a practical tool for communicating your main elements and research to your team members, investors, and any other stakeholders involved in making your vision come to life.
They are an effective scientific framework
The model canvas template uses a reliable methodology that all kinds of enterprises benefit from, from small startups to expansions in bigger companies. It relies on a functional and pragmatic framework that considers all the necessary factors for a successful undertaking.
What are some tools and resources that can help you create a business model canvas?
Strategyzer has a variety of business model canvas templates to choose from to begin planning your business. Also, if you decide to try their paid membership, you gain access to classes and modules that teach you about building business models and testing value propositions and business ideas. In addition to the classes, there is also a cost estimator feature that evaluates your business idea’s financial viability and identifies areas of weakness in your business model worth addressing.
This tool is a free website that lets you create shared links between your team members working on a business model canvas together. Using the many model canvas templates, you can have a strong start with your model and simultaneously brainstorm with your team on the same page.
Business Model Canvas Tool
Created by an alumnus of ThePowerMBA, this tool allows users to easily create a business model canvas with convenient and practical features that are easy to use. Plus, after you’re done, you can download the model canvas as a PDF for quick sharing.
The business model canvas is a great tool for entrepreneurs to better map out and implement their business goals. It offers a visual representation of a company’s vision and strategy and includes all the critical components needed to develop and release a product or service. Using a model canvas, a business has a thoughtful approach to attracting clients and establishing itself in the competitive business world. You can download our own business model canvas template to get started!