9 Key Areas of Business Model Canvas for an Entrepreneur – Inspire99

Business Model Canvas: In this article, we will talk about the meaning and definition of a business model canvas. We will also talk about its need for an entreprenuer, tools to build a lean model canvas and main parts of it. While explaining these, we will discuss about why this is important for your startup idea. The main questions we will answer in this article are:

• Meaning and definition of business model canvas
• Why does an entrepreneur need this canvas
• Tools to build your lean canvas
• Segments and sections in a canvas

What is a business model canvas?

Business model canvas definition

Business model canvas definition: The Business Model Canvas is one page visual representation of your business idea. It is a standard template to give a bird’s eye view of the business to the investors, entreprenuers and use as a foundation for a business plan. The lean canvas has 9 main parts to define the value proposition. It simply gives you an effective way to identify the broad building blocks of your business.

At the heart of your business model canvas is your value proposition, partnerships, revenue streams etc. Each of these segments is important to convey the full picture of your business.

Why do I need a business model canvas as an entrepreneur?

For a new entrepreneur or business founder, I would recommend starting off with a business model canvas. It gives you a great opportunity to look at the business as a whole. Most entrepreneurs I’ve spoken to are so passionate about their idea that they miss some elements such as commercialisation, go to market strategies etc. This canvas makes sure that you have covered all aspects that can impact your idea at a high level.

If you’re going to seek funding for your startup, the investors will expect you to generate a good business plan. A business plan is a detailed document explaining your vision with details including forecasting, product pricing etc.

Tools to generate a business plan canvas

The simplest tool to generate a lean business model canvas is using a pen and paper. A simple google search will give you the standard template to build from. However, I’ve found that using an online tool like Stratagyzer can give you a major benefit. For a startup without funds, this software gives you an opportunity to create the canvas for free and be able to develop your business plan further.

What are the areas covered in the lean canvas?

The areas covered in a business model canvas are:

Value proposition

The value proposition clearly explains why a customer needs to pay for your product. The value you generate might be in the form of reducing complexity, saving time or even saving money. Your business might create value such as making people happy. In the value proposition, you must articulate clearly a few reasons why a customer would want to pay for your product or service.

It also addresses an important question of – what does your product do that no one else can. The value proposition must influence defining your unique selling point. Once you start writing your business plan, you’ll notice that the USP will take a major part of both your startup pitch and pricing strategy.

Key Partners

This section is to identify the core partnerships with your business model. Your partners can extend from product development, marketing/sales and perhaps even operational such as financing etc. Make sure that you map out the most important people to be able to run your business.

Ideally as the startup grows, you must publish the key partners so that all employees are aware of acccount management relationships and continue to provide good service.

Key Activities

What do your key activities include? Remember, as a startup, you may decide to outsource some of your activities. But if you perform product development, this is a key activity even if it is outsoured. The key activities section of the business model canvas is to remind you of the main things that your business stands for.

It is also a very good reminder to ensure that you keep focusing on your strenghts and USP. Since early revenues are hard, startups tend to pivot early and lose focus. You can see that this is one of the most common reasons why startups fail early. The key activities ensure that you don’t lose the focus.

Key Resources

What is required for your business to run? The key resources indicate main parts of your supply chain to operate as a business. Your key resources are important because investors will want to know what constitutes as the main parts of your lean operating model. They may want you to rethink the business model, outsource certain components etc.

For these conversations, a map of your key resources will help you argue a case to define the business strategy around these resources. Examples of key resources are – supply chain for your raw materials, main distributors of your product etc. You can also use this to produce a risk map to identify weak links in your business plan.

Customer Relationships

Well, this is the core part of any business isn’t it? Whether it is a tech company or a service based one – your customers define whether you’ll stay alive. If you have poor customer service, the business will need to close down soon. In this section, you’ll need to identify the core customer relationships.

The best way to use this section is to define Tiers of customers based on either revenue or future business opportunity. Make sure that you have some space in your business plan for account management. This will ensure that you maintain good quality of service for your most valuable customers.

Channels

Channels indicate the key parts of your business in the supply chain. A business model canvas is incomplete wihthout identifying the complete journey map required for your sustenance. Also, it exposes key risks in case some of your channels aren’t strong. For instance, over reliance on outsourcing might be a risk. You can build a mitigation plan to bring some aspects in house with time to give solace to your investors and refine the product strategy. Remember, the more you know about your business, the better chance you have at securing investment.

Customer Segments

It refers to specific people groups that you can target. In a product world, you’ll call this personas who are reflective of a type or group of people. This will help you define both the product development and sales strategy. The same message will not work with all type of users. For some users, you may want to take data led approach. For some others, you might want to define a higher level approach.

Ultimately your business model will cater to not just one type of customer. Although your product journey is based on a certain few assumptions, it will change when in front of users. The segments helps you prepare your communication and approach to adapt your product/business approach.

Cost Structure

This is super important to define your financial projections as a startup. Your investors will want to understand how and when the business will achieve self sustenance. Although upfront investment helps us develop a product, we will need paying customers to ensure longevity of your business model.

The cost structure helps you identify how to target customers. Answer questions such as – whether you want to have a free and premium version of your product. Also, you’ll need to define whether your services will have a human element to it. If you’re able to create clarity, an investor will be able to introduce you to the right type of people in their network

Revenue streams

And finally revenue streams. What are the various channels through which you make money? Your product might have a direct user subscription model. But you might also have additional opportunities such as advertising or cross promoting of partner’s products. While doing this, make sure that you don’t compromise user experience. The moment a user starts feeling that you’re all about money, they will start losing interest and loyalty in your business approach.

Well, these are the high level brackets of a business model canvas. Good luck with yours and if you have any questions or want to double check – please ping below.

Cost Structur