The Business Model Canvas is a simpler version of your business model, set out on a one-page chart. It’s a useful tool that allows you to visualise and communicate the key elements of your business and how they relate to each other.
The inventor of the Business Model Canvas – the owner of the software company Strategyzer and author of Business Model Generation Alex Osterwalder – describes it as “a strategic management and entrepreneurial tool [that] allows you to describe, design, challenge, invent, and pivot your business model”.
What are the elements of the Business Model Canvas?
The Business Model Canvas has nine basic building blocks:
- Customer Segments – the people and organisations that your business creates value for and who generate income for you
- Value Propositions – the products and services you offer to customers
- Channels – the communication routes you use to reach customers
- Customer relationships – the all-important ways you build relationships and trust with your clients
- Revenue streams – the proceeds from sales of goods and services, plus any other sources of revenue for the business
- Key resources – the infrastructure of your business and its indispensable assets such as people, buildings, equipment and funds
- Key activities – what you need to do day-to-day for your business to perform well
- Key partnerships – the people and organisations you need to partner with to deliver your business activities, such as suppliers and investors
- Cost structure – the financial outlay and main areas of expenditure
These are mapped out on a canvas, so that they can be easily understood and communicated to others.
Why use the Business Model Canvas?
Less complicated and easier to digest than a Business Plan, the Business Model Canvas offers a clear and coherent structure to your business idea, in particular how it creates, delivers and captures value for your customers.
The framework encourages you to focus on the most important elements of your business and allows you to communicate them to others, clearly and concisely. The Business Model Canvas can help you to:
- Plan a new start-up
- Develop an existing business
- Generate investment
- Share a clear message with customers about your business
- Understand why your competitors are successful
How to use the Business Model Canvas
Either download the Canvas template or map it out on a screen or whiteboard. You can fill it in yourself, but you may find it more helpful to draft in people to help you.
Start with the key elements of your business model and map these out clearly and concisely. Work out how the various building blocks link up with each other. For example, will you be using the right Channels to reach the Customer Segments you are aiming to sell to? Do you have the Key Resources in place to deliver the Value Propositions that you want to offer?
Make sure that all of your Customer Segments connect to at least one of your Value Propositions and are generating Revenue Streams for your business. Discard elements that don’t add value to your business – whether customers, suppliers or income streams.
The Canvas will also help you to look at other business elements such as:
- Customer churn
- Recurring revenue
If you’re an existing business, separate current and future activities. You may be selling a particular product now, but plan to diversify into new areas moving forward.
Look for any gaps or problematic issues in your Business Model Canvas and try to find ways to resolve them. Once completed, don’t put it to one side and forget about it – keep returning to your Business Model Canvas to keep your business on track.