Building a Business Model Canvas for Your Startup

A business model canvas (BMC) is a template that summarizes the nine key components of a business model in a single diagram.

Since a BMC is used primarily to organize business model hypotheses, you should expect it to change over time so you can keep track of the different iterations of your BMC to observe how your business model evolves.

Each component of the BMC is organized within larger groupings: customers, finances, or infrastructure.

 

Business Model Canvas

You may have noticed that the value propositions section is not included within the categories in the image above.

This is your starting point. It describes your vision for how your offering will be successful, its features and benefits, and ideas for an initial minimum viable product (MVP).

Let’s consider our car wash delivery service. The service vision is that it will eliminate the need for

The features and benefits are online order, while the minimum viable product is that customers will be able to register online and make order regardless of the aesthetic of the website or application.

The goal of the Value Proposition section is to present a compelling narrative to achieve buy-in from both early adopters and investors.

The value proposition brief should outline how the offering will solve a problem or fulfill a need—in short, its value to the customer.

An example of value proposition is: “Customers wastes $ on trainers and behavior modification. Es provides mutual understanding between dog and owner. Two-way translation devise attaches to any collar and waterproof.”

After the Value Proposition, the next section that you should fill out relates toyour customers. It consists of three components:

·        Customers segments, or the target customers for your service or product

·        Channels, or how you will deliver your service to your customers

·        Customer relationships, or how you will acquire, retain, and attract new customers.

Let’s categorize the following elements as customer segments, customer relationships, or channels.

Elements	Category	comments
You envision a loyalty program, in which current customers receive money back when they refer new customers to your company	Customer relationships	This is way to retain customers once they have made purchase
You want to sell your product through vetenarian offices in order to make your product seem more scientifically legitimate.	channels	This is where customers will be able to purchase your product.
You make a list of Instagram influencers who also own dogs to see if they would post about your product	Customer relationships	customer relationships are about attracting and retaining customers. you can get earned media from influencers to attract their followers.
you target busy corporate workers in Lagos state.	customer segments	they are your target market
you set up an extensive outreach program, including welcome emails, how-to guides, and periodic phone calls checking in with customers.	Customer relationships	This is all about customer retention.

 

Next, you should evaluate the infrastructure you need to develop or secure in order to be successful. This includes:

·        Key resources, or critical physical, financial, human, and intangible assets;

·        Key activities, or processes necessary to deliver value to your customers; and

·        Key partners, or relationships that provide key resources that you cannot produce yourself.

Customer education is an example of key activities especially when creating a new market with a never-before-seen product. Examples of key activities also include marketing and device maintenance. These are the ongoing activities that will support your business.

Key resources include your engineering genius, seed money and patent for translation device.

Key partners include: Device manufacturer, Instagram influencer and veterinarians

Finally, you need to assess your cost structure and revenue streams to determine that your business model makes financial sense.

To do this, you will need to answer four questions.

How will you generate revenue? Will it be a one-time purchase? Will you use a subscription or freemium model? Will you try to earn additional revenue through referrals or affiliate links?

How many products will you sell? This estimate is based on the market size hypothesis you calculated in the previous lesson, combined with channel volume potential estimates.

How much will you charge? You will need to take into account your costs, as well as the pricing strategy you want to carry out (penetration pricing, competitive pricing etc.).

Will this be a profitable business? You don’t need exact numbers, but it is important to have enough of an estimate to decide whether to move on to the next stage of the customer development process.

Sometimes, startups need to modify the business model canvas to account for limited information about new markets.

One popular modified version is the lean canvas, which includes less about logistics and more about the customer—specifically, assumptions made about the customer’s problems, and how the business will verify those assumptions. (another modified version is the opportunity canvas, which is used for pivoting existing offerings rather than developing a new product.).

Lean Canvas

The lean canvas (read more) looks very much like the business model canvas, with the exception of four changes.

“Problem” replaces “Key Partners.” This section answers the question “what is the problem you are trying to address and ow do you understand it?”

“Key Activities” becomes “Solution.” This section presents the best possible solution to the problem you are investigating.

“Key Metrics” replaces “Key Resources.” Here you will include the actions and metrics that matter the most when proving your business hypotheses.

“Customer Relationships” becomes “unfair Advantage.” These are traits that will give your company a competitive edge and can’t easily be bought or copied. Many startups will have to leave this box blank at first!

In general terms, the lean canvas takes the focus away from operations and places the emphasis on ideas.

Why do you think this makes the lean canvas better suited to new businesses?

It facilitates experimentation and discovery to help achieve goals. The addition of key metrics encourages entrepreneurs to measure their success and adapt accordingly.

It emphasizes new ideas over traditional strategies. The focus of the lean canvas is customer problems and your unique, hard-to-copy solution. Execution is secondary, and open to revision.

In conclusion, some of the questions components of a typical BMC answer are

Key activities: What are the processes requires to deliver value to customers?

Channels answered the question of How the product will get to your customers and how much it will cost to get the product into customers’ hands.

Cost structure: How much does it cost to operate your business?

Customer relationships: How will you attract customers? How will you retain them once you’ve made a sale? How will you grow additional revenue from them over time?

Key resources: What are the physical, financial, human, and intangible assets that are critical to the company’s success? Where will you find them and how will you acquire them?

Revenue Streams: How will you generate income from customers? How much will you charge?

Key partners: Who can you team up with to procure the capabilities or resources that you require, but can’t develop yourself?

Customer segments: Who are you selling to? What are the characteristics of your typical customer?

Click here to download a business model canvas template to create your own BMC

 

Business Model Canvas Template