Business Model Canvas

Photo by Green Chameleon / Unsplash

The business model canvas (BMC) is a canvas that can be used to brainstorm and evaluate business ideas on a single sheet of paper.

The Business Model Canvas (click above for a PDF)

It is split into 9 sections:

  1. Value Proposition
  2. Channels
  3. Customer Relationships
  4. Customer Segments
  5. Revenue Streams
  6. Cost Structure
  7. Key Resources
  8. Key Activities
  9. Key Partners

Value Proposition – A Value Proposition (VP) is a short statement where you consider what it is that your business has to offer that might offer value to others. What is a pain you alleviate for customers?

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Thinking about Value Propositions
What is the Value Proposition for a rental scooter?
What is the VP for a grocery Store?
What is the VP for a university?
What is the VP for a babysitter?
What is the VP for the national tax office?
What is the VP for your letter box?

Customer Relationships – What kind of relationship is necessary to reach your customers in order to deliver this VP? Is it high-touch and hands-on, or distant and self-service, or perhaps automated? Are you co-creating value with the customer? Or selling them a turnkey product/service?

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Thinking about Customer Relationships
What kind of relationship do you have with your:
power company?
a restaurant?
a museum?
with Spotify, Netflix, Disney+?
with your doctor?
with a builder/contractor?

Channels – How do you reach your customer where they are? You could go directly to them, knocking on doors, or reach them through a channel partner? This is foundational to how you'll do the work of building a relationship with your customers and building pipelines for attracting new customers.

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Thinking about Channels
How does your Internet service provider reach you?
Can you think of an advertisement you reacted to recently?
Can you think of a client you met somewhere, was it a conference or networking event? Was that a channel?
What channel did your barber or hair stylist use to capture your business?
What's your favorite purchase of the last year? What channel did you learn about it from?

Revenue Streams – How do you actually get money from the customer? Subscriptions? Asset sales? Usage fees/rents? Grants? Licensing? Lending / Leasing? Third-party payer?

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Thinking about Revenue Streams
What are some subscription services you use?
What items have you purchased as asset sales? House, car, groceries, etc.
Do you license any products?
Are you leasing/renting anything?
Do you pay usage fees?
Do you use things that are paid for indirectly? 

Key Resources – What are the key resources, essential to delivering your Value Proposition? These are things that without them, you can't deliver your VP? Considering our key resources is a great time to ask what we do and don't need to make the VP happen for our customers? Will we need investment, or can we lean bootstrap?

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Thinking about Key Resources
What resources would you need to build a factory?
How about making potato chips?
What about an online learning portal?
A convenience store?
A farm?
An online Software as a Service company?

Key Activities – Similar to the key resources, but more operational, what are the key activities this business will undertake in order to deliver on its VP? Is it creating a physical product and the logistics that entails, is it building functionality in software or hardware?

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Thinking about Key Activities
What are the key activities of a statistical consulting firm?
A bakery?
A textile plant?
A retail store?
A restaurant?

Key Partners – Who are the key partners that enable you to deliver on the VP more effectively? What do these partners do? Insurance, marketing, scaling, acquisitions, identifying resources/talent?

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Thinking about Key Partners
What are the key partners for:
A convenience store?
An insurance company?
A doctor's office?
A factory?
A software company?

Cost Structure –  What is the cost structure which enables you to deliver on your VP? Are you cost-driven, value-driven, have high fixed costs, high variable costs, can your business benefit from economies of scale, economies of scope?

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Thinking about Cost Structure
What is the cost structure of:
Your grocery store? (hint: lots of inventory)
Netflix? (hint: how do they get their content?)
A gas station?
A Software as a Service (SaaS) company?
A wedding photographer?

When working with the BMC there is no right or wrong answer, it is simply a tool for you to use to clarify and consider a business problem from multiple perspectives. A canvas can make assumptions and hypotheses that you can use to test your ideas. Have a go, print out (pdf) five or so sheets, grab a pen and try out an idea! It really works best if you sit with the paper and use a pen. Let me know how it works out for you.