Marc L. Goldberg
Of all the startup tools, the Business Model Canvas (www.strategyzer.com) is one of the best known and trusted for helping entrepreneurs turn an idea into an organized strategy and achievable business plan. The Business Model Canvas gives entrepreneurs a broad overview of all aspects of their business, from value proposition and customer segments to operations and finance.
The tool itself, however, is no more complex than a series of nine boxes representing business sectors drawn on a sheet of paper. Much of its effectiveness lies in its simplicity. The exercise forces owners to stay focused and concise as they organize their business according to each of the boxes in order to focus on their strategy and business plan.
A Business Model Canvas allows you to put your entire business on paper and assess your strategy, planning gaps and risk exposure. According to Mark Lowenstein, SCORE mentor and business development expert, the Business Model Canvas can help entrepreneurs address specific risks and gain more insight into competitors, costs, customer segments or a market niche. .
“This tool defines an overall framework for developing a business strategy, a detailed business plan and/or a priority action plan,” he said.
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When planning your start-up, complete your own Business Model Canvas exercise and incorporate your completed canvas into your business plan. If your business is already in operation, the exercise is just as valuable. You will have the opportunity to evaluate your business plan using real data and refine your strategy to get closer to your goals. The nine boxes include:
Value proposition: What central problem does your company solve? What benefits does your business offer? And what products or services will you offer to meet your customers’ needs?
Customer segments: Who will your business serve? Will you serve one type of customer or multiple customer segments? Which customers are most critical to the success of your business?
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Sales channels: How will you reach your targeted customers and provide them with your products and services? Which will be the most profitable? How are your sales channels integrated?
Customer relationship: What types of relationships will you build with your customers? What are the relational expectations of each customer segment?
Key activities: What are the most important activities you need to engage in to realize your value proposition, secure distribution channels, build and strengthen customer relationships, optimize revenue streams, and more?
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Key partners: Which buyers and suppliers do you need to establish relationships with? What other alliances will help you accomplish your core business activities and realize your value proposition to your customers?
Key resources: What resources do you need to create value for your customers and sustain your business?
The cost structure: What are all the costs you will incur while running your business? There are two main types of cost structures: value driven and cost driven. Part of this block is determining which structure makes the most sense for your business and factoring that into your cost strategy.
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Income stream: How will you charge for our product or service? What are customers willing to spend? And, how much will each source of income contribute to your overall annual income?
Whether you are a new business owner developing a business plan for the first time or an owner looking to fill planning gaps in a current business, going through the Business Model Canvas process is a valuable exercise. It’s even more valuable if you can access a SCORE mentor as an accountable partner to guide you through the process and help fill planning gaps.
If you would like a template for applying the Business Model Canvas to your business, contact [email protected]
Contributed by Marc L. Goldberg, Certified Mentor. SCORE Cape Cod and the Islands. www.capecod.score.org, [email protected] or 508-740-4820.