The Business Model Canvas is the third conversation in our “How to Start Anything” series. In the first two sessions, we discussed how to start anything. First, we discussed your identity; you can’t give what you don’t have. Then, the critical WH questions help us frame our thoughts. Now that you’ve been able to answer what you want to do, why you want to do it, who your target customers are, and where the business will be located (both online and offline), we are ready to answer how.
How exactly do I make this business happen?
My go-to resource for this is the Business Model Canvas. I prefer this tool over others because of its simplicity and its ability to stimulate deep thoughts. The beauty of tools like this is that they can be used and adjusted as often as necessary, giving you the power to shape your business plan.
It’s important to remember that a business only exists when a customer pays for your goods or services. Having a vibrant idea is not enough; you must have customers to be in business.
So, let’s delve in.
The Business Model Canvas has nine blocks:
- Customer Segment
- Value Proposition
- Channels
- Customer Relationships
- Revenue Streams
- Key activities
- Key resources
- Key partners
- Cost Structure
Let’s delve right in!
Part 1: The Business Itself
- Customer Segment: I always start the Business Model Canvas with the customer segment. After all, a business can only exist if it has customers. As a business owner, it’s crucial to ask, “Who am I targeting with my value? What are my customer demographics? Who are they? Where are they? Are there segments of a vast population that will benefit from my product/service?” Your customers are at the heart of your business, and understanding them is crucial to your success.
- Value Proposition. This asks what value my customers will derive from my products/services. What sets me apart from everyone else offering the exact product/service? Remember, people pay for the value they attach to a product or service instead of the specific product/service. For example, my decision to choose restaurant “A” over restaurant “B” is the value I derive from A over B. It could be as basic as “I can guarantee their taste, and I’m craving that consistency.
- Channels: This asks how exactly I would communicate and deliver the business value to my customers. How would they access this product/service? Do I need to build a website? Do I have to buy delivery trucks? Do I need a physical store? Etc.
- Customer Relationships: I explain it this way: How will your customers interphase and interact with you: how would they share their feedback, thoughts, and inquiries with you? Please note that both channels and customer relationships are business-specific and should stem from the customers your business attracts. For example, a 24-hour pharmacy should have, at the very least, a 24-hour customer service line and should be positioned to offer 24-hour delivery services.
Now that we know what we are offering, who our customers are, how we deliver value to them, and how they, in turn, can reach and interact with the business, it is time to review all our sources of income from this business.
Part 2: Resources
- Revenue Streams: Don’t hold back! What are all the possible ways of earning income for this business based on the value proposition and customer segment the company appeals to? Sometimes, considering a business-to-business approach may yield better revenues compared to a business-to-customer model and vice-versa. This is where you test all possible revenue sources.
- Key Activities: This asks, “What do I need to do to get started?“ do I need to get a physical space? Do I need to register with a regulatory body? Do I need to register the business to get started? Should I buy some equipment? What activities do I need to engage in to start? If properly done, this block in our business model canvas can assist with identifying the required resources (material, financial, human, and intangible resources) and areas of need for partnerships.
- Key Resources: What do I need to get started? From our key activities, we can identify some fundamental needs. For example, an aspiring photographer can write “source for equipment“ under key activities and “professional cameras and gear” under key resources.
- Key Partners: Which relationships do I need to leverage to give me a soft landing? Suppliers are very crucial here. If a business relies on external supplies, those suppliers become key partners. For example, an aspiring restaurateur whose value proposition is to deliver healthy, freshly prepared, home-cooked meals to customers needs a supplier who supplies fresh farm produce daily to fulfil the mandate. This supplier is a key partner. Because of their vital role in the business’s success, it is crucial to identify them and decide on the type of relationship to build with them as well as possible contingency plans in the event of non-performance.
Now that we have identified our key activities, required resources, and partners, we are in a position to determine our business costs.
Part 3: Costs
- Cost Structure: What costs will this business incur? What are the capital/start-up costs? What are the recurring service costs? An excellent place to find these costs is from our key resources, activities, and sometimes partners.
If your revenue streams outweigh your cost structure, then your business is feasible and can be profitable. If the cost structure far outweighs the revenue streams, then it may be imperative to review your value proposition.
Kindly note that while the BMC provides a general overview of your business and will force you to consider all relevant parts of your business, it will not substitute the need to work on your financials to determine whether or not your business is feasible.
Were you able to develop your BMC? Kindly share your thoughts in the comment section.
Do you still need clarification about your business? You can schedule a one-on-one consultation or attend one of our business clinics.
To your success,
Moremi O Adeleye
