Ask SCORE: How can I use the business model canvas?

methodology-b5e4177c0e51a4b1c552fbec08455ccd8643b8ac6fcced615e7b2452e4d5563bThe Business Model Canvas is an entrepreneurial tool that helps you visualize, design, and reinvent your business model. It was developed by Swiss business theorist and author Alexander Osterwalder.

For a startup, using the tool can help you develop a clear view of your value proposition, operations, customers, and finances. As an existing business owner, you can use it to identify how the different components of your business relate to each other.

It can help you decide where you need to focus your time and effort. 

Many startup entrepreneurs and small business owners are so busy trying to get started and find ways to grow their business that they spend little time planning. When they do try to plan, they often don’t know where to start.

This tool sets an overarching framework for developing a business strategy, a detailed business plan, and a prioritized action plan.

The Business Model Canvas can help you address specific risks and gather more information about competitors so you can focus on a market niche.

The Business Model Canvas has nine different areas of focus that make up building blocks in a visual representation of your business.

Value Propositions — What products and services will you offer to meet the needs of your customers? How will your business be different from your competition? What challenges will you solve for your customers?

Customer Relationships — What types of relationships will you forge with your customer segments? What are the relationship expectations of each customer segment? How are they entwined with the rest of your business model?

Customer Segments — What sets of customers will you serve? Which are most important to your business?

Channels — Through what means will you reach your targeted customers and deliver your products and services to them? Which are most cost effective? How are the channels integrated?

Key Partners — Who are the buyers and suppliers you need to form relationships with? What other alliances will help you accomplish core business activities and fulfill your value proposition to customers?

Key Activities — What are the most important activities you must engage in to fulfill your value propositions, to secure distribution channels, to strengthen customer relationships, to optimize revenue streams, etc.?

Key Resources — What resources do you need to create value for your customers and sustain your business?

Cost Structure — What are the key costs your business will face? Which resources will cost the most? Which activities will cost the most?

Revenue Streams — How much will you charge for your products and services? What are customers willing to pay for? How will customers pay? How much will each revenue stream contribute to your overall revenue?

Gaps in planning stand out when using the tool. It can be helpful to revisit your Business Model Canvas frequently, to incorporate what you’ve learned and make changes to keep moving in a positive direction.

If you would like to learn more, maybe even take online classes from the creators of the Business Model Canvas, click here.

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