A business model canvas (BMC) is a widely known framework that’s used to define a startup business model. If you have an idea that you can’t wait to share with the world, unlike a business plan which requires tons of pages to establish the intricacies of the company, a business model canvas can be outlined on a single page. Before getting started on your business model canvas, there are certain elements you need to know about first that make up a BMC. Here are the core components of a business model canvas.
Customer Segments
The first core component of any business model canvas is to define which customer segment will be the focus of your business. You need to figure out what kind of products or services you’re providing to each customer segment. For any company to survive, you need profitable customers by your side who buy into your brand. You will understand the demographic information of your consumers, which can help clarify who exactly you need to target and how a certain group will benefit your business.
Value Propositions
Next, you need to think about what value you’re going to provide to the customer, as well as what customer pain points you plan to address. The value proposition is a feature designed to make a business more attractive to customers. This is a great opportunity for you to outline your strengths and advantages that differentiate your company from other businesses and what makes you unique.
Channels
To reach your desired customer segments, you need to determine what channels you’re going to focus on, and how to integrate such channels. The channel referred to here is any form of media that can be used to deliver your products or services. Whether you use a physical channel like a store to sell your products or a virtual channel like an e-commerce store, this is one of the most important components of a business model canvas.
Customer Relationships
For your startup to thrive and be the success you envisaged, you need to concentrate on customer relationships. You should begin by clarifying what kind of relationship you want to maintain with each customer segment. Understanding how to win over your customers and keep hold of loyal ones is essential for business growth.
Revenue Streams
The revenue stream is the most crucial part of a BMC. This is where the business derives revenue from customers. This element of your BMC must be closely managed, as your sole goal for the startup will be to boost business revenue. Understanding which customers are willing to pay for your products or services and for what benefit is important. There are several ways you can generate a revenue stream for your organization, such as through leasing and subscription fees.
Key Activities
The key activities are the most significant activities in carrying out a business’s value proposition. This can include what strategies you use, the research you undertake, as well as product distribution. Key activities are normally broken down into three categories. These are production, troubleshooting, and platforms.
Key Resources
The key resources in a BMC contain a list of resources that businesses should plan and have to understand their value proposition. These resources can range from stock control, raw material management, and operational process management. All three are considered when creating a business model canvas. This component deals with the resources required to create value for your customers. You need to outline the assets needed to make your startup business model work.
Key Partners
Figuring out who your key partners and suppliers are and what key activities they perform is essential when designing a BMC. Key partners are the external suppliers or companies that you’ll need to perform key activities and provide value to your customers. To reduce the risks of a business model, companies normally cultivate buyer-supplier relationships, which allows them to concentrate on their core activity. You need to outline what your motivation is for working with these key partners. There may be something specific that only they can offer, which can lower costs overall.
Cost Structure
The cost structure element of a business model canvas refers to how an organization spends money on operations. This section requires you to look at what key activities and resources are the most expensive. As the final step of a BMC, the cost structure will help you decide whether to proceed or pivot. Your company can either be value-driven or cost-driven. The former concentrates more on delivering great customer value in regard to quality or prestige, whereas the latter looks to lower all costs.
Whatever kind of startup you want to run, you can use a business model canvas to establish the A-Z of your operation.
