If you have an idea for your startup business, but you’re not sure how to make it happen, by the end of this video you’ll know how to create a complete business model canvas and how to turn your business idea into a reality.
I’ve helped many, many clients turn their business ideas into money-making business models, and now it’s your turn.
If you are wanting to bring your business ideas to life and understand what a business model really is, then keep on watching. A business model canvas is a visual overview and shows you all of the key sections and functional areas that make up your business.
It’s an amazing tool that can be used in three different situations.
When do you use the Business Model Canvas?
- Initial planning of your business to figure out what your business model is going to look like.
- Before you create a formal business plan – use the BMC as a preparation tool for before you tackle your plan
- A worksheet for your existing business, to track how you’re progressing with your goals and also to identify new opportunities for your business.
Sections of the Business Model Canvas
Now, I will show you all of the sections of the business model canvas, what they are, and how they fit together. Let’s start with the right side of the business model canvas. This is called our value side. This is everything that brings value to the business and makes us money.
The left side of the business model is our cost side. Everything on this side of the business model canvas costs us money. Now, the reason this is such a valuable tool is that it’s a one-page overview of the business, so you can see all of the different sections of your business model and how they fit together. You want to make sure that all of the sections make sense with one another, and you’ll see that as we go along.
#1 Customer Segments
The first section of the business model canvas is our customer segments. Now, the reason we start with the customer segments in our business model canvas is that everything in our business should revolve around our customers, serving their needs, and is based on what is most important to them. In customer segments, you want to answer two basic questions, who needs our solution and who will need our solution in the future?
In this section, you want to list multiple segments that represent different groups of people who want what we have to offer. Customer segments are the most important section of the business model canvas and you want to make sure that you have your customer segments figured out and completely solidified before you move onto any other step in this process.
Example of Customer Segments for Breakfast Restaurant
One example segment could be foodies visiting downtown Toronto. They are looking for hearty breakfast food. They might still be in vacation mode and they’re not in any rush to get out of the city. They care about a quality meal and they also want to treat themselves.
Another segment could be local, downtown Torontonians. They have very high income and they seek out the best of the best, even when it comes to breakfast.
#2 Value Proposition
Next, we move onto our value proposition. Our value proposition is, what is the problem that our customers have and how are solving that problem. The value proposition is in between the value side and the cost side of our business model canvas because this is our offer which needs to balance between what our customers want and how we use the different sections of the cost side to give them what they want.
Example of Value Proposition for Breakfast Restaurant
Our value proposition is what problem do our customers have and how are we solving that problem? In this example, the problem is that our customers have just woken up and they’re very hungry. This is a problem. We are solving this problem by offering high quality, unique breakfast offering with a chic downtown vibe atmosphere.
#3 Competitive Advantage
The third section of the business model canvas is our competitive advantage. How are we different and unique from our competitors to better serve our customer segments?
Example of Competitive Advantage
An example of the competitive advantage could be that this restaurant is different from its competitors in that they offer a different breakfast special every single day. The chefs are very creative and the menu changes very frequently, which is very uncommon for a breakfast restaurant.
Channels are exactly as they sound, so how do we deliver value to our customers and how did they find us? Where along the buyer journey can we communicate with our customers and how can our customers communicate with us?
Example of Channels for a Breakfast Restaurant
How are we delivering value and how are we communicating with our customers? In this example, they deliver value through their physical restaurant and they also communicate via Facebook, Instagram, and their website. This restaurant gets lots of reviews through Google My Business, TripAdvisor, and also on Yelp.
#5 Revenue Streams
The fifth section of the business model canvas, and the final of our value side is our revenue streams. Our revenue streams are, how do we make money and how are our customers willing to pay, and how much are they willing to pay? Are we selling something once or do customers subscribe to something for ongoing value? How much do the different revenue streams contribute to our overall revenue?
Example of Revenue Streams for a Breakfast Restaurant
For this example, the restaurant makes money through its menu items in their restaurant and also through catering special events. Because their customers are high income and they’re also looking to treat themselves, this business has structured their pricing model to be premium priced menu items.
So now that we’ve finished with the right side of the business model canvas, you can start to see the different sections of our business model forming, coming together and you want to make sure that all of the different sections make sense with one another.
So just a reminder, the reason that we want to start our business model canvas exercise with our customer segments is because all of the other sections of our business model rely on fitting in with our customer’s wants, needs and what they actually care about.
#6 Key Partners
Section six of our business model is our key partners. It is no mistake that our key partners are located directly mirroring our customer segments because our key partners help lower our costs in the same way that our customers make us money. Anyone who helps us to lower our costs can be considered a key partner, from suppliers, to other organizations who we can be associated with to help us lower our inputs and optimize our business operations.
Example of Key Partners for a Breakfast Restaurant
Section six of our business model canvas is our key partners. The key partners here are the food suppliers, the downtown Toronto Chamber of Commerce, and a few other restaurant associations that could help this restaurant lower their inputs and optimize their business. Now remember, key partners doesn’t mean that you have a formal contract, a partnership agreement with another business. It could just mean another business that has the same customer segments that you do and possibly you can work together to either increase the value or lower your costs.
#7 Key Activities
Section seven of the business model canvas is our activities. What activities do we do to deliver value to our customers? So, our activities could be daily activities or month activities, and if you are solopreneur and you find that your daily activities exceed the amount that you are available then that might be a red flag for you.
Example of Operational Activities for a Breakfast Restaurant
For this example, this restaurant might require activities such as food preparation, menu planning, menu promotion, social media, daily food service, kitchen cleaning, recruiting, hiring, training, and much more.
The eighth section of our business model canvas is our resources. Our resources are, what do we need in order to deliver this value to our customers? This might be physical resources, equipment, or capital, human skills, or tools of some kind.
Example of Resources for a Breakfast Restaurant
The resources that this business needs to deliver the value to their customers could be their secret recipes, experienced, innovative and knowledgeable chefs, a commercial kitchen, relationships with their suppliers, brand awareness, a great email list, all of the equipment within that commercial kitchen, their location.
#9 Cost Structures
The ninth and final section of our business model canvas is our cost structure. Here is where we want to identify how much our activities, resources, and partnerships are going to cost us. The cost structure can be a cost-driven structure, meaning that we focus on incurring the lowest possible costs, or a value-driven cost structure, meaning that we focus on providing the most amount of value and not necessarily the lowest cost inputs.
Example of Resources for a Breakfast Restaurant
In this business model canvas example, this restaurant follows a value driven cost structure, which means that they focus on delivering value more than they focus on having the lowest cost possible. So if an ingredient or another input in their business is higher quality and therefore has a higher cost, then they will still go with that option even though it has a higher cost. In this section, you also want to list out all of the costs that you will have from your resources, activities and your key partners.