With this post, I wanted to share my latest Business Model Canvas Design and explain all the sections that you should fill to organize and develop your project.
Lean startup is a methodology for developing businesses and products that aim to shorten product development cycles and rapidly discover if a proposed business model is viable; this is achieved by adopting a combination of business-hypothesis-driven experimentation, iterative product releases, and validated learning.
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Business model canvas
A Business Model Canvas is a strategic management and lean startup template for developing new or documenting existing business models. It helps visualize what is important and forces users to address key areas. It can also be used by a team (employees and/or advisors) to understand relationships and reach agreements.
1. Customer segments
Customer segments are the community of customers or businesses that you are aiming to sell your product or services to. Customer segments is one of the most important building blocks in the business model canvas for your business, so getting this building block right is key to your success.
Define your client/s type: Try to summarize your client features like age, hobbies, routines, environment...
Estimate and define your TAM, SAM and SOM:
- TAM: total addresssable market
- SAM: serviceable available market
- SOM: serviceable obtainable market
Define the problem or need solved with your business model: Focus and describes how you solve your client’s need.
2. Value propositions
A value proposition is designed to convince a potential customer that your particular product or service will add more value or better solve a problem than your competition. It should answer the fundamental question of “Why should I buy your product instead of your competitor’s product?”
Describe your product or service: Describe and list your value proposition, focus on the problem you are solving.
List the benefits that your idea provides to your client segment: List all the advantages that your idea provide to the market you are serving to.
Describe the reason why your potential client is choosing you: Describe the reason and link it your client’s type.
3. Customer relationships
Customer relationships describes the type of relationship a company establishes with it’s specific customer segments. Customer relationships are driven by customer acquisition, customer retention, and boosting sales – in other words you need to get, keep, and grow your customer relationships.
Capture: List at least three the activities to gain clients
Retention: list the activities to mantain clients
Growth: list the activities to offer more servicies to your clients
In this section, it would be helpful to estimate the conversion rates from these activities.
Channels are ways for you to reach your Customer Segments. And remember that in the initial stages it’s important not to think about scale but to focus on learning. With that in mind try to think which channels will give you enough access to your Customer Segments at the same time give you enough learning. Channels can be email, social, CPC ads, blogs, articles, trade shows, radio & TV, webinars etc. and BTW you don’t have to be on all of them, just where your Customer Segments are.
Channels: Describe 2-3 channels to provide your value proposition.
By form: directs and indirects
By type: producer, wholesaler, retailer, and consumer.
Remember that one more channel implies one more cost too.
5. Revenue streams
How you price your business will depend on the type of model it is, however, it’s quite common for startups to lower their cost, even offer it for free to gain traction, however, this can pose a few problems. The key being it actually delays/avoids validation. Getting people to sign up for something for free is a lot different than asking them to pay. There is also the idea of perceived value.
Revenue model: Describe your revenue model type like pay per use, license, renting, asset sale, advertising, subscription...
Price estimation: 3 alternatives
A) By cost-benefit
B) By competitors
C) By demand curve
6. Key activities
These are really the activities that you do on a daily basis and what you need to understand is your strengths and weaknesses to which you can play on. These may include sales and marketing, research and development, manufacturing or distribution. Perhaps if you were an app development or software company your core focus should be to program and develop.
Define this section with action verbs. Find the key activities to provide your value proposition to your customers. Ex: Develop an app, Website construction, customer service, software development, etc.
Focus on those essential activities that enable your value proposition.
7. Key resources
This is really the part that explains how you will create your value proposition. Have a think about what types of products, services, assets you may need to create your value proposition. This often includes intellectual property, talent, and infrastructure. Perhaps you have a website that is unique, perhaps you have offices or property that are very unique.
Elements needed to provide your value proposition. 4 types:
- Physical resources: Computers, offices, stores, etc.
- Intellectual resources: Licenses, contracts, patents, etc.
- Human resources: Customer service, designers, etc.
- Liquid assets
8. Key partners
Define your strategic allies essential for your business model.
Ex: distribution, shipping, hosting provider, software development, marketing, customer service, etc.
4 Different partner types:
- Buyer-Supplier partnership
- Coopetition and partnering
- Strategic Alliance
- Complementary partnering
9. Cost structure
Here you should list all the operational costs for taking this business to market. How much will it cost to build your idea? What is your burn rate — your total monthly running costs? How much will it cost to interview your customer segment? How much do market research papers cost? etc. You can then use these costs and potential revenue streams to calculate a rough break-even point.
- Key activities costs (internal): App development, design, customer service, shiping etc.
- Key resources costs (internal): Office space, warehouse, computers, licenses, designers, etc.
- Key partners costs (external): Shipping, providers, distribution, customer services.
References and links
- steve_mullen, An Introduction to Lean Canvas.
- Ries, E. (2011) personal interview. 2011
- More articles like this here: Resources