Business Model Canvas: Simple Explanation of the 9 Building Blocks
Do you have a new idea for a business? Or do you want to find new opportunities for your company? Use the Business Model Canvas (BMC)! Use the large format BMC in a workshop to quickly come to good ideas with a number of people, or to sketch your 1 page business plan yourself.
In this article I explain the 9 building blocks of the Business Model Canvas as simply as possible.
1. Customer Segments Business Model Canvas
First, describe who you want to help. In other words: what is the customer segment you serve? This can be one or more segments. The following applies: the more specific, the better. What do you prefer? A number of smaller target groups of which you know very well what their needs and problems are? Or one large, general target group?
It seems attractive to choose large, general markets as target group, because: larger sales market. But in practice it is very difficult (understatement) to be successful with a general product in a general market. To be successful it is essential to distinguish yourself.
The point is: look for the smallest possible audience to work for. This increases your chance of success. Then you can say, “I’m here especially for you.”
Tip: do you find it difficult to describe your niche clearly? First start with who is not your customer.
2. Value Propositions Business Model Canvas
Your value proposition describes what you have to offer your target audience and why customers choose you. The key questions to distinguish yourself are:
- What is your solution to the customer’s ‘problem’? These are the products and services you provide to your customers. In short: what do you have on the shelves of your store?
- How does your product or service solve the problem? The Unique Selling Points.
- Why is your product or service better than the competition? Can your solution do more, is it better, easier, does it provide higher cost savings, do you provide better service, more customization, and so on.
3. Channels Business Model Canvas
This section of the Business Model Canvas is about communication. What does your sales and marketing funnel look like? Which online and offline channels do you use to reach your target group?
And after the deal: how do you deliver your products and services? How do you provide service?
Pro tip: work out a customer journey for all personas. This way you keep an overview of all online and offline touchpoints.
4. Customer Relationships Business Model Canvas
What does the relationship with your customers look like? Investing in a close relationship with customers ensures good customer loyalty, but is also expensive. The need for contact also differs per target group and value proposition.
Do your customers prefer complete self-service? Or also personal advice from an advisor?
Do you serve your customers completely online (for example: webshop), completely offline (example: physical store), or both (example: webshop for ordering + physical store for advice and service)?
Does your customer make a purchase decision individually, or does your customer expect to become part of a community?
5. Revenue Streams Business Model Canvas
What will your revenue model be?
Describe how you generate revenue from your range of products and services. What does your target group prefer: purchase, rent, subscription? Or the freedom to choose how they pay? What’s the price? Or is a freemium model attractive with in-app payments or revenue through ads?
In the ‘cost structure’ section you also describe which costs you incur. In short: revenue minus costs determines whether you have a profitable business model.
6. Key Resources Business Model Canvas
What resources do you need to make your product or service? If you’re working out a value proposition for a consultant, maybe that means you just need a laptop, and a phone. But also think of training, a website, trademark registration. Is the core of your value proposition a physical product? Then you may need a production hall with machines and staff. Do people need to be trained? do you need patents?
7. Key Activities Business Model Canvas
You don’t have to (and can!) do everything yourself. Therefore, choose what is unique or specialized enough to do yourself and buy the rest, or outsource it. This way you can focus on those activities that really add value. The rule of thumb is: do in-house what is business-critical for continuity and growth. Let others do all other activities.
8. Key Partnerships Business Model Canvas
This section describes who you work with. The core partners section is closely related to the core activities section. For example, partnerships can help you take work off your hands, so that you can focus on your core task where you add the most value.
Collaborative partners can also help you enter new markets. Or act as sales partners in markets where you are not yet active.
9. Cost Structure Business Model Canvas
What costs do you have to incur in order to realize the revenues that you foresee? Make an overview of all the fixed and variable costs that you expect. This includes salaries, machines, purchasing, marketing, insurance, taxes, the rent of a commercial building, and so on.
What's next?
The next step is to validate your key assumptions. In this article you can read how to validate customer needs and in this article how to create a winning value proposition. Have you validated the ‘customer side’? Then get started with your Minimal Viable Product (MVP) to achieve Product Market Fit as quickly as possible and further scale up your Business Model!
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Great content! Keep up the good work!
Thanks, glad you like it!