from business model canvas to business plan

Business Plan vs Business Model Canvas Explained

6 min. read

Updated May 10, 2024

It might be stating the obvious, but planning and preparation are keys to success in business.

After all, entrepreneurs put in hard work to develop their product, understand the market they plan to serve, assess their competitive landscape and funding needs, and much more.

Successful business owners also take time to document their strategies for guiding the growth of their companies. They use these strategies to take advantage of new opportunities and pivot away from threats.

Two common frameworks for documenting strategies – the business model canvas and the business plan – are also among the easiest to get confused.

Though they can complement each other, a business model canvas and a business plan are different in ways worth understanding for any entrepreneur who’s refining their business concept and strategy.

Let’s start by digging deeper into what a business model canvas is. 

• What is a business model canvas?

You may have heard the term “business model” before. Every company has one. 

Your business model is just a description of how your business will generate revenue. In other words, it’s a snapshot of the ways your business will be profitable.

Writing a business plan is one way of explaining a company’s business model. The business model canvas takes a different approach.

A business model canvas is a one-page template that explains your business model and provides an overview of your:

• Relationships with key partners
• Financial structure
• And more…

While the business model is a statement of fact, the business model canvas is a strategic process—a method for either documenting or determining your business model.

It’s meant to be quickly and easily updated as a business better understands what it needs to be successful over time. This makes it especially useful for startups and newer businesses that are still trying to determine their business model.

You can think of a business model canvas as a condensed, summarized, and simplified version of a business plan. It’s a great way to quickly document an idea and get started on the planning process.

The business plan is a way to expand on the ideas from the canvas and flesh out more details on strategy and implementation.

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Components of a Business Model Canvas

The simplest way to think about your business model canvas is to map it out visually. A business model canvas covers nine key areas:

• Value proposition : A company’s unique offering in the market and why it will be successful.
• Key activities: The actions that a company takes to achieve its value proposition.
• Customer segments : The types of people or businesses that are likely to want a company’s products or services.
• Channels : How a company reaches customers through marketing and distribution efforts.
• Customer relationships: How a company interacts with customers and maintains important relationships.
• Revenue streams: The ways in which a company makes money.
• Key resources: The assets such as property, equipment and staffing that a company needs to perform its key activities.
• Key partners: The relationships with suppliers, vendors, customers and other stakeholders a company must maintain in order to be successful.
• Cost structure: The major drivers of company expenses that will need to be tracked and managed.

[Want an even simpler alternative? Try downloading our free one-page plan template and start building your plan in less than 30 minutes.]

To get a better sense of how a business model canvas documents business strategy, consider a company like Netflix. The streaming company’s business model is based on generating subscription revenue through its content library and exclusive content.

If Netflix executives were to create a business model canvas, it would map out how the company leverages key resources, partnerships, and activities to achieve its value proposition and drive profitability. The business model is the destination.

The great thing about a business model canvas is that you can quickly document business ideas and see how a business might work at a high level. As you do more research, you’ll quickly refine your canvas until you have a business idea you think will work.

From there, you expand into a full business plan.

• What is a business plan?

If a business model canvas captures what a company looks like when it’s operating successfully, then a business plan is a more detailed version along with a company’s blueprint for getting there.

Think of your business plan as a process of laying out your goals and your strategies for achieving them.

The business plan is more detailed, and changes over time. It examines each aspect of your business, from operations to marketing and financials.

The plan often includes forward-looking forecasts of a company’s projected financial performance. These are always educated guesses. But these forecasts can also be used as a management tool for any growing business.

Comparing actual results to the forecast can be a valuable reality check, telling a business if they’re on track to meet their goals or if they need to adjust their plan.

A business plan is also a must for companies hoping to receive a bank loan , SBA loan , or other form of outside investment . Anyone putting up funds to help you grow will want to see you’ve done your homework.

So a business plan is how you not only prepare yourself, but also show your audience that you’re prepared.

Components of a business plan

While there are several different types of business plans meant for different uses, well-written plans will cover these common areas:

• Executive summary : A brief (1-2 pages) overview of your business.
• Products and services : Detailed descriptions of what you’re selling and how it fills a need in the market.
• Market analysis : Assessing the size of your market, and information about your customers such as demographics (age, income level) and psychographics (interests, values).
• Competitive analysis : Documenting existing businesses and solutions your target customers are finding in the market.
• Marketing and sales plan : Your strategies for positioning your product or service in the market, and developing a customer base.  
• Operations plan : Describing how you will run the business from day to day, including how you will manage inventory, equipment, and staff.
• Organization and management team: Detailing the legal structure of the business, as well as key members, their backgrounds and qualifications.
• Financial Plans : Business financials that measure a company’s performance and health, including profit & loss statements, cash flow statements and balance sheets. Effective financial plans also include forward-looking sales forecasts and expense budgets.

How a business plan and business model canvas inform business strategy

Avoid the trap of using the two terms interchangeably. As we’ve shown, the two have different focuses and purposes. 

The business model canvas (or our one-page plan template ) is a great starting point for mapping out your initial strategy. Both are easy to iterate on as you test ideas and determine what’s feasible.

Once you have a clearer sense of your idea, you can expand the canvas or one-page plan into a business plan that digs into details like your operations plan, marketing strategy, and financial forecast.

When you understand how – and when – to use each, you can speed up the entire planning process. That’s because the business model canvas lays out the foundation of your venture’s feasibility and potential, while the business plan provides a roadmap for getting there.

The work of business planning is about connecting the dots between the potential and the process.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Table of Contents

• How both inform your strategy

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Business Model Canvas: Explained with Examples

Got a new business idea, but don’t know how to put it to work? Want to improve your existing business model? Overwhelmed by writing your business plan? There is a one-page technique that can provide you the solution you are looking for, and that’s the business model canvas.

In this guide, you’ll have the Business Model Canvas explained, along with steps on how to create one. All business model canvas examples in the post can be edited online.

What is a Business Model Canvas

A business model is simply a plan describing how a business intends to make money. It explains who your customer base is and how you deliver value to them and the related details of financing. And the business model canvas lets you define these different components on a single page.   

The Business Model Canvas is a strategic management tool that lets you visualize and assess your business idea or concept. It’s a one-page document containing nine boxes that represent different fundamental elements of a business.  

The business model canvas beats the traditional business plan that spans across several pages, by offering a much easier way to understand the different core elements of a business.

The right side of the canvas focuses on the customer or the market (external factors that are not under your control) while the left side of the canvas focuses on the business (internal factors that are mostly under your control). In the middle, you get the value propositions that represent the exchange of value between your business and your customers.

The business model canvas was originally developed by Alex Osterwalder and Yves Pigneur and introduced in their book ‘ Business Model Generation ’ as a visual framework for planning, developing and testing the business model(s) of an organization.

What Are the Benefits of Using a Business Model Canvas

Why do you need a business model canvas? The answer is simple. The business model canvas offers several benefits for businesses and entrepreneurs. It is a valuable tool and provides a visual and structured approach to designing, analyzing, optimizing, and communicating your business model.

• The business model canvas provides a comprehensive overview of a business model’s essential aspects. The BMC provides a quick outline of the business model and is devoid of unnecessary details compared to the traditional business plan.
• The comprehensive overview also ensures that the team considers all required components of their business model and can identify gaps or areas for improvement.
• The BMC allows the team to have a holistic and shared understanding of the business model while enabling them to align and collaborate effectively.
• The visual nature of the business model canvas makes it easier to refer to and understand by anyone. The business model canvas combines all vital business model elements in a single, easy-to-understand canvas.
• The BMC can be considered a strategic analysis tool as it enables you to examine a business model’s strengths, weaknesses, opportunities, and challenges.
• It’s easier to edit and can be easily shared with employees and stakeholders.
• The BMC is a flexible and adaptable tool that can be updated and revised as the business evolves. Keep your business agile and responsive to market changes and customer needs.
• The business model canvas can be used by large corporations and startups with just a few employees.
• The business model canvas effectively facilitates discussions among team members, investors, partners, customers, and other stakeholders. It clarifies how different aspects of the business are related and ensures a shared understanding of the business model.
• You can use a BMC template to facilitate discussions and guide brainstorming brainstorming sessions to generate insights and ideas to refine the business model and make strategic decisions.
• The BMC is action-oriented, encouraging businesses to identify activities and initiatives to improve their business model to drive business growth.
• A business model canvas provides a structured approach for businesses to explore possibilities and experiment with new ideas. This encourages creativity and innovation, which in turn encourages team members to think outside the box.

How to Make a Business Model Canvas

Here’s a step-by-step guide on how to create a business canvas model.

Step 1: Gather your team and the required material Bring a team or a group of people from your company together to collaborate. It is better to bring in a diverse group to cover all aspects.

While you can create a business model canvas with whiteboards, sticky notes, and markers, using an online platform like Creately will ensure that your work can be accessed from anywhere, anytime. Create a workspace in Creately and provide editing/reviewing permission to start.

Step 2: Set the context Clearly define the purpose and the scope of what you want to map out and visualize in the business model canvas. Narrow down the business or idea you want to analyze with the team and its context.

Step 3: Draw the canvas Divide the workspace into nine equal sections to represent the nine building blocks of the business model canvas.

Step 4: Identify the key building blocks Label each section as customer segment, value proposition, channels, customer relationships, revenue streams, key resources, key activities, and cost structure.

Step 5: Fill in the canvas Work with your team to fill in each section of the canvas with relevant information. You can use data, keywords, diagrams, and more to represent ideas and concepts.

Step 6: Analyze and iterate Once your team has filled in the business model canvas, analyze the relationships to identify strengths, weaknesses, opportunities, and challenges. Discuss improvements and make adjustments as necessary.

Step 7: Finalize Finalize and use the model as a visual reference to communicate and align your business model with stakeholders. You can also use the model to make informed and strategic decisions and guide your business.

What are the Key Building Blocks of the Business Model Canvas?

There are nine building blocks in the business model canvas and they are:

Customer Segments

Customer relationships, revenue streams, key activities, key resources, key partners, cost structure.

• Value Proposition

When filling out a Business Model Canvas, you will brainstorm and conduct research on each of these elements. The data you collect can be placed in each relevant section of the canvas. So have a business model canvas ready when you start the exercise.  

Let’s look into what the 9 components of the BMC are in more detail.

These are the groups of people or companies that you are trying to target and sell your product or service to.

Segmenting your customers based on similarities such as geographical area, gender, age, behaviors, interests, etc. gives you the opportunity to better serve their needs, specifically by customizing the solution you are providing them.

After a thorough analysis of your customer segments, you can determine who you should serve and ignore. Then create customer personas for each of the selected customer segments.

There are different customer segments a business model can target and they are;

• Mass market: A business model that focuses on mass markets doesn’t group its customers into segments. Instead, it focuses on the general population or a large group of people with similar needs. For example, a product like a phone.  
• Niche market: Here the focus is centered on a specific group of people with unique needs and traits. Here the value propositions, distribution channels, and customer relationships should be customized to meet their specific requirements. An example would be buyers of sports shoes.
• Segmented: Based on slightly different needs, there could be different groups within the main customer segment. Accordingly, you can create different value propositions, distribution channels, etc. to meet the different needs of these segments.
• Diversified: A diversified market segment includes customers with very different needs.
• Multi-sided markets: this includes interdependent customer segments. For example, a credit card company caters to both their credit card holders as well as merchants who accept those cards.

Use STP Model templates for segmenting your market and developing ideal marketing campaigns

Visualize, assess, and update your business model. Collaborate on brainstorming with your team on your next business model innovation.

In this section, you need to establish the type of relationship you will have with each of your customer segments or how you will interact with them throughout their journey with your company.

There are several types of customer relationships

• Personal assistance: you interact with the customer in person or by email, through phone call or other means.
• Dedicated personal assistance: you assign a dedicated customer representative to an individual customer.  
• Self-service: here you maintain no relationship with the customer, but provides what the customer needs to help themselves.
• Automated services: this includes automated processes or machinery that helps customers perform services themselves.
• Communities: these include online communities where customers can help each other solve their own problems with regard to the product or service.
• Co-creation: here the company allows the customer to get involved in the designing or development of the product. For example, YouTube has given its users the opportunity to create content for its audience.

You can understand the kind of relationship your customer has with your company through a customer journey map . It will help you identify the different stages your customers go through when interacting with your company. And it will help you make sense of how to acquire, retain and grow your customers.

This block is to describe how your company will communicate with and reach out to your customers. Channels are the touchpoints that let your customers connect with your company.

Channels play a role in raising awareness of your product or service among customers and delivering your value propositions to them. Channels can also be used to allow customers the avenue to buy products or services and offer post-purchase support.

There are two types of channels

• Owned channels: company website, social media sites, in-house sales, etc.
• Partner channels: partner-owned websites, wholesale distribution, retail, etc.

Revenues streams are the sources from which a company generates money by selling their product or service to the customers. And in this block, you should describe how you will earn revenue from your value propositions.  

A revenue stream can belong to one of the following revenue models,

• Transaction-based revenue: made from customers who make a one-time payment
• Recurring revenue: made from ongoing payments for continuing services or post-sale services

There are several ways you can generate revenue from

• Asset sales: by selling the rights of ownership for a product to a buyer
• Usage fee: by charging the customer for the use of its product or service
• Subscription fee: by charging the customer for using its product regularly and consistently
• Lending/ leasing/ renting: the customer pays to get exclusive rights to use an asset for a fixed period of time
• Licensing: customer pays to get permission to use the company’s intellectual property
• Brokerage fees: revenue generated by acting as an intermediary between two or more parties
• Advertising: by charging the customer to advertise a product, service or brand using company platforms

What are the activities/ tasks that need to be completed to fulfill your business purpose? In this section, you should list down all the key activities you need to do to make your business model work.

These key activities should focus on fulfilling its value proposition, reaching customer segments and maintaining customer relationships, and generating revenue.

There are 3 categories of key activities;

• Production: designing, manufacturing and delivering a product in significant quantities and/ or of superior quality.
• Problem-solving: finding new solutions to individual problems faced by customers.
• Platform/ network: Creating and maintaining platforms. For example, Microsoft provides a reliable operating system to support third-party software products.

This is where you list down which key resources or the main inputs you need to carry out your key activities in order to create your value proposition.

There are several types of key resources and they are

• Human (employees)
• Financial (cash, lines of credit, etc.)
• Intellectual (brand, patents, IP, copyright)
• Physical (equipment, inventory, buildings)

Key partners are the external companies or suppliers that will help you carry out your key activities. These partnerships are forged in oder to reduce risks and acquire resources.

Types of partnerships are

• Strategic alliance: partnership between non-competitors
• Coopetition: strategic partnership between partners
• Joint ventures: partners developing a new business
• Buyer-supplier relationships: ensure reliable supplies

In this block, you identify all the costs associated with operating your business model.

You’ll need to focus on evaluating the cost of creating and delivering your value propositions, creating revenue streams, and maintaining customer relationships. And this will be easier to do so once you have defined your key resources, activities, and partners.  

Businesses can either be cost-driven (focuses on minimizing costs whenever possible) and value-driven (focuses on providing maximum value to the customer).

Value Propositions

This is the building block that is at the heart of the business model canvas. And it represents your unique solution (product or service) for a problem faced by a customer segment, or that creates value for the customer segment.

A value proposition should be unique or should be different from that of your competitors. If you are offering a new product, it should be innovative and disruptive. And if you are offering a product that already exists in the market, it should stand out with new features and attributes.

Value propositions can be either quantitative (price and speed of service) or qualitative (customer experience or design).

What to Avoid When Creating a Business Model Canvas

One thing to remember when creating a business model canvas is that it is a concise and focused document. It is designed to capture key elements of a business model and, as such, should not include detailed information. Some of the items to avoid include,

• Detailed financial projections such as revenue forecasts, cost breakdowns, and financial ratios. Revenue streams and cost structure should be represented at a high level, providing an overview rather than detailed projections.
• Detailed operational processes such as standard operating procedures of a business. The BMC focuses on the strategic and conceptual aspects.
• Comprehensive marketing or sales strategies. The business model canvas does not provide space for comprehensive marketing or sales strategies. These should be included in marketing or sales plans, which allow you to expand into more details.
• Legal or regulatory details such as intellectual property, licensing agreements, or compliance requirements. As these require more detailed and specialized attention, they are better suited to be addressed in separate legal or regulatory documents.
• Long-term strategic goals or vision statements. While the canvas helps to align the business model with the overall strategy, it should focus on the immediate and tangible aspects.
• Irrelevant or unnecessary information that does not directly relate to the business model. Including extra or unnecessary information can clutter the BMC and make it less effective in communicating the core elements.

What Are Your Thoughts on the Business Model Canvas?

Once you have completed your business model canvas, you can share it with your organization and stakeholders and get their feedback as well. The business model canvas is a living document, therefore after completing it you need to revisit and ensure that it is relevant, updated and accurate.

What best practices do you follow when creating a business model canvas? Do share your tips with us in the comments section below.

Join over thousands of organizations that use Creately to brainstorm, plan, analyze, and execute their projects successfully.

FAQs About the Business Model Canvas

• Use clear and concise language
• Use visual-aids
• Customize for your audience
• Highlight key insights
• Be open to feedback and discussion

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Amanda Athuraliya is the communication specialist/content writer at Creately, online diagramming and collaboration tool. She is an avid reader, a budding writer and a passionate researcher who loves to write about all kinds of topics.

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The 20 Minute Business Plan: Business Model Canvas Made Easy

Table of Contents

What’s the Business Model Canvas?

How do you get started, why use the business model canvas, when should you use the business model canvas, how do you use the canvas to facilitate alignment and focus, step 1 (of 10): customer segments, step 2 (of 10): value propositions, step 3 (of 10): channels, step 4 (of 10): customer relationships, step 5 (of 10): revenue streams, step 6 (of 10): key activities, step 7 (of 10): key resources, step 8 (of 10): key partnerships, step 9 (of 10): cost structure, step 10 (of 10): applications, analysis & next steps, example a: enable quiz (startup), example b: hvac in a hurry (enterprise), using the google doc’s/powerpoint template.

If you’re already familiar, you can skip to the next section, ‘ How do I get started ?’.

The Business Model Canvas (BMC) gives you the structure of a business plan without the overhead and the improvisation of a ‘back of the napkin’ sketch without  the fuzziness (and coffee rings).

Together these elements provide a pretty coherent view of a business’ key drivers–

• Customer Segments : Who are the customers? What do they think? See? Feel? Do?
• Value Propositions : What’s compelling about the proposition? Why do customers buy, use?
• Channels : How are these propositions promoted, sold and delivered? Why? Is it working?
• Customer Relationships : How do you interact with the customer through their ‘journey’?
• Revenue Streams : How does the business earn revenue from the value propositions?
• Key Activities : What uniquely strategic things does the business do to deliver its proposition?
• Key Resources : What unique strategic assets must the business have to compete?
• Key Partnerships : What can the company not do so it can focus on its Key Activities?
• Cost Structure : What are the business’ major cost drivers? How are they linked to revenue?

The Canvas is popular with entrepreneurs and intrapreneurs for business model innovation. Fundamentally, it delivers three things:

• Focus : Stripping away the 40+ pages of ‘stuff’ in a traditional business plan, I’ve seen users of the BMC improve their clarify and focus on what’s driving the business (and what’s non-core and getting in the way).
• Flexibility : It’s easier to facilitate alignment by tweaking the model and trying things (from a planning perspective) with something that’s sitting on a single page.
• Transparency: Your team will have a much easier time understanding your business model and be much more likely to buy in to your vision when it’s laid out on a single page.

The first time you engage with the canvas, I recommend printing it out or projecting it on a whiteboard and going to town (see below for a PDF). However, if you’re ready to put together something a little more formal (for distribution, presentation, etc.) here’s a Google App’s template you can copy or download as MSFT PowerPoint:

*Omnigraffle a popular diagramming program for the Mac. It has a fairly easy to use layering environment which you may find handy as you want to tinker with and produce different views of the canvas. You can try Omnigraffle for free (the basic paid version is $99).

The short answer is this: because it’s simple yet focused and that means more of your audience is likely to pay attention to it. Also, it’s highly amenable to change on the margins.

This matters a lot- more than most people think. A company that wants to innovate has to be ready to be wrong . A good VC in early stage investments succeeds with a prevalence of something like a 1/10. If you think you’re doing a lot better than that with substantial new innovation investments (a startup or a new line of business inside an enterprise) you’re probably throwing good money after bad.

Transparency, simplicity, and focus are great facilitators of the ‘creative destruction’ a good innovation program needs, and the Canvas does a nice job of delivering that across lines of business. For a large corporation with multiple lines of business at various levels of maturity, I actually prefer the Corporate Innovation Canvas as a starting point. However, from there, the Business Model Canvas does an excellent job of bringing clarity to the questions of how, for example, a given line of business creates focus and then implements it in an innovation-friendly way with, for example, ‘objectives and key results’ OKR’s . It’s a central element in the ‘innovation stack’ where an enterprise is able to go from priority innovation areas (with the Corporate Innovation Canvas) to testable business model designs (with the Business Model Canvas) to product charters (with an agile team charter ) to individual learning pathways to cultivate the talent they need to execute.

Even more important than the top down cascading of objectives with testable results and KPI’s is the improvement in the feedback in outcomes that helps the overall innovation program learn and adapt quickly. With layer appropriate innovation metrics, it’s much easier for the achievements of individuals to cohere (or not) to the job of teams and in turn from there to lines of business back up to corporate objectives. This helps both help the company’s talent understand where they might benefit from more practice and learning as well as what constitutes success in their individual roles and collaborations.

Anytime you want to have a focused discussion about what matters to a given line of business, the Business Model Canvas is a good place to start. The Canvas has received a lot of attention as a tool for startup entrepreneurship. While this may be one of the ‘sexier’ and more ostensibly simple applications of the Canvas, I actually think it’s one of the least compelling. For a startup, the only thing that matters is product/market fit, which the Canvas represents as a set of relationships between Customer Segments and Value Propositions. The Canvas doesn’t do a bad job of describing this, but it’s kind of overkill- the whole left side of the Canvas which describes the delivery infrastructure is mostly irrelevant for startups that are still finding product market fit, since all that’s provisional about where (and whether) they arrive at product/market fit.

Where the Canvas really shines is describing an existing line of business to answer questions like: a) What does product/market fit mean for this business? b) Where have we focused our company building and is it still relevant to ‘a’? c) What are our key revenue, cost, and profit drivers, and how do we improve those?

Now we’re taking! Whether you’re an ‘intrapreneur’ exploring a new extension to the business or a ‘digital transformation’/IT consultant trying to facilitate a discussion about what ‘strategic IT’ means and how you’ll know if you achieve it, the Canvas is a quick and productive place to anchor such a discussion.

First and foremost, I’d try it out for yourself. Fill out the elements the business you’re working on and then ask yourself ‘Does this make sense?’ ‘What are the most important linkages and components of the model?’

From there, you may just want to use the Canvas you sketch to facilitate alignment on some other topic. However, if you’re working with a team on a new venture or with a client on a new project, you may then want to take it from the top and facilitate a workshop where you facilitate a fresh take on the Canvas, levering your experience thinking through it once. The link below will take you to a related curriculum item that has workshop slides, prep. items, and agenda.

LINK TO WORKSHOP PAGE

Otherwise, the next sections (10 steps) offer a tutorial on how to think through a business model design with the Canvas. The closing sections offer notes on how to use the Google Doc’s/PowerPoint and Omnigraffle templates.

Output : a list of Personas, organized by Customer Segment if you have more than one segment. I recommend trying to prioritize them- Who would you pitch first if you could only pitch one? Who next? And so forth…

Notes : If you’re spending a lot of time on this first item, that’s OK (and it’s probably good). The Canvas is a tool, not a strategy and not all the nine blocks are equal. The pairing of Customer Segments and Value Propositions is really the ‘independent variable’ that should be driving everything else in your business model. When I use the Canvas in my Venture Design classes, we usually spend all of the first session (plus time for field research) on Customer Segments and Value Propositions.

For example, at Leonid, an enterprise software company I founded, we thought our largest customers worked with us because of the cost savings we offered and our knowledge about best practices. It turned out that was mostly wrong- reducing their time and risk to get new services to market was the most important. It’s not that the other things weren’t important, but they weren’t the top Value Proposition. That made a difference on how we sold the product and how we focused on operationalizing it for customers.

This mapping says ‘We have 3 personas. Persona 1 cares about VP 1 & 2. Persona 2 cares about VP 2; Persona 3 cares about VP3. (One segment only so segments not noted)’.

Output : a prioritized list of Value Propositions and linkages from each Personas to the VP’s relevant to them.

Notes: Again, this pairing is the key driver for most business models and if you want more on how to describe and discovery what to put in this part of the canvas, I recommend this: Tutorial- Personas .

Maybe you feel like you’re in good shape on understanding the customer’s world but you don’t have any validation on whether the Value Propositions are clicking because this is a new venture? If you’re not sure, that’s OK and good for you for acknowledging the uncertainty! It’s the responsible thing to do. The key is to write down those assumptions, prioritize them, and figure out the quickest and cheapest way to prove or disprove them. That’s what Lean/Startup is about and there are resources here to help you with that, if you’d like- Tutorial: Lean Startup .

Channels includes entities you use to communicate your proposition to your segments, as well as entities through which you sell product and later service customers (see AIDAOR journey below). For example, if you sell bulbs for light houses and there’s a website all light house attendants purchase equipment, that site is a sales Channel. If you use Google AdWords, that’s a Channel, too (for getting attention). If you use a third party company to service the bulbs when they break, that’s also a Channel.

Output : a list of important Channels, linked to Personas or Segments if they differ substantially. Make notes on what steps are relevant for each- promotion, sales, service, etc. See Note this section for more structure on this.

Notes: Channels and the next item, Customer Relationships, define your interface with the Customer. It’s important to think all the way through the customer ‘journey’ in specific terms. For most businesses, the way they get a customer’s attention is different than the way they onboard them or support them over the long term. For this, I recommend the AIDA.OR framework (attention-interest-desire-action-onboarding-retention) and storyboarding your way through it. Here’s a post explaining all that- Storyboarding AIDA(OR) . If you don’t want to do the storyboards, I recommend at least making notes about your customer journey through the AIDA(OR) steps.

Another consideration is whether your channels will give you enough visibility into the user, including, for example, a way to follow up with users. Not sure? Document your assumptions Lean Startup style and figure out how you’ll quickly prove or disprove them.

Output : a description of Customer Relationships, with notes if they differ across Customers (between Segments or among Personas within a Segment) or across the customer journey.

Notes: If you’re a startup, be sure to document and review critical assumptions here. Also, the focal items are in a kind of specific order- you should validate your Segments and their relationship to the Propositions above all else. If this means you provide personal support in the early days (a ‘concierge test’ in Lean Startup terms) to do discovery and validation of Segments and Propositions, that’s OK. You can subsequently test the Customer Relationship models. (Here’s a post on using consulting as a concierge vehicle in B2B if you want more detail: Consulting as B2B Concierge Vehicle ).

Notes : If you have a startup or are re-engineering the business, this is a time to look at where you’re driving revenue and whether it aligns with the rest of your focal points. Are you charging on value? Perceived value? They say everyone loves their banker; hates their lawyer. Why is that? Is there an actionable analog in your business?

For a product-driven business, this probably includes ongoing learning about users and new techniques to build better product. If you’re focused on doing a bunch of things for a particular set of customers (ex: comprehensive IT for law offices), this probably includes maintaining superior expertise on the segment(s) and creating or acquiring products and services that are a good fit, whatever that entails. For an infrastructure business (ex: electric utility), it probably includes keeping the infrastructure working reliably and making it more efficient.

Outputs : a list of Key Activities linked to your business’ Value Propositions.

Notes : One question this analysis should raise for you is whether or not certain Activities and Resources are actually core, actually focal to your business, something you’ll want to think through .

Outputs : a list of Key Resources linked to your business’ Key Activities.

Notes : Product-driven businesses have a differentiated product of some sort. Rovio, the company that makes the popular app Angry Birds, is such a company. Key Resources in product-driven businesses are typically key talent in critical areas of expertise and accumulated intellectual property related to their offering.

Scope-driven businesses create some synergy around a particular Customer Segment. For example, if you started a business that would take care of all the IT needs for law firms, that would be a scope-driven business. These businesses typically have key knowledge about their segment, a repeatable set of processes, and sometimes infrastructure, like service centers.

Infrastructure-driven businesses achieve economies of scale in a specific, highly repeatable area. Telecommunications is traditionally an infrastructure business. Retailers focused on retail, like Walgreens or Costco, are primarily infrastructure-driven businesses. The Key Resources for this type of business are, you guessed it, various types of physical or virtual infrastructure.

Let’s take a single product category: diapers. The Honest Company or another innovating around compostable or otherwise more environmentally friendly diapers would be a product-driven take on the category. Procter & Gamble which has a cradle-to-grave strategy for providing consumer products is a scope-based take; so are various baby-focused retailers. Kimberly-Clark (wood pulp) or DuPont (chemicals and polymers) are both infrastructure-based takes: diapers is just another way to sell something they produce at scale with relatively little differentiation.

If there are major cost components that don’t map to a Key Activity, I’d take a closer look at those costs.

Output : a list of Cost Structure elements with notes on their relationship to Key Activities.

Congratulations- you have a working canvas! The section below offers a few analytical ideas and suggestions for next steps.

Core Applications The most core and obvious applications of the Canvas are to ask: – Does it make sense? – Could it be better? – Does the rest of my team understand and agree? Have additional ideas? – (rinse and repeat at least quarterly)

Competitiveness The canvas does a good job of helping you figure out your business, which is a good place to start. You also want to look at the competitive environment and think about if and how you have/maintain a long term competitive advantage.

For this, I like Michael Porter’s Five Forces framework ( Wikipedia Page ; see also Chapter 2 of ‘ Starting a Tech Business ‘). Try walking through the Five Forces for your company and then bounce back to your canvas. How does it all hang together?

Next Steps Every business is a work in progress (sorry, I try to avoid saying things like that but it seemed to fit here). As you go through the canvas, you may encounter areas that give you trouble. The table below summarizes a few of the most common that I see in my work as a mentor and coach:

Want to make innovation an everyday thing?

What is Enable Quiz?

Enable Quiz is a (fictional) startup that’s building a lightweight quizzing application for companies that hire a lot of technical talent (engineers). Their take is:

For hiring managers who need to evaluate technical talent, Enable Quiz is a talent assessment system that allows for quick and easy assessment of topical understanding in key engineering topics. Unlike formal certifications or ad hoc questions, our product allows for lightweight but consistent assessments of technical talent.

Why and how would Enable Quiz use the Business Model Canvas?

They have a small team, but arriving at a clear, shared understanding of what they’re after is still important. That said, it’s important that the way they talk about this is both highly visible and amenable to change. Given that, the Canvas is a good fit.

The Business Model Canvas at Enable Quiz

This page shows Enable Quiz’s current working view of product/market fit:

What is HVAC in a Hurry?

HVAC in a Hurry is a mid-sized enterprise that services commercial HVAC (heating, ventilation, and air conditioning) systems. Their take on the business is:

For facilities managers & business owners who need their heating & cooling systems managed and repaired, HVAC in a Hurry is a full service provider that allows for easy and responsible management of a business’ HVAC systems. Unlike smaller firms, our commitment to best practices and training allows customers to worry less and realize superior total cost of ownership for their HVAC systems.

Why and how would HVAC in a Hurry use the Business Model Canvas?

HVAC in a Hurry has a working version of product/market fit. However, their industry is competitive and successful firms increasingly use technology to improve customer experience (CX) and reduce cost (overhead) in their operations. HVAC in a Hurry has a small ‘digital transformation’ team that’s working on digital applications to improve the company’s performance. This team decided to use the Canvas to ‘manage upwards’ in order to facilitate better discussions about where they should focus, how that aligns with the business as a whole, and what success definition makes sense for them.

The Business Model Canvas at HVAC in a Hurry

Here’s their current view of product/market fit:

If you’re not familiar with it, Google Doc’s is a web-based office suite, similar to MS Office. If you have a gmail account, you can access it (no guarantees- that was the case last time I checked).

First, you’ll want to link to the template file: BUSINESS MODEL CANVAS TEMPLATE IN GOOGLE DOC’S .

Once you’re accessed the file, you can make make it your own by going to the File menu and either ‘Make a copy…’, creating a copy in your own Google App’s domain or you can use the ‘Download as…’ option to download it as PowerPoint (and a few other formats).

What’s your experience with the Canvas? How have you used it? What worked? What didn’t? Please consider posting a comment!

Copyright © 2022 Alex Cowan · All rights reserved.

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A Better Way to Think About Your Business Model

• Alexander Osterwalder

How Nespresso used a simple business model canvas to change face of the coffee industry.

The business model canvas — as opposed to the traditional, intricate business plan — helps organizations conduct structured, tangible, and strategic conversations around new businesses or existing ones. Leading global companies like GE, P&G, and Nestlé use the canvas to manage strategy or create new growth engines, while start-ups use it in their search for the right business model. The canvas’s main objective is to help companies move beyond product-centric thinking and towards business model thinking.

• Alexander Osterwalder is cofounder of Strategyzer.com , a company that builds practical tools for business strategy and innovation. Together with Yves Pigneur, he invented the Business Model Canvas and co-authored the international bestsellers  Business Model Generation  and  Value Proposition Design .

Partner Center

Business Plan vs. Business Model Canvas: What’s the Difference?

The main difference between Business Plan and Business Model Canvas is that a business plan is like a detailed story about your business, while a business model canvas is a simple visual chart.

Before we move to more differences, let’s first understand Business Plan and Business Model Canvas:

Major differences between Business Plan and Business Model Canvas

If you have a related query, kindly feel free to let me know in the comments below.

Business Model Canvas (BMC)

What is the Business Model Canvas

Business Model Canvas (BMC) is a framework that helps determine how a business creates, delivers, and captures values. It is a visual representation of the important aspects or parts to consider when designing a Business Model.

BMC aids in constructing a shared understanding of a business by condensing it into a simple, relevant, and intuitively understandable one-page visual while not oversimplifying the complexities of how enterprises function.

This concept has been applied and tested around the world and is used in organizations such as GE, P&G, Nestlé, IBM, Ericsson, and Deloitte, including Government Services of Canada and many more [1],[2] .

The Nine Building Blocks

BMC describes a business through nine basic building blocks that show the logic of how a business intends to make money. These nine blocks cover the four main areas of a business: Customers, Offer, Infrastructure, and Financial Viability.

BMC acts as a shared language for describing, visualizing, assessing, and changing business models. It is like a blueprint for a strategy to be implemented through organizational structures, processes, and systems.

Each of these blocks is explained in more detail as follows:

1. Customer Segments (CS)

These are the groups of people or organizations that a business aims to reach and serve. Customers are the heart of a business model, and without (profitable) customers, a business cannot survive.

Customers are grouped into distinct segments with common needs, common behaviors, or other attributes. Customer groups represent separate segments if:

• Their needs require and justify a distinct offer.
• They are reached through different Distribution Channels.
• They require different types of relationships.
• They have substantially different profitability.
• They are willing to pay for different aspects of the offer.

An organization must make a conscious decision about which segment(s) to serve and which segments to ignore. Once this decision is made, a business model can be carefully designed around a strong understanding of specific customer needs.

The following two questions, if answered with clarity, help a business identify its CS.

• For whom are we creating value?
• Who are our most important customers?
• What are the customer archetypes?

Examples of some of the Customer Segments are shown in the figure:

2. Value proposition (VP)

Value Proposition describes the bundle of products and services that create value for a specific Customer Segment chosen by a business.

A VP is the reason why customers turn to one company over another. VP must solve a customer’s problem or satisfy a need. A business can have more than one VP, but each must consist of a selected bundle of products and/or services that caters to the requirements of a specific Customer Segment.

While some VPs may be innovative and represent a new or disruptive offer, others may be similar to existing market offers but with added features and attributes.

An organization’s VP must answer the following questions with clarity:

• What value do we deliver to the customer?
• Which one of our customer’s problems are we helping to solve?
• Which customer needs are we satisfying?
• What bundles of products and services are we offering to each CS?

Elements from some of the following can contribute to customer value creation:

3. Channels (CH)

Channels describe how a company communicates with and reaches its Customer Segments to deliver a Value Proposition.

Channels are customer touch points that play an important role in the customer experience and serve several functions, including:

• Raising awareness about a company’s products and services
• Helping customers evaluate a company’s Value Proposition
• Allowing customers to purchase specific products and services
• Delivering a Value Proposition to customers
• Providing post-purchase customer support

To establish an effective channel, a company must first answer the following:

• Through which Channels do our Customer Segments want to be reached?
• How are we reaching them now?
• How are our Channels integrated?
• Which ones work best?
• Which ones are most cost-efficient?
• How are we integrating them with customer routines?

There are five distinct phases (figure below) through which a channel passes, and it could cover more than one of these phases at a time.

Channels can be either direct, indirect or hybrid, as shown:

Finding the right mix of Channels to satisfy how customers want to be reached is crucial in bringing a Value Proposition to market and can create a great customer experience.

4. Customer Relationships (CR)

Customer Relationships describe the types of relationships a company establishes with specific Customer Segments. Relationships can range from personal to automated. An organization’s CR strategy may be driven by one of the following motivators:

• Customer acquisition
• Customer retention
• Boosting sales (upselling)

A business can arrive at the optimum CR by asking the following questions:

• What type of relationship does each of our Customer Segments expect us to establish and maintain with them?
• Which ones have we established?
• How costly are they?
• How are they integrated with the rest of our business model?

Several categories of Customer Relationships may co-exist in a company’s relationship with a particular Customer Segment. Some of which are:

5. Revenue Streams (RS)

Revenue Streams represent the company’s cash (earnings) from each Customer Segment and are like the arteries of any business.

There are two distinct categories of Revenue Streams:

• Transaction Revenues which are one-time customer payments
• Recurring Revenues that are ongoing payments to either deliver a Value Proposition to customers or provide post-purchase customer support

A business can arrive at its ideal revenue stream by asking the following questions:

• For what value are our customers willing to pay?
• For what do they currently pay?
• How are they currently paying?
• How would they prefer to pay?
• How much does each Revenue Stream contribute to overall revenues?

There are several ways a business can generate revenue, such as:

A business may have one or more Revenue Streams, each with different pricing mechanisms. The choice of pricing mechanism greatly influences the revenues generated.

There are two main types of pricing mechanisms, Fixed and Dynamic, as follows:

6. Key Resources (KR)

The Key Resources describe the most important assets required to make a business model work.

These resources allow an enterprise to create and offer a Value Proposition, reach markets, maintain relationships with Customer Segments, and earn revenues. Different Key Resources are needed depending on the type of business model.

For example, a chip fabrication business like TSMC [9] requires capital-intensive facilities worth billions of dollars, while a chip designer like NVIDIA [10] would need skilled manpower as its Key Resource.

Key Resources can be owned or leased by a business or acquired from its key partners. They can be identified by answering the following questions:

• What Key Resources do our Value Propositions require?
• What resources are required to sustain our Distribution Channels, Customer Relationships and Revenue Streams?

Key Resources can be categorized as follows:

7. Key Activities (KA)

Key Activities describe the most important things a company must do to make its business model work. They are required to create and offer a Value Proposition, reach markets, maintain Customer Relationships, and earn revenues.

Key Activities differ depending on the business model type. For example, Microsoft’s Key Activity is software development, while for Dell, it is Supply Chain Management. For a consultancy firm like McKinsey, Key Activity is problem-solving.

A business can identify its Key Activities by answering the following questions:

• What Key Activities do our Value Propositions require?
• What activities directly contribute to maintaining our Distribution Channels, Customer Relationships and Revenue Streams?

Key Activities can be categorized as follows:

8. Key Partnerships (KP)

The Key Partnerships describe the network of suppliers and partners that make the business model. There are four types of partnerships:

A business must ask the following questions before forming partnerships:

• Who are our key partners?
• Who are our key suppliers?
• Which Key Resources are we acquiring from partners?
• Which Key Activities do partners perform?

Primarily, there are three motivations for a business when creating partnerships, as shown:

9. Cost Structure (CS)

Cost Structure describes all costs incurred to operate a business model. A business incurs costs in creating and delivering value, maintaining customer relationships, and generating revenue. Costs are business-specific, where some are more cost-driven than others.

A business must answer the following questions to arrive at an optimum cost structure:

• What are the most important costs inherent in our business model?
• Which Key Resources are most expensive?
• Which Key Activities are most expensive?

While costs should be minimized in every business model, it is useful to distinguish between two broad classes of business model Cost Structures:

• Cost Driven : This model focuses on minimizing costs wherever possible. This approach aims at creating and maintaining the leanest possible Cost Structure, using low-price Value Propositions, maximum automation, and extensive outsourcing. Examples: No frills airlines like Southwest & easyJet, Fast food joints such as McDonald’s & KFC.
• Value Driven: Premium Value Propositions and a high degree of personalized service usually characterize value-driven business models. Examples: Luxury hotels, Expensive Cars like Rolls-Royce

Cost Structures can have the following characteristics:

Putting-it-all together

The nine business model Building Blocks form the basis for a handy tool, which is called the Business Model Canvas (figure below). This tool resembles a painter’s canvas preformatted with nine blocks that allow painting pictures of new or existing business models. It is a hands-on tool that fosters understanding, discussion, creativity, and analysis.

BMC works best when printed out on a large surface such that groups of people can jointly note, sketch, and discuss business model elements.

Example of Business Model Canvas

Nespresso [17] , a fully owned daughter company of Nestlé, changed the dynamics of the coffee industry by turning a transactional business (selling coffee through retail) into one with recurring revenues (selling proprietary pods through direct channels).

The two-part strategy involved selling their patented coffee machine to retail customers first to lock them into the brand. This generated a recurring demand for coffee refills (pods) that led to constant revenues. These pods were sold directly through mail/website/own stores, thereby eliminating middlemen/dealers, which further increased profits [1] .

Nespresso’s strategy plotted on a Business Model Canvas looks as follows:

Business Model Canvas helped Nespresso establish a solid and enduring foundation by engaging consumers directly and bringing a barista-like experience within the reach of a home or an office.

Advantages & Limitations

• Encourages Collaboration – collaborative framework, which helps put different business stakeholders in sync. This improves the likelihood of generating new ideas and their quality.
• Facilitates testing of ideas before launch – allows business owners, strategists, and managers to think through business ideas as well as test concepts that would otherwise get tested with potential customers where the stakes are higher.
• Customer-centered approach – Key customer segments, relationships, activities, and value propositions are all elements that focus on creating, delivering, and capturing value for customers.
• Clarity – Analyzing the business through the lens of nine blocks brings better clarity and structure to the business model.

Limitations

• Lacks a section for defining the start-up’s mission statement, which is crucial to understanding the goals and objectives of any business.
• Overlooks the importance of a profit mechanism beyond costs and revenues, including decisions on how to use potential profits.
• The order of the canvas is not intuitive, making it difficult to read and understand the strategic decisions in a logical sequence.
• Does not depict interconnections between different elements, which can have a significant impact on the overall business model.
• Fails to acknowledge the company’s role within its ecosystem, including its impact on the environment and local communities.
• External factors such as competition, history, and other industry-specific factors are absent from the canvas, which can greatly influence the success of a business model.

1. “A Better Way to Think About Your Business Model”. Harvard Business Review, https://hbr.org/2013/05/a-better-way-to-think-about-yo . Accessed 01 Aug 2023

2. “Business Model Generation”. Alexander Osterwalder, https://www.strategyzer.com/books/business-model-generation . Accessed 28 Jul 2023

3. “The Apple M1 is a revolution that is changing the computing world”. Citymagazine, https://citymagazine.si/en/apple-m1-is-a-revolution-that-changes-the-computer-world/ . Accessed 29 Jul 2023

4. “Mass Customization”. Corporate Finance Institute, https://corporatefinanceinstitute.com/resources/management/mass-customization/ . Accessed 29 Jul 2023

5. “Moka Pot”. Wikipedia, https://en.wikipedia.org/wiki/Moka_pot . Accessed 29 Jul 2023

6. “NetJets Homepage”. NetJets, https://www.netjets.com/en-us/ . Accessed 01 Aug 2023

7. “Distribution Channels – Definition, Types, & Functions”. Feedough, https://www.feedough.com/distribution-channels-definition-types-functions/ . Accessed 30 Jul 2023

8. “Lease from Hertz”. Hertz, https://www.hertz.com/rentacar/rental-car/car-lease . Accessed 30 Jul 2023

9. “TSMC”. Wikipedia, https://en.wikipedia.org/wiki/TSMC . Accessed 30 Jul 2023

10. “NVIDIA”. Wikipedia, https://en.wikipedia.org/wiki/Nvidia . Accessed 30 Jul 2023

11. “BMW, Daimler, Ford and Volkswagen team up on high-power charging network”. Techcrunch, https://techcrunch.com/2017/11/03/bmw-daimler-ford-and-volkswagen-team-up-on-high-power-charging-network/ . Accessed 31 Jul 2023

12. “Honda And Sony Combine Talents To Build Electric Vehicles”. Forbes, https://www.forbes.com/sites/peterlyon/2022/06/26/honda-and-sony-announce-joint-venture-to-build-electric-vehicles/ . Accessed 31 Jul 2023

13. “Uber and Spotify launch car music playlist partnership”. BBC, https://www.bbc.com/news/technology-30080974 . Accessed 31 Jul 2023

14. “Walmart Has the Scale and Infrastructure to Generate Positive Gains”. Yahoo Finance, https://finance.yahoo.com/news/walmart-scale-infrastructure-generate-positive-201822628.html . Accessed 31 Jul 2023

15. “Demand-Side Economies of Scope in Big Tech Business Modelling and Strategy”. MDPI, https://www.mdpi.com/2079-8954/10/6/246 . Accessed 31 Jul 2023

16. “The Business Model Canvas”. Strategyzer, https://www.strategyzer.com/canvas/business-model-canvas . Accessed 31 Jul 2023

17. “HomePage”. Nespresso, https://www.nespresso.com/us/en/ . Accessed 01 Aug 2023

18. “Business Model Canvas of Nespresso”. Alex Osterwalder, https://www.youtube.com/watch?v=dhQh-tryXOg . Accessed 01 Aug 2023

19. “Nespresso Capsule”. Electromall, https://electromall.net/product/nespresso-capsule/ . Accessed 01 Aug 2023

20. “The Best Nespresso Machine (But It’s Not for Everyone)”. Newyork Times, https://www.nytimes.com/wirecutter/reviews/best-nespresso-machine/ . Accessed 01 Aug 2023

21. “Business Model Canvas”. Think Design, https://think.design/user-design-research/business-model-canvas/ . Accessed 01 Aug 2023

22. “6 Problems with the Business Model Canvas”. The Pourquoi Pas, https://www.thepourquoipas.com/post/problems-with-the-business-model-canvas . Accessed 01 Aug 2023

• McKinsey 7S Model
• Elaboration Likelihood Model of Persuasion
• The Johari Window Model

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Business Model Canvas Explained: Definition, Pros, Cons, and Building Blocks

So, here's the thing. We all know that we need structure to work effectively, but where do we start with so many options available? One tool worth considering is the Business Model Canvas (BMC) . Used effectively, it can give solid structure to your planning. 

In this article we will examine how the model works and a few ways to use it effectively. Then, we will describe its best practices and some recommendations on getting started. Finally, we will explore possible alternatives. 

Ready to get to know all about the BMC? Let's begin.

The Business Model Canvas, explained

The Business Model Canvas is a strategic management tool that helps businesses visualize and analyze their business models. It consists of 9 fundamental building blocks that describe the core aspects of a company's value proposition, infrastructure, customers, and finances (more on that later, we promise). 

By using it, organizations can gain a deeper understanding of their overall business model , identify areas for improvement, and develop new strategies for growth. One of the key benefits of the BMC format is that it's very visual. Used adequately, it allows organizations to create a display of their business model in alignment with strategic business objectives and the overall value proposition.

The nine BMC building blocks were initially presented in 2005 by Alexander Osterwalder. They were based on his Ph.D. work on business model ontology, supervised by Yves Pigneur. Since its release, the authors have developed other related tools, such as the Culture Map and the Value Proposition Canvas, which have helped the BMC tool to evolve and added value to it.

Business Model Canvas examples

Some examples of the BMC include:

• Strategy planning
• Business planning
• Business modeling

Lean Canvas vs. Business Model Canvas

Both the Lean and Business Model Canvas enable you to capture your entire model on a single page. The primary difference between them is that the Lean Canvas focuses mainly on solving a particular problem. The Business Canvas Model, on the other hand, is more sales orientated and usually focuses on selling products or services. 

Advantages and disadvantages of the Business Model Canvas

Even though the BMC offers a series of features in order to effectively visualize and analyze your organization's business model, there are also some possible drawbacks to be aware of – and avoid. 

To start on the right note, the benefits of the Business Model Canvas include:

• A clear and comprehensive business model overview in a single visual format. This makes it easier to understand, articulate, and communicate.
• Strong collaboration and breaking down silos. Using the BMC approach incentives people to work as one team, as it involves all stakeholders, and enables them to actively participate in developing, improving, and refining the business model.
• Colleagues constantly progressing with feedback (to borrow from an ITIL principle). The BMC approach allows for a fast and efficient testing of different business model configurations, speeding up the innovation process and reducing the time to market.
• A structured and systematic approach to analyzing and designing business models, which helps identify areas for improvement and innovation.
• A flexible approach that enables innovation instead of limiting it. The framework can be adapted to different types of businesses, industries, and customer groups.

However, if you choose to work with this management tool, you need to consider its potential disadvantages :

• Using the BMC approach effectively can be challenging without prior knowledge of business modeling concepts and terminology. You will need to put the work in and do some pre-reading to get the most out of it.
• Because it's so visual, it may oversimplify the complexity of a business model, making it more challenging to articulate some of the aspects of the organization's operations and performance. This makes it unsuitable for highly-specialized or complex businesses.
• Because it's a framework rather than a prescriptive standard that must be strictly adhered to, it doesn't provide detailed guidance on implementing or executing the business model, which can lead to difficulties in translating the canvas into action.
• It can rely on assumptions and hypotheses, which may not always be accurate or relevant for real-world situations.

The 9 building blocks of a Business Canvas Model

The Business Model Canvas is organized in nine  building blocks that represent a business model's key elements. These building blocks are:

• Value Proposition - The unique value the business provides to its customers and how it differentiates itself from competitors. In other words, it’s what sets your business apart, what makes it special, and what value it brings.
• Customer Segments - The different groups of customers the business targets with its products or services. This building block looks at your most important customers.
• Customer Relationships - The business' relationships with its customers and how it interacts with them. This is a fundamental building block as not only does it help you build and maintain a relationship, it also enables you to map out the cost and deliverables needed to continue to improve that relationship.
• Channels - T he different channels that the business uses to reach and interact with customers, including physical and digital channels.
• Key Partnerships - The relationships and collaborations that the business has with its suppliers, vendors, and other external partners.
• Key Activities - The key activities that the business must perform to deliver its value proposition and operate successfully. This building block helps you to define your most mission-critical actions and prioritize them accordingly.
• Key Resources - The key resources the business requires to operate, including human resources, physical assets, and intellectual property. This can also include relationships, distribution channels, and virtual assets.
• Revenue Streams - The different sources of revenue that the business generates from its customers, including one-time sales, recurring revenue, and other revenue streams. This building block also helps determine how each stream contributes to the business profit.
• Cost Structure - The various costs that the business incurs to operate, including fixed costs, variable costs, and other expenses. It also helps you identify your most expensive assets and activities to make effective financial plans for the future.

How to build a Business Model Canvas in 14 steps

The Business Model Canvas is flexible – no one size fits all. But for our money, there are 14 steps to effectively build it.

Step 1: Define the purpose 

The first step is to define the purpose of the Business Model Canvas. Where are you now, and where do you want to be? What do you hope to achieve? Who is the target audience? Have you double-checked to ensure what you want to achieve is in line with the strategic objectives of the rest of the business?

Step 2: Identify the nine building blocks

Identify the nine building blocks of the BMC, review each in relation to your business, and understand their purpose.

Step 3: Define the Value Proposition

What will add value? Start by defining the unique value that your business offers to customers. This will be the foundation of your canvas.

Step 4: Identify your Customer Segments 

Define the different groups of customers your business targets and their specific needs and preferences so you can focus and direct your efforts accordingly.

Step 5: Define Customer Relationships 

Identify your business' relationships with its customers and how it interacts with them. You can also use this step to identify your most important relationships so you can focus more effort on maintaining and improving them.

Step 6: Determine the Channels

Identify your business's channels to reach and interact with its customers, including physical and digital channels. From a service desk perspective, this could be offering a tier 0 channel with self-service or AI-enabled support capabilities before providing tier 1 and level 2 channels which offer a more people-centric user experience .

Step 7: Define Key Partnerships

Identify your business's relationships and collaborations with its suppliers, vendors, and other external partners. Remember, it's not just relationships with customers and stakeholders that matter, your suppliers are part of your team, so manage those relationships appropriately.

Step 8: Identify Key Activities

Define the key activities that your business must perform to deliver its value proposition and operate successfully.

Step 9: Determine Key Resources

Identify the key resources that your business requires to operate, including people, knowledge and wisdom, financial assets, and IT assets.

Step 10: Determine Revenue Streams 

Identify the different sources of revenue that your business generates from its customers. If you have a finance team,  work with them to identify current revenue streams and plan for future ones.

Step 11: Determine Cost Structure

Work with your finance team to identify the various costs that your business incurs to operate, CAPEX, and OPEX costs. 

Step 12: Build the Canvas

Once you have defined all of the building blocks, you can start creating the canvas to visualize what you are planning to accomplish.

Step 13: Review and refine

The BMC isn't a one-and-done approach. Review your model and seek feedback from your stakeholders to correct the course when needed.

Step 14: Keep going! 

In the words of Walt Disney, "Keep moving forward." Build and refine your model over time to reflect current and future activities more accurately. 

How to complete a Business Model Canvas

No one likes a blank page, do they? The difficult part is always getting started, but I promise, if you follow these steps, you'll be off to a great start: 

• Start with the Value Proposition - Before you do anything else, fill in the Value Proposition block in the center of the canvas. This should describe the unique value that your business provides to customers and how it differentiates itself from competitors. Focus on getting this point right because value is everything in terms of the BMC.
• Add in your enablers - This will include your key activities, customer segments, relationships (both customer and supplier relationships) assets, key activities, and channels.
• Add in your financials - Put in your revenue dreams and your cost models to make your BCM more transparent and ensure there are no hidden costs.
• Progress iteratively with feedback - Once you have filled in all the building blocks, review your canvas, iterate, and redefine  as needed. Seek input from stakeholders and make adjustments.
• Give the gift of clarity - Remember, this is a visual model, so don't get too stuck on the details or use too much jargon. The effect you're looking for is clear, concise, and visual.
• Relationships matter - We are talking about the relationship between each building block, so ensure they are correctly represented in your diagram.

Six alternatives to the Business Model Canvas

While the Business Model Canvas is a popular tool for developing and communicating a business model, other options are available too. Some alternatives include:

• Lean Canvas - This tool is similar to the BMC but focuses on startups and small businesses. It includes fewer blocks and focuses on validating hypotheses and testing assumptions quickly.
• SWOT Analysis - This tool helps to identify a business's strengths, weaknesses, opportunities, and threats. This can be a valuable tool for assessing the current state of a company and identifying areas for improvement.
• Business Model Innovation - This involves developing a new business model that is different from the traditional one used in the industry. It can be done through creative thinking, exploring new technologies, or adopting a new approach to customer relationships.
• Blue Ocean Strategy - This framework helps businesses to create new markets and uncontested market space. It involves identifying and focusing on areas of innovation that competitors have not explored.
• Value Proposition Canvas - This tool helps businesses to define and communicate their value proposition to customers. It focuses on the customer's needs, desired outcomes, challenges, and how the company can better meet those needs than its competitors.

Key takeaways

The Business Model Canvas or BMC is a strategic management tool that helps businesses visualize, design, and analyze their business models. Some of its common applications include business planning, value propositions, and modeling.

If you want to give it a shot to plan your organization’s strategy, make sure that you have your BCM template ready with the nine key elements that need to be completed. And don’t forget to follow through our six tips on how to get started!

  Frequently Asked Questions

How do you make a good business model canvas .

To make a good Business Model Canvas, clearly define the unique value proposition of your business and ensure that the key building blocks of the canvas (such as channels, revenue streams, and cost structure) are aligned with the overall strategic objectives of the business. Review and improve the canvas as needed to continue improving and aligning with business needs.

What are the four types of business models? 

The four types of business models are product, service, platform, and sub-subscription-based.

What are the three sections of the Business Model Canvas? 

Value Propositions, enablers, and financial planning.

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Business Model Vs Business Plan: What’s The Difference

Sculpting success in the realm of commerce hinges on two critical blueprints:  the business model and the business plan . As if peering through a dual-lens, one unveils the anatomy of value creation, while the other charts a course for achieving it. This isn’t about mere documents; it’s the lifeblood of strategic foresight and operational vision.

Here’s the crux: although they waltz together in strategic symbiosis, these entities each spin a unique narrative of your venture’s voyage. One sketches the architecture of your enterprise, laying bare the revenue streams and value proposition.

The other, a meticulous roadmap, presents meticulous market analysis, financial projections, and the operational plan set to navigate the turbulent tides of commerce.

By journey’s end, you’ll not just differentiate between the two but harness their combined power.

Delve into concepts like competitive advantage, customer segmentation, and scalability. Decode the mesmerizing narrative behind a robust strategic planning foundation. Sales forecasting, funding requirements, investor pitch decks.

The differences between business model vs business plan

The business model is the foundation of a company, while the business plan is the structure. So, a business model is the main idea of the business together with the description of how it is working.

The business plan goes into detail to show how this idea could work. A business model can also be considered the mechanism that a company has to generate profits. At the same time, the business plan also does its part in being the way a company can present its strategy. It is also used to show the financial performance that is expected for the near future.

Comparing how business models and business plans work to help you in different ways is important. A business model can help you be sure that the company is making money. It helps to identify services that customers value. It also shows the reciprocation of funds for the activity that a business renders to its customers.

Any business can have different ways of generating income, but the goals of the business model should aim to simplify the money process. It does this by focusing on the large income generators.

So, we now understood that a basic business model is a gateway to show how an organization is functioning. A business plan is a document that shows the strategy of an organization together with the expected performance details.

We can find the details of a company when we check its business plan. What it does is offer more info about the business model. It does this by explaining the teams needed to meet the demand of the business model. It explains the equipment needed, as well as resources that need to be obtained to start creating. Explaining the marketing goals , and how the business is going to attract and retain more customers over the competition , will be part of the model.

Another interesting thing when it comes to comparing business models and business plans is that they cannot function without each other. Just remember this, the business model is going to be the center of the business plan.

Business plan

When comparing using a business model versus a business plan, we also need to understand each one better to draw some final conclusions. One of the first goals of a company could be to define its business model.

The business plan is going to be the detailed part that includes all the information and steps like Mayple’s marketing plan template, organization, products or services, sales plan, business proposal for investors , and so on. Some useful questions that you can use when developing your business plan are:

• What do we have now?
• What do we want to have in the future?
• What do we need in order to be there?

Business Model

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Understanding Your Business Model Canvas: A Step-By-Step Guide

This step-by-step guide will help you understand the Business Model Canvas and how to create one for your business. Learn how to identify key resources, assess the viability of your business plan, and create a roadmap for success. Get the information you need to start working on your business model today!

The canvas is a tool used to visualize business ideas and help entrepreneurs and owners develop a comprehensive strategy for their business. By comprehending the business model canvas guide you can gain an in-depth understanding of the key components that make up a successful business model.

The business model canvas also provides a comprehensive overview of the various elements of the business, including the customer segment, value proposition, revenue model, cost structure, and distribution channels.

Furthermore, having a high quality business model canvas helps entrepreneurs and business owners to identify potential sources of revenue and identify risks and opportunities.

What is a business model canvas?

The Business Model Canvas is a visual representation of the core components of your business. It's a great tool to help you to think about which elements of your business are most important, and how they interact with each other. Think about your overall vision for your business. You can use it to identify new opportunities and to help you to prioritize your ideas. The canvas can help you to flesh out your ideas and to start to think about how your various business elements fit together.

What are the nine key components of a business model canvas?

The business model canva provides the framework to define the nine core components of a business model, which are:

• Value proposition
• Customer segmentation
• Key activities
• Partnerships
• Cost structure
• Revenue streams
• Potential success
• Potential failure

What is a good example of a business model canvas?

The business model canvas is meant to help you identify your most valuable customer and find ways to make their lives easier. A landing page is one way to do this. Landing pages are meant to collect customer data and convert prospects into leads. They can be used as a business model canvas component to collect customer data and ensure your marketing message is on target.

How can I use the business model canvas to develop a better understanding of my business?

That understanding developes by giving you a visual overview of what your business is currently doing. Every business has a model, even if it hasn't been fleshed out or thought about -and the canvas helps you define that model-. The canvas also helps you track your business development and growth so you can see your model take shape over time.

How can I use the business model canvas to define the value proposition of my business?

When you're building a startup, you're trying to solve a problem for a customer. You need to understand what problem you're solving for them, and why your solution is better than the competition.

The business model canvas helps you understand your customers and where your business fits into the market. It also helps you define your value proposition. To answer the question of how to use the business model canvas, you need to understand the value that your business is providing to customers. The canvas helps you understand how your product or service fits into the marketplace and what makes it unique.

What is customer segmentation and how is it used to improve the business model canvas?

Every business needs to find their niche. The reason for this is that if you try to appeal to everybody, you will end up appealing to nobody. Finding the right target audience is the first step to success. Once you have them, you can find ways to get them to buy your products.

Finding customers who are willing to pay more for your product or service is often the way to go. These are the customers who are most likely to buy from you again. If you can find a way to target these customers, you will have a great business model. Then, this information is used to improve the business model canvas.

How can I use the business model canvas to better understand my customer base?

The canvas offers a straightforward way to analyze the market by putting all the facts in one place. An entrepreneur can assess the market situation and customer needs by answering a few questions:

• Who is the target audience?
• What do they need?
• How do they currently solve their problem?
• How can I improve their situation?
• How can I reach my clients?
• What is the pricing model?
• What is my brand image?
• How can I build a relationship with my clients?

By answering these questions and placing them on the canvas, you can better understand your customer base.

What are the key activities necessary to run my business?

Every business is unique, so there's no one-size-fits-all answer to this question. However, there are a few common activities that most businesses will include. These include:

• Marketing and sales
• Finance and accounting
• Customer service
• Human resources
• Legal and compliance

There are many others, but these are some of the most important. Depending on the business, some of these areas may be more important than others. For example, customer service is essential for a retail business but may not be as important for a software company.

How can I use the business model canvas to define the key areas of my business?

Essentially, you can use the business model canvas to visualize every step of your business, from where it originates to where it ends. This will help you focus on your business model, but more importantly, you can show others where your business starts and ends.

What are the partnerships necessary for my business to succeed?

There are several important factors to consider when answering this question

First , the entrepreneur should identify areas where they need help and find a partner who can provide that assistance.

Second , the entrepreneur should make sure the partnership is a good fit for both parties involved.

Third , the entrepreneur should make sure the partnership is legally binding.

Finally, the entrepreneur should be aware of potential risks associated with partnering with another party.

How can I use the business model canvas to define the cost structure of my business?

Your business model canvas will give you an idea of what you need to do to get your business off the ground. But, before you can get there, you have to consider whether you have the resources to do so. For example, are you ready to make the financial investment required to get your business off the ground? Spending time reflecting on your personal finances as an individual and as a business owner can help you answer this question and make a more informed decision about whether you have the capital required to get started.

What are the revenue streams associated with my business?

Depending on the nature of your business, you may have multiple revenue streams. We would suggest that you start by listing them all, then take a look at the ones that are most promising and start thinking about how you can optimize them. Try to come up with a plan for each revenue stream so that you know what you're working towards and what you need to do to make it happen.

Can I use the business model canvas to evaluate the potential success of my business?

The most important thing to remember when evaluating the potential success of your business is that no one can predict the future. No matter how much experience you have or how many experts you consult, there are simply too many variables that can affect the outcome. So rather than trying to predict the future, focus on what you can control.

Identify your key objectives and goals, and develop a plan for achieving them. Continuously track your progress, and adjust your plan as needed. By focusing on what you can control, you can put yourself in the best position to succeed without getting bogged down by uncertainty.

What strategies can I use to make sure my business is successful?

It's easy to get swept up in the excitement and drama of your business and lose sight of the big picture. To ensure your success, you need to be hyper-aware of your goals and targets and constantly check in with yourself to make sure you're on the right path. A lot can happen in a day, or even an hour, so you'll need to be diligent about staying on track.

We recommend setting aside 10 minutes every day to reflect on your business and make sure it's on track to meet your goals. This doesn't mean you can slack off on the tasks at hand, but it will keep you from getting distracted by details and keep you on the right path.

How can I use the business model canvas to help me make decisions?

You can spend hours, days, or weeks researching every single aspect of your business, but if you don't take action and start moving forward, you will never accomplish anything. That's why we think the business model canvas is so helpful. It forces you to focus on the most important aspects of your business and figure out how you're going to get them done.

It's easy to get overwhelmed with all the details, but the business model canvas forces you to narrow it down to the most important parts of your business. Once you've chosen the most important parts of your business, you can start working on them and taking action.

What are the highlights associated with my business model?

The answer to this question should focus on the vision you have for your company. Your company is unique and you should be able to point out the benefits that make it so. You should be able to articulate the vision behind your company and the mission it has.

How can I use the business model canvas to adjust and improve my business model over time?

Ask yourself these questions:

• What is working well?
• What is not working well?
• What are the opportunities?
• What are the threats?

By answering these questions, you can adjust your business model to become more successful and improve over time.

The Canvas allows entrepreneurs to quickly evaluate the customer base and make decisions based on the data they have collected. Additionally, the canvas can be used to adjust and improve the business model over time. To ensure the potential success of a business, entrepreneurs should consider the key questions when creating their business model canvas, as well as any potential risks associated with the model. With the right tools and strategies, entrepreneurs can use the business model canvas to establish and grow a successful business.

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Business Model Canvas

What is the business model canvas.

A business model canvas provides a high-level, comprehensive view of the various strategic details required to successfully bring a product to market. The typical use case for this tool is to outline the fundamental building blocks of a business, but it can be used effectively for individual products as well. The exact ingredients may vary, but these are some of the typical components included:

• Customer segments —Who is going to use this product?
• Product value propositions —What is this going to do for the customer to make their life/job better?
• Revenue streams —How will the company make money from this product?
• Channels —How will the product be sold or distributed?
• Customer relationships —What is the success and support strategy for new customers?
• Key partners —What other companies or individuals are part of the development and go-to-market strategy?
• Key activities —What must happen internally to release this product?
• Key resources —What people, materials and budget are required to pull this off?
• Cost structure —How much will it cost to develop, manufacture, distribute, and support the product?

Asking and answering these questions should be de rigueur for any new product, but this particular framework is useful for distilling the supporting business case down into something easily digestible. By forcing everything to be on a single page, each question must be answered succinctly, which often cuts through any grandstanding to illustrate whether each area is truly addressed and viable.

How do product managers use the business model canvas?

The business model canvas serves two primary purposes for product managers : focusing their thinking during its creation along with expediting and framing the conversation when communicating with others.

Because the business model canvas is a comprehensive summary of what the product will do, who will use it, why they’ll use it, how it will happen, and how the money works, it requires a lot of thinking and homework to put it together. This exercise is very helpful for product managers to fully understand the market opportunity and refine their story while uncovering potential problem areas and fully vetting their impact. Plus the process of boiling everything down to a single page ensures that what is included is as truthful and well supported as possible.

The business model canvas can serve as a continually referenceable touchstone for the product development process and beyond, essentially serving as a mission statement for the product. As conditions on the ground change and more is learned about the product’s market reception and usage, the canvas can be updated to accurately reflect the latest information; reviewing the canvas periodically is a worthy activity in and of itself.

As a communication tool, the business model canvas is an ideal document for our short attention span world and is as useful with the executive team as it is with a junior developer. Since it only contains the most salient and relevant information, the audience won’t be drowning in details or distracted by supporting evidence or non-sequiturs. The canvas can also create a universal vocabulary for the product and get everyone using the same language and concepts going forward.

Tips for using the business model canvas

Here is how to make the most of the business model canvas and the process of creating and maintaining it:

• Note assumptions and challenge them —Since a business model canvas is developed while a product is still “theoretical” there is often a lack of actual facts to rely on. Instead, educated guesses, informed opinions and assumptions are utilized to build it out. While there’s often no escaping these, anything in the canvas that is an assumption versus a proven fact should be called out, with every effort made to both challenge the assumption and anticipate the impact if the assumption turns out to be incorrect.
• Bounce it off a virgin audience —Fellow employees and even board members will approach a business model canvas with a trunkload of inherent biases. To truly test the veracity and completeness of a canvas, allow some outside parties to validate it independently. It should be a self-explanatory document, so allowing them to review it and provide feedback without any dialogue or explanations is a great test of its worthiness and thoroughness.
• It’s easy to update, so keep it current —Unlike longer, weightier documents, the single-page nature of the business model canvas means there’s no excuse for it to languish and fall behind the business’s current line of thinking or newly gathered information. Reviewing it on a regular basis and maintaining its accuracy enhances its usefulness and is a helpful process to note when assumptions or plans have changed.
• An ever-present reminder —Thoughts, plans, goals, and assumptions were laid out succinctly in the canvas with great care and deliberation. Going forward the canvas can be continually referred to for guidance, inspiration, and level setting as folks become swept up in the momentum of product development, sales, and marketing.
• Present it in pieces —Sure, the entire business model canvas fits on one piece of paper, but there is a lot of things on that 8 ½ x 11 inch page. When presenting it, discuss each piece individually, gradually revealing the entire contents. This will prevent information overload and allow the team to convey things narratively instead of an information dump.
• Reference all the evidence —Any hard data should be clearly referenced (if not included) in the canvas to give the arguments and statements as much legitimacy as possible. Reviewers will be trying to poke holes (as they should), so firm things up whenever there’s a chance.
• Be specific —No one needs a business model canvas to understand fundamental business case elements; it is intended to tell the story and rationale for this particular product. Cut out anything generic and make it as relevant to this exact opportunity as possible. In particular, link individual customer segments with their respective value propositions, since a product won’t be all things to all people.
• Create multiple canvases —During the early phases, generating more than one business model canvas based on divergent assumptions, target markets, or value propositions can be a useful tool for exploring different directions the product could head. After the plans are firmed up, multiple canvases can still be employed, this time to see how different scenarios pan out when key factors change… it can be used as a wargaming tool to prepare for different potential outcomes.
• Who, what, and why first. How and how much second —Although a business model canvas includes everything from a value proposition and personas to implementation costs and resources, everything should be driven from the market opportunity and rationale for bringing a product to market. If those aren’t solid, spending cycles on technology and costs is a waste of time.

Creating a business model canvas puts new product ideas under the microscope and pulls together disparate sources of intelligence, opinions, hunches and research into a single piece of paper. It forces critical thinking and analysis of assumptions and guesses and provides an excellent reference point for the entire organization.

Once the canvas is approved and productization begins, the canvas can also serve as a straw man for the product roadmap, lining up future features and functionality based on the priorities laid out in the document to achieve market success.

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The Business Model Canvas: Better Than a Business Plan [+ Free Templates]

Some links included here may be affiliate links, meaning we may earn a small monetary bonus from referring you to them. In no way does this increase the price you pay.

Do you have a great idea for a business or a new product/service but don’t know how to get started?

The business model canvas is an easy-to-use tool that can help you understand your idea and make it more concrete. It’s also a great way to talk about your idea with others, so they can give feedback on what works and what doesn’t.

The Business Model Canvas will help you identify the key components of your venture and map out the relationships between them. You’ll be able to see all aspects of your venture in one diagram—from customer segments, value propositions, channels, revenue streams, costs structures to team roles and organizational structure.

While it’s often used by startups, larger businesses, and more “refined” companies, this honestly is a great tool, no matter how large or small your company is.

I’ve created a free toolkit that includes a business model canvas template and more helpful tools. You can grab it below:

In June I was accepted into a business coaching/learning program called “Power Up Your Business.” It’s sponsored by a local community college and essentially they teach you the framework for a powerful business, along with offering business coaching, working on tactical business plans, and more.

I had heard of this before, and even tried to use it for a “business” I was going to run about 4 years ago ( which clearly didn’t go anywhere).

When I previously used the canvas, I was really confused on everything and I kind of just put it to the side and never thought about it again. So when I heard the topic for the day I wasn’t wildly impressed. I was thinking it wasn’t worthwhile, and was just another “exercise” some trainers and professors make you do.

But this class was one of those times where you go from “yeah, I already know this” to “holy crap, I have a LOT of work to do.”

I felt energized and excited, and THAT NIGHT I went home and was thinking about this before bed. This led to an episode of entrepreneurial insomnia , and I woke up at 3am with my mind RACING about all kinds of ideas for my business.

I actually started a new note on my phone, wrote down everything that came to mind, and by the time I got done it was quite long!

I got out of bed around 5am and filled out an entirely new business canvas for a pivot I was going to be making in my business.

This exercise gave me so much clarity on how I’m going to be moving forward, so I had to share it with you.

What is the Business Model Canvas?

The Business Model Canvas was created by Alexander Osterwalder, and is a strategic management and entrepreneurial tool used to capture the essence of your new venture. It will help you determine if you are on the right path, saving valuable time, energy, and resources in the process. This tool helps entrepreneurs build businesses that can evolve over time with ease.

In short, the Business Model Canvas is a way to quickly put together a business plan without the need for writing a traditional 80-page business plan detailing every aspect of a business you have yet to create.

It’s a method that allows you to quickly iterate and make changes to the plan without having to start a new business plan.

A lot of you might be thinking:

“But Chenell, I just run a [blog, website, ecommerce store, freelancing business, etc] why would I need something like this?”

I’d say if you’re asking the question of whether or not you need to complete this exercise, that you probably need it more than you think.

Having a plan and strategy for going into business and knowing who your customers are and how you can help them is CRITICAL to success.

This tool is used as a template for lean startups and as a strategic management tool.

The 9 Blocks of the Business Model Canvas

If you’ve been following along, I put together a post about each of these throughout the last week or so.

If you look at the canvas as a whole,  the right half of the canvas is essentially the “front of the house” stuff, like what kind of customers you’re helping, how you keep them as customers, etc.

The left half of the canvas is like the “back of the house” where you’re focusing on the activities you are doing in the business, what resources you need, who your key partners are, etc.

Both sides meet in the middle at your value propositions,  which are essentially what kind of offering you have for your clients and customers.

There are nine blocks that make up a business model canvas.

1. Customer Segments

Who are your customers? Who are you creating value for?

This section is about figuring out who you are going to provide value for. In this block of the canvas, fill in characteristics of the people you are targeting.

I know you’ve heard all about determining your niche, and choosing your avatar for your business. This is building upon those exercises.

A customer segment is a group of people (or businesses if you’re a B2B company) that you are looking to sell your products and services to.  It’s essentially the common characteristics your target market has that will allow you to find and market to them more easily.

2. Customer Relationships

How do you get, keep and grow/upsell customers? How do you interact with your current and potential customers? What type of relationship do they expect from working with you?

Customer Acquisition

How are you getting new customers ? This could be anything from email marketing to search engine optimization (SEO) to going out and doing direct sales.

Think about the methods you are going to use to attract the right people to your business. Where are your customers currently hanging out? Are they on Facebook, or are they lingering in an industry-specific forum asking questions?

Customer Retention

Acquiring customers can be challenging, and it’s always easier to sell again to a current customer than to get a new one. How are you going to keep your customers around?

Are you going to mail out postcards for special occasions, have monthly check-in calls, or just surprise and delight them with free stuff? Maybe you’re promoting your customers on social media, whatever it is, take note of it.

Grab the Business Model Canvas Toolkit to more easily follow along. This includes a PDF template of the canvas, along with a step-by-step guide to completing your own canvas:

3. Channels

How do you deliver your product or service? Is it B2B, B2C? How are you reaching your customers and prospects?

There are a few phases of channels to keep in mind:

• Awareness  – these channels could be search engines, social media, etc.
• Evaluation  – Your website, review sites, and again social and search
• Purchase  – Merchant accounts, invoicing platforms, your website
• Delivering Value Proposition – postage or mail, email providers, systems you use to deliver the product or service. Are you going to be delivering value with an online course , consulting and coaching, or do you have a “done for you” kind of offering?
• Post-Purchase Support – your email newsletter, chat platforms, content marketing, and customer service reps.

4. Value Proposition & the Value Proposition Canvas

“A value proposition is a promise of value to be delivered, communicated, and acknowledged . It is also a belief from the customer about how value (benefit) will be delivered, experienced and acquired.” – Wikipedia

What value do you deliver to the customer? Which problem(s) are we helping to solve for the customer?

This is one of the more important exercises to do because if you don’t know what you’re providing and to who, you’re going to fall down a lot more than you need to.

It’s so important, that half of the business model canvas is actually called the value proposition canvas (I know, ALL of the canvases!).

Pause here, and go figure out your value proposition.

5. Key Activities

What do you need to do well to make money? What kind of activities do you need to do to provide that value to the customer?

How exactly are you going to provide value and what kinds of activities need to happen in order for your customer to get what they expected?

As we determined in the value proposition phase, there are certain things customers are going to expect from your business. The key activities block of the canvas helps us figure out what those are and what we should be paying attention to that might not necessarily drive value.

6. Key Resources

What key resources do you need to deliver that value proposition?

Key Resources are the important things your business needs to build out the value proposition you promise customers.  Without these resources, you wouldn’t be able to deliver value, and you wouldn’t have a business to build a business model canvas for.

There are four types of key resources: financial, intellectual, human and physical. These can be things like machinery, systems and processes, patents, salespeople, credit cards, and business loans.

7. Key Partners

This piece of the canvas can get a little confusing once you read through all the types of partnerships there are. But if you take a really granular look, these strategic partnerships can be as simple as a virtual assistant (VA) you’re going to hire, or someone you are going to get into an affiliate relationship with.

Having a partner can be as easy as referring customers to each other.  Or it can be as complicated as two businesses creating a third company together because they found a need in the market and can each contribute a piece of that new pie.

Partnerships are one of the essential building blocks of the business model canvas, and for any business. It’s almost impossible to have a business that provides value for its customer and doesn’t require some kind of partner.

Essentially, we are answering these questions: who is going to help you deliver on that value proposition? A business can’t be all things to all people, so what kind of partnerships do you need to deliver the best service?

8. Cost Structure

This piece is where we should be looking at your fixed costs and variable expenses. But also looking at whether you’re going to be a cost-driven or value-driven business. In short, this means  are you going to be focused on providing the lowest cost solution, or will you be focused on providing value and not worry so much about low costs.

There are a few types of cost structures, including cost-driven, value-driven, fixed costs, variable costs, etc.

What the major cost drivers for the business? Include key resources and key activities in this. What type of cost structure are you going to be using?

9. Revenue Streams

How is the business earning revenue from customers and delivering the value proposition?

There are a few main types of revenue streams (these are not exclusive):

• Subscription fees  – i.e. Netflix
• Fees for usage – i.e. cell phone companies
• Selling assets  – i.e. Amazon
• Lending/renting/leasing  – i.e. Airbnb, Zipcar, Turo
• Licensing  – photography and music
• Brokerage   fees  – i.e. real estate brokers
• Advertising  – i.e. Google Adsense or partnerships

When to Use the Business Model Canvas

The Canvas can be viewed as a one-page business plan, that can be easily updated. I think it’s extremely helpful for these business situations:

When you’re launching a new product or service.

Sure, it may seem as easy as saying, I’m going to start selling bread at my pastry shop. But then you dig deeper by filling out the canvas and realize you’re going to need new ovens, new employees (or at the very least  extensive training for current employees), new marketing strategies, a different managerial schedule (baking usually happens in the wee hours of the morning), and on, and on.

When you’re starting a new business (or blog!)

Many of us have literally “fallen into” entrepreneurship because we had a skill people wanted to pay us for, and we just started selling it without thinking strategically. It’s time to take a step back and get that clarity you’re missing. This will take a few hours out of your day, but it will add so much relief to your life, trust me!

When you need clarity on your current business (this was me!) and don’t have a serious business plan in place.

Similar to the one above, I fell into offering marketing services because the people around me needed help. I knew nothing about running a business, and have just been guessing my way through most of it. Not anymore!

When you want to compare a few different ideas for a new business, service, or product to sell.

This one is so critical! We always have a million ideas running around in our heads, why not narrow it down to the 2 or 3 we are most excited about and really dive deep into those ideas? Do we have a strong business model? Do people actually need what we are offering? Can we actually make a living from this?

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Looking for a business plan alternative consider a business model canvas for startups.

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By Rieva Lesonsky

Is the thought of writing a business plan holding you back from starting a business? If you’re eager to get your business idea off the ground—without the drudgery of creating a massive document first—a business model canvas for startups might be right for you.

What is a business model canvas for startups?

A business model canvas is a quick-start alternative to a business plan. It helps you think through the most important aspects of startup—such as your product or service, your target market, and the resources you'll need to launch—in a brief chart format.

Every startup business needs a plan—but a traditional business plan isn’t your only option.

When to use a business model canvas

Why might you want to use a business model canvas instead of a traditional business plan? Here are some situations where a business model canvas might be appropriate:

• You suddenly have an opportunity you want to act on. Maybe a restaurant space is for lease in the exact area you dream of launching your restaurant. Perhaps you have the chance to form a partnership with someone who has lots of the resources you need to start a business. Using a business model canvas can enable you to act quickly before opportunity slips away.
• You want to beat the competition. If you have an innovative business idea, such as a software application or invention, using the business model canvas can help you be first to market. In a highly competitive space, other startups are likely planning launches similar to yours; the business model canvas can help you get the jump on them.
• You don’t need outside financing. If you are trying to get a bank loan, angel capital, or venture capital, you’ll need to have a traditional business plan ready to show the financing source. But if you have sufficient startup capital on your own, there’s no law saying that you have to follow the traditional business plan format.
• You want to rapidly assess the viability of your idea. Writing a traditional business plan will reveal any flaws in your idea; however, a business model canvas can help you pinpoint problems faster. Using a business model canvas, you can decide immediately if your idea will fly or if you need to revise it or scrap it and move on to another concept.

Who Needs A Business Checking Account?

Of course, some people just prefer the speed of a business model canvas and don’t want to spend weeks or months crafting a lengthy traditional business plan. If this is you, go ahead and try the business model canvas. Just keep in mind this format isn’t an excuse for neglecting the details of planning your startup.

Other Articles From  AllBusiness.com :

• The Complete 35-Step Guide for Entrepreneurs Starting a Business
• 25 Frequently Asked Questions on Starting a Business
• 50 Questions Angel Investors Will Ask Entrepreneurs
• 17 Key Lessons for Entrepreneurs Starting a Business

What’s included in a business model canvas for startups

The business model canvas for startups takes a high-level view of your business idea and focuses on the key elements you’ll need to make it viable. Developed by Alexander Osterwalder , it’s a one-page document in chart form that covers the nine “building blocks” that help your business startup make money.

• Key partners: Who are the buyers, suppliers, partners, and other alliances that can help you accomplish core business activities?
• Key activities: What are the most important actions you need to take in order to fulfill your value propositions, strengthen customer relationships, secure distribution channels, and maximize revenue streams?
• Key resources: What essential resources are needed to launch and run your business and create value for your customers?
• Unique value proposition: What products and services do you plan to offer? What customer needs do they meet? How do they differentiate your business from your competition?
• Customer segments: What customer groups will your business serve? Identify the customer personas that your business provides value for.
• Customer relationships: What relationships will you build with your customer segments? What kind of relationship does each customer segment expect?
• Channels: What distribution methods will you use to deliver your products or services to your target market?
• Cost structure: What will it cost to start and sustain your business? Which resources and activities will be the most expensive?
• Revenue streams: How will your business make money? How will you price your products and services? Are there other potential revenue streams?

You can create a business model canvas on paper or a whiteboard. There are also several apps you can use to create your business model canvas; they allow you to incorporate additional information, easily save and share the business model canvas, and more.

Where to get help with the business model canvas

There are several places to get help creating your business model canvas. You can start by watching this SCORE webinar on using the Business Model Canvas. Then visit Strategyzer , Canvanizer , and Xtensio to find a business model canvas tool you can use. You’ll also find sample business model canvas examples, resources, and training to help.

Both the traditional business plan and the business model canvas can help startup entrepreneurs evaluate their ideas and make important decisions about launching their startup.

Of course, you can use both methods if you want. Many entrepreneurs start with a business model canvas to give them a “jump start” and then flesh out a traditional business plan further down the road.

(Disclosure: SCORE is a client of my company.)

I am CEO of GrowBiz Media, a media and custom content company focusing on small business and entrepreneurship. Email me at  [email protected] , follow me on Twitter  @Rieva , and visit my website  SmallBizDaily.com  to get the scoop on business trends and sign up for my free TrendCast reports. Read all of  Rieva Lesonsky’s articles .

RELATED:  Don’t Waste Time on a Startup Business Plan—Do These 5 Things Instead

This article was originally published on AllBusiness .

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Entrepreneurial Prodigy

Business Model Canvas vs. Traditional Business Plans: Choosing the Right Framework

In the ever-evolving landscape of entrepreneurship, the choice between a Business Model Canvas and a Traditional Business Plan can be pivotal. Each framework offers distinct advantages and caters to different needs, making it essential for aspiring entrepreneurs to understand their differences and select the most suitable one for their venture. In this comprehensive guide, we’ll delve into the intricacies of both approaches, highlighting their pros and cons to help you make an informed decision.

Understanding the Business Model Canvas

The Business Model Canvas, developed by Alexander Osterwalder and Yves Pigneur, is a visual tool that provides a holistic view of a business model. It consists of nine building blocks, including key partners, key activities, value proposition, customer relationships, customer segments, channels, cost structure, revenue streams, and resources. This framework emphasizes simplicity, flexibility, and agility, making it ideal for startups and innovative ventures.

Here’s an overview of each building block:

• This block identifies the different groups of customers or market segments that your business serves. Customers can be segmented based on demographics, psychographics, behavior, or other criteria. Understanding your customer segments helps you tailor your products, services, and marketing efforts to meet their specific needs.
• The value proposition describes the unique value that your business offers to its customers. It articulates the benefits and solutions that address customer pain points or fulfill their desires. Your value proposition should clearly communicate why customers should choose your products or services over alternatives offered by competitors.
• Channels represent the various ways in which your business reaches and interacts with customers to deliver value. This can include distribution channels, sales channels, marketing channels, and customer service channels. The choice of channels depends on your target market, product characteristics, and customer preferences.
• This block outlines the types of relationships your business establishes and maintains with its customers. Customer relationships can range from transactional to long-term partnerships and can be built on factors such as personalization, self-service, community engagement, or dedicated support.
• Revenue streams represent the sources of revenue generated by your business model. This can include one-time sales, recurring subscriptions, licensing fees, advertising revenue, or other monetization methods. Understanding your revenue streams is essential for optimizing pricing strategies and maximizing profitability.

Pros of Business Model Canvas

The business model canvas offers several advantages for entrepreneurs and businesses:.

• Visual Representation: The Canvas provides a visual representation of the business model, making it easier to understand and communicate complex ideas. It condenses key elements of a business model onto a single page, allowing stakeholders to grasp the entire concept at a glance.
• Holistic View: By considering nine key building blocks, the Canvas encourages a holistic view of the business model. It prompts entrepreneurs to think about all aspects of their business, including customer segments, value proposition, revenue streams, and cost structure, ensuring that no critical elements are overlooked.
• Flexibility: The Canvas is highly adaptable and can be customized to fit the specific needs and circumstances of different businesses and industries. It accommodates a wide range of business models, from startups to established enterprises, and can be easily modified as the business evolves over time.
• Iterative Process: Using the Canvas facilitates an iterative process of business model development and refinement. Entrepreneurs can experiment with different ideas, test hypotheses, and make adjustments to their business model based on feedback and insights, leading to more robust and effective strategies.
• Collaborative Tool: The Canvas fosters collaboration among team members, stakeholders, and partners by providing a common framework for discussion and decision-making. It enables multidisciplinary teams to work together to analyze, brainstorm, and develop innovative business models collaboratively.
• Strategic Alignment: The Canvas helps align various components of the business model with overall strategic objectives and goals. It ensures that all elements of the business model are aligned with the company’s mission, vision, and values, enhancing coherence and consistency in strategy execution.
• Risk Reduction: By systematically evaluating different aspects of the business model, the Canvas helps identify potential risks and vulnerabilities early in the planning process. Entrepreneurs can proactively address risks and develop mitigation strategies to minimize negative impacts on the business.

Cons of Business Model Canvas

While the business model canvas offers many benefits, it also has some limitations and potential drawbacks:.

• Simplicity vs. Complexity: While the Canvas provides a simplified overview of the business model, some businesses may find it too simplistic for their needs. Complex business models with multiple revenue streams, customer segments, or value propositions may not be fully captured or adequately represented on the Canvas.
• Limited Detail: The Canvas does not delve deeply into each component of the business model, which can lead to oversimplification or omission of critical details. Entrepreneurs may need to supplement the Canvas with additional documentation or analysis to fully understand and develop their business model.
• Static Nature: The Canvas provides a snapshot of the business model at a specific point in time, but it may not capture the dynamic nature of business environments and evolving market conditions. Business models are subject to change over time, and the Canvas may become outdated if not regularly reviewed and updated.
• Lack of Guidance: While the Canvas provides a framework for organizing key elements of the business model, it does not offer explicit guidance on how to develop or implement each component. Entrepreneurs may require additional resources, expertise, or support to effectively translate the Canvas into actionable strategies and initiatives.
• Risk of Oversimplification: There is a risk that the Canvas may oversimplify complex business challenges or overlook nuances and interdependencies among different elements of the business model. Entrepreneurs should exercise caution and critical thinking when using the Canvas to ensure that important considerations are not overlooked.
• Difficulty in Quantification: The Canvas focuses on qualitative aspects of the business model, such as value proposition and customer segments, which may make it challenging to quantify or measure certain components. This can limit the ability to conduct rigorous analysis or make data-driven decisions based on the Canvas alone.

Exploring Traditional Business Plans

Traditional Business Plans are comprehensive documents that outline all aspects of a business, including executive summary, company description, market analysis, organizational structure, marketing strategy, operations plan, financial projections, and appendices. This format is well-established and often required by investors and financial institutions for funding purposes.

Here are some key aspects and considerations of traditional business plans:

• Comprehensive Documentation: Unlike the concise and visual nature of the Business Model Canvas, traditional business plans typically involve more extensive documentation. They include sections such as an executive summary, company description, market analysis, organization and management structure, product or service offerings, marketing and sales strategies, operational plans, and financial projections.
• In-depth Market Analysis: Traditional business plans often include a thorough analysis of the target market, industry trends, competitive landscape, and customer demographics. This analysis may involve primary research, such as surveys and interviews, as well as secondary research using industry reports, market data, and competitor analysis.
• Detailed Financial Projections: Business plans typically feature detailed financial projections, including income statements, cash flow forecasts, and balance sheets. These projections estimate the company’s financial performance over several years, taking into account revenue streams, expenses, capital expenditures, and funding requirements. Financial projections are often supported by assumptions and sensitivity analysis to assess the impact of various scenarios on financial outcomes.
• Risk Assessment and Mitigation Strategies: Traditional business plans include a thorough assessment of potential risks and challenges that may affect the business’s success. This involves identifying internal and external risks, such as market volatility, regulatory changes, competitive pressures, or operational issues. Business plans also outline strategies for mitigating these risks and contingency plans to address unforeseen circumstances.

Pros of Traditional Business Plans

Traditional business plans offer several advantages for entrepreneurs and businesses:.

• Comprehensive Strategic Planning: Traditional business plans provide a structured framework for comprehensive strategic planning. They cover all aspects of the business, including market analysis, competitive landscape, operational strategies, and financial projections, helping entrepreneurs develop a thorough understanding of their business concept and its potential for success.
• Detailed Financial Projections: Business plans include detailed financial projections, such as income statements, cash flow forecasts, and balance sheets. These projections help entrepreneurs assess the financial feasibility of their business idea, estimate funding requirements, and demonstrate the potential return on investment to investors and lenders.
• Investor Attraction: Traditional business plans serve as a valuable tool for attracting investors, lenders, and other stakeholders. They provide a detailed overview of the business opportunity, market potential, competitive advantages, and growth strategies, helping entrepreneurs communicate their vision and secure funding for their venture.
• Risk Assessment and Mitigation: Business plans include a thorough analysis of potential risks and challenges that may impact the business’s success. Entrepreneurs identify risks related to market dynamics, competition, regulatory compliance, operational issues, and financial constraints, and develop strategies to mitigate these risks effectively.
• Strategic Guidance: Business plans offer strategic guidance and direction for entrepreneurs, outlining the company’s goals, objectives, and milestones. They provide a roadmap for achieving long-term success, guiding decision-making, resource allocation, and performance monitoring as the business grows and evolves.
• Operational Efficiency: By documenting operational processes, workflows, and organizational structure, business plans help entrepreneurs establish efficient and effective operations. They outline key activities, responsibilities, and timelines, ensuring that all stakeholders are aligned and coordinated in executing the business strategy.

Cons of Traditional Business Plans

While traditional business plans offer several advantages, they also have some limitations and potential drawbacks:.

• Time and Resource Intensive: Developing a traditional business plan requires a significant investment of time, effort, and resources. Entrepreneurs must gather market research, analyze data, create financial projections, and document detailed strategies, which can be time-consuming and detract from other critical tasks.
• Rigid and Inflexible: Traditional business plans can be rigid and inflexible, making it challenging to adapt to changing market conditions, emerging trends, or unexpected challenges. Entrepreneurs may find it difficult to revise or update their business plans in response to new information or feedback, leading to outdated or irrelevant strategies.
• Limited Predictive Accuracy: Financial projections and market forecasts included in traditional business plans are based on assumptions and estimates, which may not accurately predict future outcomes. External factors such as economic conditions, consumer behavior, and competitive actions can impact business performance, rendering initial projections inaccurate or obsolete.
• Focus on Documentation Over Action: The process of creating a traditional business plan may prioritize documentation and formality over action and execution. Entrepreneurs may become overly fixated on developing the perfect plan, rather than taking tangible steps to test their business concept, acquire customers, and generate revenue.
• Not Suitable for All Businesses: Traditional business plans may not be suitable for all types of businesses, particularly startups or small businesses operating in dynamic or rapidly evolving industries. These businesses may require more agile and iterative approaches to planning and strategy development.
• Overemphasis on Funding: While business plans are often used to attract investment from investors and lenders, they may place too much emphasis on fundraising as the primary goal. Entrepreneurs may lose sight of other important aspects of business development, such as product development, customer acquisition, and market validation.

Choosing the Right Framework

Consider your stage of development.

Considering your stage of development is crucial when selecting the right framework for business planning.

Here’s how different stages may influence your choice:

• At this stage, you’re exploring business ideas and testing their feasibility. Lean methodologies like the Lean Startup approach or the Business Model Canvas are often preferred. These frameworks emphasize rapid experimentation, customer validation, and iterative refinement of business concepts. They allow you to quickly test assumptions, identify market opportunities, and pivot as needed based on feedback.
• In the startup stage, you’re working to establish your business and acquire your first customers. Lean methodologies remain valuable, helping you refine your value proposition, validate your business model, and achieve product-market fit. As you begin to scale, you may also need to develop a more detailed business plan to attract investors, secure financing, and plan for growth.
• As your business grows, you may need to shift towards more traditional business planning frameworks. A traditional business plan with detailed financial projections and market analysis becomes essential for securing investment, scaling operations, and managing complexity. However, lean methodologies can still be valuable for maintaining agility, fostering innovation, and adapting to changing market conditions.
• In the maturity stage, your business has achieved stability and is focused on sustaining its success over the long term. Traditional business planning frameworks continue to be important for strategic decision-making, resource allocation, and performance monitoring. However, you may also benefit from incorporating elements of lean methodologies to drive continuous improvement, foster a culture of innovation, and stay competitive in the marketplace.

Evaluate Your Objectives and Audience

Evaluating your objectives and audience is critical when choosing a business planning framework.

Here’s how to align your objectives and audience with the right framework:

• Clarity of Purpose: Determine the primary purpose of your business planning efforts. Are you looking to validate a business idea, secure funding, develop a growth strategy, or improve operational efficiency?
• Outcome Expectations: Clarify the desired outcomes of your business planning process. Do you need a detailed roadmap, financial projections, market analysis, or actionable insights for decision-making?
• Flexibility vs. Structure: Consider the level of flexibility and structure you require. Are you open to experimentation and iteration, or do you need a more systematic and comprehensive approach?
• Investors and Lenders: If you’re seeking funding from investors or lenders, they may expect to see a traditional business plan with detailed financial projections, market analysis, and risk assessments. They want to understand the potential return on investment and the viability of your business model.
• Internal Stakeholders: Your team members and internal stakeholders may benefit from a framework that provides clarity on goals, strategies, and operational plans. They need actionable insights and alignment to execute effectively.
• Customers and Partners: External stakeholders, such as customers and partners, may prefer a more concise and visual framework that clearly communicates your value proposition and market positioning. They want to understand how your offerings meet their needs and differentiate from competitors.

Once you’ve evaluated your objectives and audience, you can select a business planning framework that best meets your needs:

• Lean Methodologies (e.g., Lean Startup, Business Model Canvas): These frameworks are ideal for entrepreneurs focused on experimentation, customer validation, and agility. They provide flexibility and encourage rapid iteration based on feedback from stakeholders. They are suitable for early-stage startups or businesses exploring new opportunities.
• Traditional Business Plans: Traditional business plans are suited for entrepreneurs seeking funding, developing long-term strategies, or operating in established industries. They offer comprehensive documentation, detailed financial projections, and in-depth market analysis. They are appropriate for businesses at various stages of development, particularly those aiming for growth or expansion.
• Hybrid Approaches: You may also choose to combine elements of different frameworks to create a customized approach that aligns with your objectives and audience. For example, you could start with a lean methodology to test assumptions and validate your business model, then transition to a traditional business plan as you seek funding or scale operations.

In the debate between Business Model Canvas and Traditional Business Plans, there is no one-size-fits-all answer. Both frameworks offer unique advantages and cater to different entrepreneurial needs and objectives. As you embark on your entrepreneurial journey, take the time to evaluate your business model, stage of development, and audience preferences to determine the most suitable framework for your venture. Whether you choose the simplicity and agility of the Business Model Canvas or the depth and structure of a Traditional Business Plan, remember that the ultimate goal is to create a roadmap for success and sustainable growth.

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Business Model Canvas Explained: BMC Meaning (Template + PPT)

A product is only as good as the Business Model (BM) that supports it, and creating an innovative product requires an equally innovative BM. The Business Model Canvas is an easy visual tool your team can use to conceptualize and iterate the key aspects of your Business Model.

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In the modern business strategy , where innovation reigns supreme and adaptability is key, understanding your business model is extremely important. That’s where the Business Model Canvas (BMC) comes in, a flexible tool meant to clarify the key parts of your business strategy in a simple and practical way, It helps you describe, challenge and innovate the Business Model of an organization, and it does this quite well, at least on a high level.

In this guide, we’ll explain what the BMC is all about, why it’s important, and how to use it effectively. Whether you’re an experienced business owner, a corporate leader, or just starting out, understanding the BMC can really help your business thrive. To get started, you can download the Business Model Canvas Template PPT (PowerPoint) Format for easy implementation and customization to suit your specific business needs.

Understanding Meaning and Definition of BMC: What is the Business Model Canv as?

A Business Model encapsulates essential aspects of your business, encompassing your company’s Value Proposition, how you generate and deliver that value, and the associated costs and benefits. Essentially, it answers the Who, What, How, and Why of your business. When crafting a Business Model, it’s beneficial to articulate the assumptions or hypotheses that underpin your business systematically. 

The Business Model Canvas stands as a strategic management tool that serves precisely this purpose. It facilitates a clear understanding of your current Business Model, aids in designing a new one, identifies any critical oversights, and allows for comparisons with other models, it was developed by Alexander Osterwalder and popularized by the Lean Startup movement. Widely adopted by both startups and corporations, the Business Model Canvas enables teams to comprehensively grasp, discuss, and assess a Business Model, as well as swiftly devise or refine one. Its appeal lies in condensing years of business school knowledge and management consulting expertise onto a single page, supplemented with straightforward questions guiding each section’s completion.

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The UNITE Business Model Canvas

Key building blocks of the business model canvas template.

The Business Model Canvas (BMC) template consists of nine key building blocks that capture the essential aspects of a business strategy . These building blocks are:

• Customer Segments : Identifies the different groups of customers or markets that the business serves.
• Value Proposition : Describes the unique value that the business offers to each customer segment.
• Channels : Outlines how the business reaches and interacts with its customers to deliver its value proposition.
• Customer Relationships : Defines the types of relationships the business establishes with its customers to acquire, retain, and grow its customer base.
• Revenue Streams : Specifies the sources of revenue generated by the business from each customer segment.
• Key Resources : Lists the essential assets, capabilities, and resources required to deliver the value proposition and operate the business.
• Key Activities : Describes the core activities and processes the business must perform to create and deliver its value proposition.
• Key Partnerships : Identifies the strategic alliances and partnerships necessary to leverage external resources and capabilities.
• Cost Structure : Outlines the costs incurred by the business in operating its key activities, delivering its value proposition, and maintaining its customer relationships.

These building blocks together provide a holistic view of the business model, enabling organizations to analyze, design, and optimize their strategies effectively. In the following sections, we will delve into each element in detail, exploring its significance and how it contributes to shaping a robust business model.

1) Customer Segments in Business Model Canvas

Central to the business model canvas (BMC) is the identification of distinct customer segments, each with its own needs, preferences, and pain points. Customer segmentation in BMC involves dividing a customer base into distinct groups based on shared characteristics such as demographics, interests, and purchasing behaviors. When determining customer segments, it’s crucial to consider who the problem-solvers are, who will perceive value in your offerings, and whether your target audience comprises individuals or businesses. Understanding the characteristics and preferences of your audience, whether they are men or women, young adults, or teenagers, is essential for tailoring your value proposition effectively. 

Additionally, assessing the size of each segment helps gain insights into market dynamics at both micro and macro levels. Creating detailed customer personas for each segment provides a deeper understanding of their needs and preferences, facilitating more targeted and effective marketing strategies.

2) Key Partnerships in Business Model Canvas

Collaboration lies at the heart of successful business endeavours, and the BMC acknowledges the significance of forging strategic partnerships. Whether through supplier relationships, distribution alliances, or joint ventures, leveraging key partnerships in BMC can unlock new opportunities and enhance value delivery. Identifying the key resources required for your business operations is essential for ensuring the smooth execution of activities. These resources encompass both tangible assets and intangible elements necessary to carry out business functions effectively. Tangible resources may include office space, computers, internet connections, vehicles, machinery, and utilities like electricity. Intangible resources, on the other hand, encompass human capital, such as skilled staff members, expertise, and knowledge. By understanding and securing these resources, businesses can facilitate the seamless execution of key activities and enhance overall operational efficiency.

3) Key Activities in Business Model Canvas

Behind every successful business model is a series of key activities that drive value creation and operational excellence. From product development to marketing campaigns to customer support, identifying and optimizing these core activities is essential for sustained competitiveness. The Key Activities of a business or product are the essential actions taken to fulfil the value proposition for customers. It involves considering the resources, time, expertise, and strategies required to deliver value. For instance, activities could include consulting, designing, web development, baking, driving, or shovelling, depending on the nature of the business. Understanding these activities is crucial for optimizing operations and ensuring the effective delivery of value to customers.

4) Revenue Streams in Business Model Canvas

Revenue Streams represent the avenues through which your business monetizes its value proposition, converting solutions to customers’ problems into financial gains. Pricing strategies should align with the perceived value of the solution relative to the customer’s pain point. Various revenue models exist, including pay-per-product, fee-for-service, fixed-rate pricing, subscription models, dividends, referral fees, freemium models, and equity gain opportunities. Selecting the most suitable revenue model hinges on understanding customer preferences, market dynamics, and the unique value proposition offered by the business.

5) Value Proposition in Business Model Canvas

At the core of the Business Model Canvas lies the value proposition, which encapsulates the unique solution a business offers to address the needs or challenges of a specific customer segment. Whether it’s a product or service, the value proposition should distinguish itself from competitors by being innovative, disruptive, or offering distinctive features. These propositions can be quantitatively defined by factors like price and speed of service, or qualitatively by aspects such as customer experience and design. Crafting a compelling value proposition is essential for attracting and retaining customers, as it communicates the benefits and advantages that set a business apart in the market landscape.

6) Channels in Business Model Canvas

Effective distribution channels are essential for reaching and engaging target customers, and the BMC helps businesses identify and optimize these channels. Identifying the appropriate channels through which to reach your customers is integral to the success of your business. These channels serve as the pathways for customers to discover your value proposition and engage with your offerings. Considerations such as where your customers are located, their media consumption habits, and their online presence are essential in channel selection. For instance, channels could include social media platforms, email marketing, networking events, or traditional advertising mediums like billboards and radio. By understanding how to effectively reach your target audience, businesses can maximize their visibility and engagement, ultimately driving growth and success.

7) Key Resources Business Model Canvas

Key resources encompass the assets necessary to create value for customers, ranging from intellectual property to physical infrastructure and human capital. For instance, Zara, a renowned fashion retailer, relies on several key resources to deliver its value propositions effectively. These include robust stock management systems, an extensive network of physical stores, a strong brand presence, and efficient logistics and supply chain infrastructure. Stock availability is crucial for customer satisfaction, and Zara’s distribution network and brand reputation help ensure timely delivery and meet customer demands. Additionally, investing in technology and skilled staff is vital for managing inventory, production processes, and product delivery efficiently.

8) Customer Relationship in Business Model Canvas

Understanding the nature of your relationship with customers is vital for shaping your business operations effectively. Customer relationships encompass various modes of interaction, from in-person meetings to online engagement. For instance, your business might engage in one-to-one interactions, utilize third-party contractors, or leverage online platforms for customer communication. Creating a User Journey Map can provide valuable insights into these interactions, highlighting touchpoints and opportunities for automation. By delineating the customer relationship landscape, businesses can refine their operations and enhance customer experiences accordingly.

9) Cost Structure in Business Model Canvas

The cost structure in BMC of a company encompasses its expenditure on operations and reflects its strategic approach towards costs. A cost-driven company prioritizes minimizing costs to offer competitive prices to customers, as seen in fast-fashion retailers like Forever 21. Conversely, value-driven companies like Gucci emphasize creating value through high-quality products and premium experiences. Understanding key costs, cost drivers, and the relationship between activities, resources, and revenue streams is crucial for optimizing cost structures. Companies also need to assess the balance between fixed and variable costs, leverage economies of scale, and determine whether they prioritize cost optimization or delivering value to customers. Explore resources like CFI’s Budgeting and Forecasting course for insights into effectively managing future cash flows and expenses.

Benefits of a Business Model Canvas

The adoption of the Business Model Canvas offers a myriad of benefits that can catalyze strategic clarity, foster innovation, and drive organizational success.

Strengthens Focus on Value Proposition, Visual Representation, and Clarity

The BMC enables businesses to distill complex business strategies into a visually intuitive format, fostering clarity and alignment across stakeholders. By focusing on the core value proposition and key components of the business model, organizations can streamline decision-making and drive strategic focus.

Speed and Agility

The BMC’s iterative and adaptable nature empowers businesses to experiment, iterate, and pivot with agility, enabling rapid response to market dynamics and emerging opportunities.

Facilitates Collaboration

The BMC serves as a common language for cross-functional collaboration, allowing teams to align on strategic objectives, identify synergies, and co-create innovative solutions. By fostering a collaborative mindset and breaking down silos, organizations can harness the collective intelligence of their teams to drive value creation.

Strategic Decision-Making

By providing a holistic view of the business model, the BMC empowers decision-makers to make informed and data-driven strategic choices. Whether evaluating new market opportunities, assessing competitive threats, or allocating resources, the BMC serves as a strategic compass for guiding decision-making.

Identifying and Evaluating Key Components

The structured framework of the BMC facilitates systematic analysis and evaluation of key components, enabling businesses to identify strengths, weaknesses, opportunities, and threats. By gaining deeper insights into customer segments, value propositions, and revenue streams, organizations can refine their strategies and enhance competitive advantage.

Adaptability and Iteration

The BMC’s iterative approach encourages continuous learning and adaptation, allowing businesses to evolve and innovate in response to changing market dynamics and customer preferences. By embracing experimentation and feedback loops, organizations can stay ahead of the curve and seize new opportunities for growth and differentiation.

Action-Oriented Approach and Common Language

Unlike traditional business planning approaches, which often result in lengthy and static documents, the BMC fosters an action-oriented mindset and a shared understanding of the business model. By distilling complex concepts into a concise and actionable format, the BMC empowers teams to translate strategy into execution with clarity and purpose.

However, where the Business Model Canvas falls short is in providing guidance on how to implement a business model effectively. This is where the Operating Model Canvas steps in. Fortunately, these two models complement each other seamlessly. The Operating Model Canvas expands upon the Value Creation aspects of the Business Model Canvas, primarily focusing on operational details. So, when it comes to putting your Business Model into action, you can replace the more abstract Value Creation aspects with the detailed elements outlined in the Operating Model Canvas. This integration strengthens the link between strategic planning and operational execution, ensuring a holistic approach to business development.

The Operating Model Canvas is utilized similarly to other canvases, such as the Business Model Canvas. Teams gather around a flip chart or whiteboard, outlining the canvas’s areas and filling them with Post-it notes discussing critical aspects and their interconnections. Starting with the core Value Delivery Chain(s) and addressing major challenges next is often helpful. The strength of the Operating Model Canvas lies in its brevity, focusing on key elements and fostering high-level alignment to execute strategies effectively. It prompts consideration of various scaling alternatives, such as outsourcing versus in-house operations. While it can be expanded into a more detailed document, keeping it concise initially is crucial to establish a foundational understanding of execution strategies.

Download the Complete eXtended Business Model Canvas Package, including instructions for putting it to work for you today.

The eXtended Business Model Canvas goes beyond the core Business Model Canvas by providing a broader perspective on an organization’s operations and context. It contextualizes the business model by examining underlying drivers, customer needs, team dynamics, and the organization’s values and culture. This holistic approach helps businesses better understand their “why” and overarching objectives, represented by the Business Intention & Objectives and Massive Transformative Purpose (MTP), Understanding customers’ needs and considering the team’s composition, structure, values, and culture.

• Business Intention & Objectives: Start by defining the ultimate goals and aspirations of your business, linking your Business Model to its overarching purpose and intention.
• Massive Transformative Purpose (MTP): Recognize the power of a deeply unifying purpose, known as a Massive Transformative Purpose, to drive exponential growth and success.
• Solution/Market Fit: Focus on understanding your customers’ needs and improving Solution/Market Fit to drive growth, emphasizing an outside-in perspective and avoiding assumptions.
• Jobs to be Done : Identify the functional and emotional jobs your customers need fulfilling, providing insights into their core motivations and needs.
• Customer Segments: Define the target segments and create representative personas based on data-driven insights to understand who your most important customers are.
• People & Structure: Success hinges on assembling the right team and maintaining an adaptable organizational structure to navigate change effectively.
• Values & Culture: Uphold core values and cultivate a strong organizational culture to support differentiation and long-term sustainability.
• Unfair Advantage: Identify unique assets and capabilities that set your business apart and cannot be easily replicated, contributing to a sustainable competitive advantage in the market.

By addressing these drivers, businesses can gain deeper insights into their purpose, customer needs, team dynamics, and competitive advantages, ultimately guiding the development of a robust and successful business model.

Once you’ve delved into the key components of the eXtended Business Model, it’s essential to focus on exploring the Value Model in greater depth. This model serves as the core of your Business Model, encapsulating your primary Value Proposition(s) and associated offerings within the overall Product System. Utilizing tools like the Value Proposition Canvas allows for the logical development and testing of products or services. Notably, this canvas facilitates the management of existing Value Propositions while also fostering the creation of new ones. Its strength lies in its ability to foster empathy with customers, enabling the translation of their needs into innovative solutions that address significant yet unmet Jobs to be Done.

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The Business Model Canvas

What is the business model canvas.

The business model canvas is a tool designers use to map out a business or product’s key actors, activities and resources, the value proposition for target customers, customer relationships, channels involved and financial matters. It gives an overview to help identify requirements to deliver the service and more.

“A business model describes the rationale of how an organization creates, delivers, and captures value.” — Alexander Osterwalder, Co-creator of the Business Model Canvas  

Learn about the business model canvas and how it helps in design.

• Transcript loading…

The Business Model Canvas – Flexible Chart, Early-Warning System and More 

In service design , two tools are essential to use early in your design process: the business model canvas and the value proposition canvas . You can use the business model canvas to build an overview of changes to be made to an existing business (e.g., a merger) or of a totally new business opportunity or market gap . At the start of your design process, it’s vital to map out the business model of your service to see how it will fit into the marketplace. You’ll also need to ensure what you propose can bring maximum value to both your customers and business, and keep doing so in terms of customer retention, profitability and more.

To gain the most accurate vision of a proposed product or service, it’s essential to understand all the components and dynamics of not only the customer experience but also the service as a whole ecosystem . This ecosystem contains all the channels and touchpoints that must work together to deliver and sustain maximum value to the customer.

This canvas gives you several important advantages, namely these:

It’s collaborative – so you can bring the various partners together on the same page to generate and analyze ideas, and have an early testing ground for concepts before you advance to service staging a prototype.

It’s human-centered – so you can keep close track on how to create and maximize value for customers as well as stakeholders and other partners.

It makes it easier to collect rich data – if you have a clear purpose and strategy in mind. 

A business model canvas typically contains 10 boxes:

Key Partners – The people who will help you fulfill the key activities, using the key resources. 

Key Activities – Those vital actions that go into the everyday business to get things done; these are all the activities needed to realize and maintain the value proposition, and to power everything else involved.

Key Resources – The tools needed to get those things done, stretching across all areas the canvas covers to include, for example, customer retention.

Value Proposition – The item you think will create value for your customer: e.g., a new idea, a price drop. This is a summary of what your business will deliver to customers, and feeds into the value proposition canvas, the tool you’ll use to expand this.

Customer Relationships – Where you envision the relationship each customer segment expects: e.g., customer acquisition, retention and upselling (i.e., How do you get customers? How do you keep customers? How do you continue to create value for them?).

(Note: boxes 5 and 4 are closely linked as everything you do revolves around retaining the customer and considering the customer lifecycle.)

Customer Segments – Your most important customers (e.g., seniors); consider the value of personas here.

Channels – How you deliver the value proposition. Will it be online, through physical means or a combination? Here, you identify which channels are the best (both desirable for customers as well as cost-efficient and cost-effective for the brand).

Cost Structure – Here you find the most essential cost drivers. This allows you to consider the return on investment (ROI).

Revenue Streams – Where you find potential revenue sources (e.g., advertising). 

Sustainability – How sustainable your offering is overall, to the environment, to the social good, etc.

© Strategyzer AG, modified, CC-BY-SA-3.0

How to Build a Business Model Canvas

For the best results, follow these guidelines and aim to fill in all the gaps, looking out for cause-and-effect relationships that run between boxes/throughout:

Complete the top seven boxes (Key Partners to Customer Segments) – using all the information you can gather from your research.

Complete the next boxes:  

Cost Structure – Determine the cost drivers from the Key Partners, Activities and Resources boxes; and

Revenue Streams – Determine these from the Customer Relationships, Customer Segments and Channels boxes.

Once you have established these, you can work to estimate them in monetary terms.

Complete the Sustainability box – according to the insights you’ve found.  

Here’s an example of a business model canvas as a work in progress:

© Interaction Design Foundation, CC BY-NC-SA 3.0

Overall, remember your canvas is a flexible tool. It’s also a living document that you can revisit and use to find the most effective alternatives. With a clear sense of goals, a keen eye for detail and ear for input, and a readiness to refine this canvas, you can use it to fine-tune the best service prototype every time.

Learn More about The Business Model Canvas

Take our Service Design course , featuring a template for service blueprints.

Read this example-rich piece by experienced strategy designer Justin Lokitz for tips on using the business model canvas .

Find some additional tips on how to make the most of your business model canvas here .

Answer a Short Quiz to Earn a Gift

What is the main function of a Business Model Canvas?

• To compile financial reports for profit recording
• To design aesthetic elements of a product
• To map out an organization’s key elements and strategies

Which of the following is part of a Business Model Canvas?

• Key partners
• Legal contracts
• Technical specifications

What does the value proposition component represent in the Business Model Canvas?

• The financial assets of a company
• The internal team structure
• The unique value a company offers to its customers

Why are customer segments important in the Business Model Canvas?

• They define the team hierarchy.
• They describe the various company locations.
• They identify the target audience for the business.

What does the cost structure component of the Business Model Canvas indicate?

• The company's annual profit
• The distribution channels quarterly timelines
• The main costs to operate the business

Better luck next time!

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Literature on the Business Model Canvas

Here’s the entire UX literature on the Business Model Canvas by the Interaction Design Foundation, collated in one place:

Learn more about the Business Model Canvas

Take a deep dive into Business Model Canvas with our course Service Design: How to Design Integrated Service Experiences .

Services are everywhere! When you get a new passport, order a pizza or make a reservation on AirBnB, you're engaging with services. How those services are designed is crucial to whether they provide a pleasant experience or an exasperating one. The experience of a service is essential to its success or failure no matter if your goal is to gain and retain customers for your app or to design an efficient waiting system for a doctor’s office.

In a service design process, you use an in-depth understanding of the business and its customers to ensure that all the touchpoints of your service are perfect and, just as importantly, that your organization can deliver a great service experience every time . It’s not just about designing the customer interactions; you also need to design the entire ecosystem surrounding those interactions.

In this course, you’ll learn how to go through a robust service design process and which methods to use at each step along the way. You’ll also learn how to create a service design culture in your organization and set up a service design team . We’ll provide you with lots of case studies to learn from as well as interviews with top designers in the field. For each practical method, you’ll get downloadable templates that guide you on how to use the methods in your own work.

This course contains a series of practical exercises that build on one another to create a complete service design project . The exercises are optional, but you’ll get invaluable hands-on experience with the methods you encounter in this course if you complete them, because they will teach you to take your first steps as a service designer. What’s equally important is that you can use your work as a case study for your portfolio to showcase your abilities to future employers! A portfolio is essential if you want to step into or move ahead in a career in service design.

Your primary instructor in the course is Frank Spillers . Frank is CXO of award-winning design agency Experience Dynamics and a service design expert who has consulted with companies all over the world. Much of the written learning material also comes from John Zimmerman and Jodi Forlizzi , both Professors in Human-Computer Interaction at Carnegie Mellon University and highly influential in establishing design research as we know it today.

You’ll earn a verifiable and industry-trusted Course Certificate once you complete the course. You can highlight it on your resume, CV, LinkedIn profile or on your website.

All open-source articles on the Business Model Canvas

Service design - design is not just for products.

The Relationship Between Visual Design and User Experience Design

• 2 years ago

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What is Business Model Canvas?

What is the Business Model Canvas?

The Business Model Canvas (BMC) is a strategic management and entrepreneurial tool which is a visual chart that allows you to describe, design, challenge, invent, and pivot your business model. It provides an organizational blueprint for further planning and action. The resulting canvas is a single-page business plan that represents how an organization creates and delivers value to its customers in the future. You can design a business model canvas by yourself but it is more effective if done by a group of people, for example with colleagues or domain experts. The canvas collects information under nine areas critical to an organization by addressing value proposition, customers, infrastructure, and finances.  The Business Model Canvas is useful for:

• Startups and entrepreneurs
• New products or services within an existing business model
• Organizations reassessing their old business model
• Alignment of plans throughout all levels of the organization
• Organizations seeking new relationships with customers, key partners, and investors
• Consultants and advisors tasked with assisting or evaluating an organization
• Businesses undertaking mergers or acquisitions

The Nine Basic Building Blocks of Business Model Canvas

The Business Model Canvas breaks your business model down into nine easily-understood blocks which show the logic of how your company intends to make money. It typically uses sticky notes to add items to your printed Business Model Canvas, in this way you can easily more the position of an item from one building block to another.

Build My Canvas with this Template

You can create your Business Model Canvas by completing the building blocks in the following order:

1.      Customer Segments – Who are the customers?

Define the different groups of people or organizations you aim to reach and serve.

• Who are the customers?
• For whom are you creating value?
• Who are your most important customers?

2.      Value Propositions – What’s compelling about the proposition?

Describe the products or services that create value for your customers.

• Why would a customer choose your company?
• What customer problem or need do you solve?
• Which products or services are offered?

3.      Channels – How are these propositions promoted, sold and delivered?

Determine how you reach your customers to deliver the value.

• How does your company reach customers?
• Which communication, distribution and sales channels are used?
• How would customers want to be reached?

4.      Customer Relationships – How do you interact with the customer through their ‘journey’?

Define which kind of relationships your company has with the customers.

• How personal is the relationship with the customer?
• What type of relationship does the customer expect?

5.      Revenue Structure – How does the business earn revenue from the value propositions?

Describe how the company generates revenues. Revenue is generated by selling your products or services or from other activities.

• For what are the customers willing to pay?
• For what are the customers currently paying?
• How do customers prefer to pay?

6.      Key Resources – What unique strategic assets must the business have to compete?

Determine the most important resources for your company. Key resources can be physical, financial, intellectual, or human.

• What resources are needed to create value or revenue?
• What resources does your company need to organize the distribution channels?
• What resources are needed to maintain customer relationships?

7.      Key Activities – What key activities the company do to deliver the value proposition?

Define the most important activities your company must perform.

• What activities are needed to maintain customer relationships?
• What activities are needed to generate value and revenue?
• What is needed to organize the distribution channels?

8.      Key Partnerships – What can the company outsource to partners so it can focus on its key activities?

Describe the suppliers and partners on which your company depends. Partnerships can be created to reduce risk or to acquire resources.

• Who are your partners and suppliers?
• Which resources are acquired from them?
• Which activities do partners perform?

9.      Cost Structure – What are the business’ major cost drivers? How are they linked to revenue?

Creating and delivering value to customers will result in costs. Determine the most important costs inherent in your business model.

• Which Key Resources are most expensive?
• Which Key Activities are most expensive?

Why use the Business Model Canvas?

A Business Model Canvas requires much less documentation than a traditional business plan. Because all the information is on a single page, updates and modifications are far easier to make. The simplified layout provides a clear picture of the organization for new employees, business partners, and potential investors.

• Identify problems that your product must solve
• Analyze competitors and market leaders to understand their strengths and weaknesses
• Find a solution for your target audience’s problems
• Identify key metrics of your success. If we speak about mobile app metrics could be the number of app installation, active users, subscribers, etc.
• Find key partners to grow the development temps
• Create a unique value proposition to make your target audience use your app instead of all alternatives
• Know who your clients are. You should know where are they located, what are they interested in, why do they want to use your product.
• Research marketing channels. This helps you to promote your app correctly.
• Determine the best revenue stream for your startup
• Identify key resources and activities.
• And, naturally, to estimate costs for all development stages of your product.

Business Model Canvas template

A Business Model Canvas template is structured as nine building blocks supporting four key elements of the organization: Value Proposition, Customers, Infrastructure, and Finances.

The nine-building blocks consist of Value Proposition, Customer Segments, Customer Relationships, Distribution Channels, Key Activities, Key Partnerships, Key Resources, Revenue Streams, and Cost Structure.

Business Model Canvas Example – Lego

LEGO has revamped the entire business model using the Canvas.  Not only did they avoid bankruptcy, but they quadrupled the revenue and brought back the love of the kids around the world.

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* LEGO Business Model Canvas. By G. Motter

* Business Model Canvas from Strategyzer.com licensed under the Creative Commons Attribution-Share Alike 3.0.

©2024 by Visual Paradigm. All rights reserved.

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Free Business Plan Template for Small Businesses (2024)

Use this free business plan template to write your business plan quickly and efficiently.

A good business plan is essential to successfully starting your business —  and the easiest way to simplify the work of writing a business plan is to start with a business plan template.

You’re already investing time and energy in refining your business model and planning your launch—there’s no need to reinvent the wheel when it comes to writing a business plan. Instead, to help build a complete and effective plan, lean on time-tested structures created by other  entrepreneurs and startups. 

Ahead, learn what it takes to create a solid business plan and download Shopify's free business plan template to get started on your dream today. 

What this free business plan template includes

• Executive summary
• Company overview
• Products or services offered
• Market analysis
• Marketing plan
• Logistics and operations plan
• Financial plan

This business plan outline is designed to ensure you’re thinking through all of the important facets of starting a new business. It’s intended to help new business owners and entrepreneurs consider the full scope of running a business and identify functional areas they may not have considered or where they may need to level up their skills as they grow.

That said, it may not include the specific details or structure preferred by a potential investor or lender. If your goal with a business plan is to secure funding , check with your target organizations—typically banks or investors—to see if they have business plan templates you can follow to maximize your chances of success.

Our free business plan template includes seven key elements typically found in the traditional business plan format:

1. Executive summary

This is a one-page summary of your whole plan, typically written after the rest of the plan is completed. The description section of your executive summary will also cover your management team, business objectives and strategy, and other background information about the brand. 

2. Company overview

This section of your business plan will answer two fundamental questions: “Who are you?” and “What do you plan to do?” Answering these questions clarifies why your company exists, what sets it apart from others, and why it’s a good investment opportunity. This section will detail the reasons for your business’s existence, its goals, and its guiding principles.

3. Products or services offered

What you sell and the most important features of your products or services. It also includes any plans for intellectual property, like patent filings or copyright. If you do market research for new product lines, it will show up in this section of your business plan.

4. Market analysis

This section includes everything from estimated market size to your target markets and competitive advantage. It’ll include a competitive analysis of your industry to address competitors’ strengths and weaknesses. Market research is an important part of ensuring you have a viable idea.

5. Marketing plan

How you intend to get the word out about your business, and what strategic decisions you’ve made about things like your pricing strategy. It also covers potential customers’ demographics, your sales plan, and your metrics and milestones for success.

6. Logistics and operations plan

Everything that needs to happen to turn your raw materials into products and get them into the hands of your customers.

7. Financial plan

It’s important to include a look at your financial projections, including both revenue and expense projections. This section includes templates for three key financial statements: an income statement, a balance sheet, and a cash-flow statement . You can also include whether or not you need a business loan and how much you’ll need.

Business plan examples

What do financial projections look like on paper? How do you write an executive summary? What should your company description include?  Business plan examples  can help answer some of these questions and transform your business idea into an actionable plan.

Professional business plan example

Inside our template, we’ve filled out a sample business plan featuring a fictional ecommerce business . 

The sample is set up to help you get a sense of each section and understand how they apply to the planning and evaluation stages of a business plan. If you’re looking for funding, this example won’t be a complete or formal look at business plans, but it will give you a great place to start and notes about where to expand.

Lean business plan example

A lean business plan format is a shortened version of your more detailed business plan. It’s helpful when modifying your plan for a specific audience, like investors or new hires. 

Also known as a one-page business plan, it includes only the most important, need-to-know information, such as:

• Company description
• Key members of your team
• Customer segments

💡 Tip: For a step-by-step guide to creating a lean business plan (including a sample business plan), read our guide on how to create a lean business plan .

Benefits of writing a solid business plan

It’s tempting to dive right into execution when you’re excited about a new business or side project, but taking the time to write a thorough business plan and get your thoughts on paper allows you to do a number of beneficial things:

• Test the viability of your business idea. Whether you’ve got one business idea or many, business plans can make an idea more tangible, helping you see if it’s truly viable and ensure you’ve found a target market. 
• Plan for your next phase. Whether your goal is to start a new business or scale an existing business to the next level, a business plan can help you understand what needs to happen and identify gaps to address.
• Clarify marketing strategy, goals, and tactics. Writing a business plan can show you the actionable next steps to take on a big, abstract idea. It can also help you narrow your strategy and identify clear-cut tactics that will support it.
• Scope the necessary work. Without a concrete plan, cost overruns and delays are all but certain. A business plan can help you see the full scope of work to be done and adjust your investment of time and money accordingly.
• Hire and build partnerships. When you need buy-in from potential employees and business partners, especially in the early stages of your business, a clearly written business plan is one of the best tools at your disposal. A business plan provides a refined look at your goals for the business, letting partners judge for themselves whether or not they agree with your vision.
• Secure funds. Seeking financing for your business—whether from venture capital, financial institutions, or Shopify Capital —is one of the most common reasons to create a business plan.

Why you should you use a template for a business plan

A business plan can be as informal or formal as your situation calls for, but even if you’re a fan of the back-of-the-napkin approach to planning, there are some key benefits to starting your plan from an existing outline or simple business plan template.

No blank-page paralysis

A blank page can be intimidating to even the most seasoned writers. Using an established business planning process and template can help you get past the inertia of starting your business plan, and it allows you to skip the work of building an outline from scratch. You can always adjust a template to suit your needs.

Guidance on what to include in each section

If you’ve never sat through a business class, you might never have created a SWOT analysis or financial projections. Templates that offer guidance—in plain language—about how to fill in each section can help you navigate sometimes-daunting business jargon and create a complete and effective plan.

Knowing you’ve considered every section

In some cases, you may not need to complete every section of a startup business plan template, but its initial structure shows you you’re choosing to omit a section as opposed to forgetting to include it in the first place.

Tips for creating a successful business plan

There are some high-level strategic guidelines beyond the advice included in this free business plan template that can help you write an effective, complete plan while minimizing busywork.

Understand the audience for your plan

If you’re writing a business plan for yourself in order to get clarity on your ideas and your industry as a whole, you may not need to include the same level of detail or polish you would with a business plan you want to send to potential investors. Knowing who will read your plan will help you decide how much time to spend on it.

Know your goals

Understanding the goals of your plan can help you set the right scope. If your goal is to use the plan as a roadmap for growth, you may invest more time in it than if your goal is to understand the competitive landscape of a new industry.

Take it step by step

Writing a 10- to 15-page document can feel daunting, so try to tackle one section at a time. Select a couple of sections you feel most confident writing and start there—you can start on the next few sections once those are complete. Jot down bullet-point notes in each section before you start writing to organize your thoughts and streamline the writing process.

Maximize your business planning efforts

Planning is key to the financial success of any type of business , whether you’re a startup, non-profit, or corporation.

To make sure your efforts are focused on the highest-value parts of your own business planning, like clarifying your goals, setting a strategy, and understanding the target market and competitive landscape, lean on a business plan outline to handle the structure and format for you. Even if you eventually omit sections, you’ll save yourself time and energy by starting with a framework already in place.

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Business plan template FAQ

What is the purpose of a business plan.

The purpose of your business plan is to describe a new business opportunity or an existing one. It clarifies the business strategy, marketing plan, financial forecasts, potential providers, and more information about the company.

How do I write a simple business plan?

• Choose a business plan format, such as a traditional or a one-page business plan. 
• Find a business plan template.
• Read through a business plan sample.
• Fill in the sections of your business plan.

What is the best business plan template?

If you need help writing a business plan, Shopify’s template is one of the most beginner-friendly options you’ll find. It’s comprehensive, well-written, and helps you fill out every section.

What are the 5 essential parts of a business plan?

The five essential parts of a traditional business plan include:

• Executive summary: This is a brief overview of the business plan, summarizing the key points and highlighting the main points of the plan.
• Business description: This section outlines the business concept and how it will be executed.
• Market analysis: This section provides an in-depth look at the target market and how the business will compete in the marketplace.
• Financial plan: This section details the financial projections for the business, including sales forecasts, capital requirements, and a break-even analysis.
• Management and organization: This section describes the management team and the organizational structure of the business.

Are there any free business plan templates?

There are several free templates for business plans for small business owners available online, including Shopify’s own version. Download a copy for your business.

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