BUSINESS MODELS

Business Model Canvas

A business model Canvas is a management tool with elements describing a company’s business model. A business model describes the rationale of how an organization creates, delivers and captures value. Every business has its own unique model it follows. With growing need a uniform template was established on which all businesses today base their models. This is what is referred to as the Business Model Canvas. The BMC simply allows you to share your business model with anyone the easiest way possible.

Why use a business model canvas

• It breaks down your business model into a more understandable format so you can recognize and act on necessary areas that need improvement
• It reveals clear paths on which to build organizational innovation strategy
• It helps communicate your goals to your team
• It helps align focus.

Checkout: Free Sample Business Plans

The canvas is made up of 9 blocks which represent the major areas of a business; customers, value, infrastructure and viability.

Customer Segments

The key to ensuring that the product and its features meet customers is understanding the market. Customer segmentation allows a business to understand who its customers are, their needs, future prospects, etc. As a business you can go ahead and choose a segment whose needs you can satisfy fully depending on resource constraints and other factors?

Who are your customers? Are u targeting the;

• General market (Mass Market)
• A Small group (Niche Market)
• Multiple groups of similar individuals (Segmented)
• Etc.

Value prepositions

After establishing your market, your next concern should be the problem you are trying to solve with this value you are providing. Why is your product valuable to the above segments? Does your product or service improve performance, does it get the job done, does it stand out in design, is it of lower price, etc. The value is usually something unique that customers have to relate too or remember after interacting with your business.

Checkout: Free business model canvas examples below. Continue reading

Channels

After establishing the value and the segments, the business now has to connect these two. How your intended value reaches your customer segments is through a channel. Is it an in person sales force, do you own distribution stores, do you sale online, whole sale, etc. Evaluate the pros and cons of each of these channels and choose one appropriate for your business.

Customer Relationships

Now that blocks 1, 2 and 3 are linked, your next area of concern should be how to keep this channel connected. This is done through establishing customer relationships. How do you relate to your customers?

This could be;

•  Self-service: provides for customers to serve themselves.
•  Personal assistance: provides for the business employees providing assistance.
•  Automated services: provides for computerized self-service based on data.
•  Etc.

Priority should be given to establishing loyal customer relationships who tend to yield steady revenue year in year out. The value of a customer is usually evaluated basing on how much he/she spends on the organizations products/services and how often he/she utilizes them.

Revenue Streams

A revenue stream is simply a methodology through which a business gets its revenue from the customer segment. How do customers purchase your products? Or how to you get money from them? This can be in any of the following ways:

•  Asset purchase: exchanging ownership of a product.
•  Usage fee: charging a fee for product or service usage
•  Subscription: charging for timely usage/consistent usage e.g. pay-tv businesses
• Renting: charging temporary exclusive access for a time period.
•  Licensing: charging the use of intellectual property.
• Etc.

Key resources

What resources do you need in place for your business to work or to put the business model into action? These could be Human i.e. key people involved in business activities, Physical assets like facilities, buildings, vehicles, etc. List all the resources your business model depends on and the most important will be the ones to focus on.

Key Activities

Consider the most important activities that have to occur in order for your business model to work. Key activities move all the way from making the business’ value preposition to the revenue stream i.e. from production to designing to delivery of the value. What actions must your company take to operate successfully?

Key Partnerships

Partnerships are a network of people who complement each other in helping the business provide its value and extract revenue. Who are your suppliers and service providers? What partnerships has your business forged? These could be; strategic alliances, competition, buyer supplier, joint ventures. Etc. A business needs to establish its relationships, strengthen bonds and look for future partnerships to ensure continuous existence and growth.

Cost Structure

A business can be Value-driven i.e. focused on providing maximum value to customers or Cost-driven focusing on reducing costs. An entrepreneur should establish all costs involved and establish plans for each of the costs. What are your most important costs? These costs can be; fixed costs that don’t change or variable costs that vary with output.

Below are links to some examples of practical business model canvases. You can view them and make one tailored for your business. If you need any further assistance or questions specific to your business, contact us at service4businessweknow@gmail.com or simply use our contact us page here

Business Model Canvas Examples

• Retail business
• Local service provider
• Local manufacturer

Conclusion

The above sectors should be the main focus of your business to survive and ensure continuous growth. Always remember: a well-designed/detailed business model canvas alone isn’t sufficient for your business, you need to put it into action and ensure every business personnel understands each of your listed areas accurately.

This above article is written by Arthur Kakande and is subject to criticisms, suggestions, or any kind of compliments to help improve it. drop us an email on service4businessweknow@gmail.com with BMC as the subject and your submissions will be much appreciated.