If you’re working at or have founded a startup you’ll likely come across the term Business Model Canvas. If you’re unfamiliar with the term, a business model canvas is a single-page reference that can work as a compass for a business, created by Alexander Osterwalder and first referenced in his work on Business Model Ontology in 2008. It’s a good “first step” in figuring out everything you’ll need to get the ball rolling with your venture, and is an excellent alternative (at least at first) to a traditional business plan.

A business model canvas gets you thinking about all of the different components that will make up your business. It’s easy to get excited or caught up in the bigger picture and lose sight of the specific things you’ll need to tackle to be successful, but after completing this exercise you should have a much better understanding of which actions are required to move you forward towards validation.

If you’re a startup in Calgary, one of the more persuasive perks to building a business model canvas is that it could potentially help you secure grant funding. The Calgary Innovation Coalition (CIC) is a regional innovation network (RIN) that provides resources to support entrepreneurs. Early-stage technology companies can submit a copy of their business model canvas to receive coaching, feedback, and other resources that can help move their business forward.

Business Model Canvas Template
Free Downloadable Business Model Canvas Template from Strategyzer, available at https://strategyzer.com/canvas/business-model-canvas

 

The business model canvas is divided up into nine sections that fall into three broader categories: feasibility, desirability, and viability.

Feasibility in boils down to a single, quintessential question: what do you need to make this happen? In this part of the business model canvas, you’ll take a look at the partners, activities, and resources required to get your business up and running.

Determining the desirability of your business requires asking yourself some difficult question about exactly what you’re offering and who you’re offering it to. You’ll look at the relationship between your value proposition and how it will fit into the lives of the people that make up your target market. The desirability of your business will impact your marketing decisions including pricing, placement, and promotional strategy.

The viability component of the business model canvas is often referred to as “the sanity test”. This is the part of the canvas where you take a look at your costs and revenue streams for your business. If your costs greatly outweigh your likely revenue then it would be, to be blunt, insane to start this business.

 

Building Your Business Model Canvas

While there’s no wrong way to fill out the business model canvas, there are definitely “easier” ways of doing it. To keep things flowing more linearly, we’ve reworked the order of the business model canvas a little. If you get caught up in something just keep moving forward and come back to fill in the blanks later.

Value Proposition

While the entire business model canvas is lean and only covers the essentials, there’s no denying that the value proposition is the keystone. This is the place to make that big bold statement about what you’re offering, what it will do to satisfy your customers’ needs, and what differentiates you from your competitors. It should be straight-forward, jargon-free, and to-the-point. We also want to put heavy emphasis on the word value here. This is where you highlight the value that your product and its features will provide to users, not a list of the specific features. Think more along the lines of what it will accomplish rather than how it will accomplish it.

 

Market Segments

Create market segments by considering the commonalities between your potential users and grouping them accordingly. While your intuition may be to keep your segments as large as possible, the more specific you get, the more likely you will be able to build and market an appealing product. From here a good question to ask is: if I could capture only one of these market segments, which one would be most important?

 

Channels

Once you know who your customers are and how your product will benefit them, next consider how you will deliver it to them. Distribution channels for digital products are typically more straightforward than physical products, but there are still several things to consider. Building a website to provide both information and an opportunity to purchase your product or service is a given, but choosing other distribution channels may require a little more thought. For example, if you’re building a mobile app you may have to choose between building for iOS or Android. Other distribution channels you may want to consider include industry service providers that can direct customers to your product. A classic example of this is online travel agents that can recommend an airline or hotel.

How you market your product may change from one distribution channel to the next. If you are selling primarily online through your website then perhaps online ads through AdWords or social media may be your best bet. A product that is more hands-on may benefit from live demos or conferences where users can test it for themselves. Whatever your distribution channels, be sure to consider how you will get your product to your end user.

 

Customer Relationships

Depending on your product or service your target customers may have certain expectations in terms of the relationship you’ll work to build with them. According to Strategyzer “Your company should clarify the type of relationship it wants to establish with each Customer Segment. Relationships can range from personal to automated, from transactional to long-term, and can aim to acquire customers, retain customers, or boost sales (upselling). The type of Customer Relationships you put in place deeply influence the overall customer experience.” Whatever types of customer relationships you integrate into your business you should always consider and account for the costs associated.

Startup Calgary Business Model Canvas Workshop
Startup Calgary Business Model Canvas Workshop

Key Activities

When tackling the “key activities” component of your business model canvas look to define the most important actions required to deliver on your value proposition.  Consider the business activities required to build and support customer relationships, access revenue streams, as well as anything else that will impact your ability to get your product or service to your target market.

 

Key Resources

Something you’ll quickly learn when building a business is that pretty much everything you’re looking to do will eat up resources. If you plan to do everything yourself it’ll take up your valuable (and increasingly limited) time. Once you begin looking to outsource you’ll see that hiring great help is expensive. Either way, to deliver your value proposition it’s important to be realistic and prepared when it comes to prioritizing resources. If something isn’t essential consider putting it on the backburner until it is, or when you’re in a position where you can allocate resources for nonessential things.

 

Key Partners

We’ve all heard that old idiom that it takes a village to raise a child, and the same can be said about running a business. Whether you’re talking about hiring talent or seeking investors, partnerships are essential to your business. In this part of the business model canvas, you should consider who these partners will be, as well as their motivations. Will you need to pay them? Give them equity? These are things you’ll need to think about.

 

Cost Structure

There’s a reason they call the viability part of the business model canvas the sanity test! For cost structure, you’ll take a close look at what you consider to be the highest costs for your business, as well as take a look at which resources and activities will cost you the most. There’s no secret number to multiply this by to get closer to the actual amount you should look to spend, it’s typically same to assume that you’ll end up with more costs than you anticipate, not less.

 

Revenue Streams

We know that we already gave a shout out to value proposition as being the most important part of the business model canvas, but revenue streams are a close second! Let’s face it, if you don’t have adequate revenue then this business of yours isn’t going to work out. The first thing that you’ll need to consider when determining your revenue streams is how much you think your customers will pay for what you’re offering. It’s also possible that you have ideas for future developments that can bring in additional revenue: write those down too!

Need Some Help?

What happens if you find yourself feeling less than confident about some of the things you’ve put into certain sections of your business model canvas? First, just relax. Yes, all of the stuff included is essential to your business, but it’s okay if you don’t have all of the best answers right away. There are plenty of online resources, such as Strategyzer, that help entrepreneurs work through their business model canvas.

If you prefer more of an offline approach and live near Calgary you’ll definitely want to check out the Business Model Canvas Workshops put on by Startup Calgary. Register early, because Calgary is jam-packed with enthusiastic entrepreneurs and these workshops usually fill up!