Canvas Business Model

Business Model, what it is and how to develop it

Let's see how we transform an idea of ​​creating a company or a business project into a business model that is coherent and that covers all aspects of the business. Example with the Canvas business model.

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What is a Business Model

The business model is a simple, practical and very visual document that intends to give an integrated view of the creation of the company or business project.

This is one of the activities that the potential entrepreneur and enthusiast you have to be aware of it and do it, preferably with the help of someone with experience.

Create and Discuss the Business Model
Create and Discuss the Business Model

It starts by defining which product or service we intend to implement and what kind of value we can create and deliver to our customers.

We must identify the entire process up to the sale to the customer, defining, discussing and evaluating:

  • Suppliers, competition and key partners,
  • How do we get products or services to the customer,
  • What type of customers and, if there are several types of customers, what are the characteristics of each segment,
  • What activities are key in the process,
  • What key resources do we have or what we need,
  • As we are going to publicize the idea,
  • How we will interact with customers, first to attract them and then to retain them.
  • What value proposition do we add, in relation to the competition,
Text indicating ADVERTISING

Finally, we need to aggregate these ideas and start to quantify how much we are going to sell and what the costs will be and what will be materialized in the Business Plan.

The Business Model and the Business Plan

While the business model is about what the company or project does, the business plan is about how the company will do it.

Business model is a document that shows in a simple way the idea of ​​creating a company or project.

It shows how value is created and delivered to customers from this idea or proposal to implement the idea.

The business model forces us to identify the resources and skills we have and what we need to obtain to ensure that the processes and activities we have identified can be executed well.

How to create the Business Model

The elaboration of the business model depends on the sector of activity and the experience of each of the actors.

We can make lists, for example, of suppliers, possible partners, competitors, key activities that have been identified (opening, advertising, etc.).

Text indicating ADVERTISING

In this analysis we can also find some critical success factors, for example in relation to the competition, knowing what type of similar products it offers, what prices, promotions, use of means of dissemination, namely social networks, internet sales and eventually having access to the accounts of some competing companies, through companies that provide this kind of information.

We can also use popular models such as the “Canvas” Model or the “Porter Value Chain” Model.

Value Chain
Value Chain

The best-known methodology to support the development of the business model is Canvas, created by Alex Osterwalder and Yves Pigneu and that helps to have a more complete view of a business.

The Business Model Canvas frame contains the following nine parameters

  • Value offer
  • customer segment
  • key activities
  • key resources
  • Sources of revenue
  • Partnerships
  • Customer relationship
  • distribution channels
  • Cost structure

On the other hand, the business plan is a more detailed document that presents economic and financial analyses, market analysis and therefore supports the viability of the business.

The process to prepare the business plan, considering that we now have to quantify the value of the various aspects of the business, will help us to integrate all the ideas and verify the impact of the strategic decisions. It may also raise questions that will require a new reassessment of some of these points, in order to proceed.

When the business plan is considered completed becomes the company's guide. Once the objectives have been defined, throughout the life of the company it is possible to verify whether these objectives are being met, what deviations are there and whether it is necessary to redefine the strategy or, simply, adjust some parameters and proceed.

It is, therefore, the company's management planning and control tool, par excellence.

Canvas Business Model

You can use a document with the nine parameters and the structure that appears.

Canvas Business Model
Canvas Business Model

Value offer

Start with the middle column, to explain what you are going to do and what value you offer to customers in order to win and retain them. What kind of problem are we helping our customers to solve? What kind of needs are we able to satisfy?

Customer Segmentation

Which customers do we intend to serve? Who are our most important customers? Are there any specific profiles in these customers? How are they grouped or associated? Where are they located? Is there a common need?

Key Activities

What are the key activities that the company has to carry out to make the business model work? Are they linked to distribution channels, or to customer relationships? Do they have an impact on revenue?

Key Resources

What are the most important features for the business model to work? Are they linked to distribution channels, or to customer relationships? Do they have an impact on revenue?

Revenue Sources

What is the price and how will we receive this value from our customers? What price are our customers willing to pay? What kind of product or service are customers paying for today? How are they paying today? How would they like to pay? How much each source of revenue contributes to the total value of the earnings you want to earn.

Key Partnerships

Who are the most important suppliers and partners that will help the company to function? What key resources are we acquiring from these partners? What key activities are these partners carrying out?

Relationship with customers

What kind of relationship do our customers expect us to establish and maintain with them? What types of relationships are we going to establish with customers to win and retain them?

Distribution Channels

How will the company communicate with customers to deliver the Value Proposition?

Cost Structure

What are the most significant costs involved in operating the Business Model? What are the most expensive key features? What are the most expensive key activities in the operation?

Finally, this entire process can and must be improved, using discussions with people from different areas who can contribute to enriching and enhancing the business model.

Invite people with a profile like potential customers to watch demos, proposals or prototypes and ask for feedback.

Business Models that might interest you

Franchise or Franchising

It is a business model in which the parent company or franchisor, through a contract with the franchised company, grants the right to use its knowledge, brand, products, services, technologies, management methods in exchange for financial compensation.

Examples such as McDonald's, Antarte, Burguer King, Century 21, Swarovski, Parrot without Feathers.

Anual Subscription

The subscription or recurring model, customers pay for the service monthly or other periodicity.

This model works very well for businesses that offer a continuous service or product, such as entertainment services, Spotify, Netflix or newspaper reading services such as Expresso, Público, mentoring model for professionals from different areas or the subscription box model in which periodically receives a box or other format with exclusive products, books, wines, stationery.

Freemium

It is a business model in which a product or service is offered for free, but for which you have to pay a fee to obtain additional resources. Free is a “free” product or service and additional features are “premium”.

Very common in software and web services.

Examples like Skype, Mailchimp, Dropbox, Zapier, OneDrive, Google Drive.

bait and hook

It is a model in which a product or service is offered at a very low price (bait), but which forces the company to obtain a complementary product or service with a higher profit margin (hook). One product or service does not work without the other.

Example of espresso machines where the capsules only work in that machine. Printers and ink cartridges, water dispenser (bait) and water bottles (hook).

Market Place

In this Marketplace model, a smaller store rents the virtual space of a larger store and, in return, gives it a percentage of sales.

Example like Uber, AirBnB, Amazon.

social business

For the entrepreneur who also wants to be socially and environmentally supportive, this can be a form of business.

These are companies that, in addition to their image, are concerned with generating positive impacts for the world.

Examples, DoctorGummy, MEL-Mulheres Empreendedoras da Lusofonia.

SaaS, Software as a Service, Software as a Service

Software as a Service is a way of distributing and marketing software.

In this model, the software supplier offers, in addition to the software, all the necessary structure for this service, such as servers, backup mechanisms, security precautions. The customer uses the service via the Internet and pays a fee for the service.

For example, Zoom, Camtasia, Doodly.

We can now start to work out the business plan.

The Business Plan
The Business Plan

Business model

Sheet to use as a Business Model, based on the "Business Model Canvas".

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