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Startup development

How to boost startup with Business Model Canvas

by Ehsan Jahandarpour, from Ehsan Jahandarpour, on Apr 26
Learn how did companies like Apple, Skype, Google, Lego, and Air bnb boosted their startups using Business Model Canvas - A Must Have Guide for Entrepreneurs!
Business model generation cover book


"Business Model Canvas is there to help you grow your business. The moment you overlook your Business Model, you'd be missing the Big Picture..."

... especially if you are of the opinion that having a great idea, cool product and money are the most important success factors of your startup!

Let me give you a metaphorical example to understand why business model is that important and what is a business model.

Imagine you are driving in a dark night in the desert. Although your car's tank is full of petrol [it means you have enough capital to start your business].

You may also own a good Car to drive through the desert [This can be translated to a good business idea or a decent product], and indeed you have a destination in mind to reach [and this is your startup's vision], Your chance of success is not that high.

What am I talking about?

Bear with me for a moment and I will help you see a bigger picture on how to create a business model, but first, let me tell you why did I say your chance of success is not high.

All 3 essential elements that e have seen above are critical to the success of your startup, however, to cross the desert [or metaphorically, how to launch your startup and grow your business] you need a Compass for your journey {obviously, these days digital GPS navigator has replaced the Compass}

Respectively for your business to grow you need a set of right startup tools to show you the best strategies on how to achieve your startup's vision & mission.

Your business model is the tool that enables you to plan for your business, measure your progress and craft the strategies to adapt to market and become a successful entrepreneur.

How to develop a business model?

Your success depends heavily on your startup's business model. Although you need to use the best startup resources and groom yourself to have the most significant entrepreneurial skills, your business model canvas template drives your business in difficult situations.

You might be thinking what can help grow my business?

Well, in this article, I will walk you through the very important steps you need to take in order to develop your business Model based on Business Model Canvas, STEP By STEP! This is a very super easy to implement and helps you have some amazing results.

How to write a lean business model canvas to boost your business?

Firstly, You need to understand the difference between the types of business models. Unlike traditional business model examples, the new business model generation IS NOT A LENGTHY DOCUMENT that takes days to write and after you're finished creating a business model, rather surprisingly no one can understand what it is about or how feasible your business plan is.

Instead you gotta focus on growth, the right business pattern and simplifying the entire process of launching your business. Lean business model, which I will get through it in a moment, is all about taking your business idea and turning it to a successful business.

AVOID using traditional business model examples were designed for stable markets and could have been included in corporate strategies of multi million dollar companies with an established network of customers when the market has literally no fluctuation. When you make a model strategy using your market research results, your You ought to make it as lean as possible to be able to adapt to market demands.

You can start with a basic business model and have agility in mind to iterate your business model and implement your business plan successfully. 

In other words, the era of managing and launching business using the traditional corporate strategy model is over. In order to win the startup competition, you'd need to make sure that you have all 9 building blocks of the business model generation pdf (listed below) in control.

It's time to get to the details of creating a business model and help you understand how to write a business plan based on business model canvas. the follow 9 bullet points are the most important elements of a business plan written using business model canvas.

  1. Customer Segment (CS)

  2. Value Proposition (VP)

  3. Channels (CH)

  4. Customer Relationships (CR)

  5. Revenue Streams (R$)

  6. Key Resources (KR)

  7. Key Activities (KA)

  8. Key Partnerships (KP)

  9. Cost Structure (C$)

Whether you use business model canvas or any other method, you need to take the following steps to starting your own business and differentiate your startup from others: Let me break down the effective business plan,  STEP BY STEP:

STEP 1: who are your target customers? (CS)

The first step of writing an effective business plan is to begin with identifying who are our customers. Put the business model canvas template on the wall and gather the team together. At this stage of identifying prospective customers, your team and you should focus on how to provide value to customers.

Here is the trick: you need to ask yourself not only once but as many times as required until you really figure out who is your target market.

Identifying your customers helps you in many ways such as implementing the right marketing strategy with higher ROI, focusing on right partnership and channels to connect with suppliers and customers, spending more time on key activities and obviously as a result, having better revenue from your revenue streams.

It's important to call your decision making team and the key stakeholders together and pass them a set of sticky notes. Ask your team to write down their answers to the following questions on the sticky notes and place them on the customer segments of your business model canvas template on the wall.

  • Identifying who are our customers
  • Who are your target customers in this niche and the other niches
  • How to provide value to customers
  • How to identify potential customers for your startup
  • What are your customer's needs and expectations
  • What are your different target markets you should penetrate
  • Define your target customer profile

    Once you have written your answers to "who is your customer", you should drill down and categorize your customers based on the following criteria:
  • Gender,

  • Age,

  • Location,

  • Earning,

  • Spending habit,

  • Marital status,

  • Interests

  • and many more factors, indeed.

The more you narrow down your target market in contents of your business plan and the more you specify your customer segment, the better your chance of getting your business started successfully; Of course, we will get to the process of analysing the result of your market research.

Tip: While working on your customer segment and defining your business model, make sure you don't stuck in the details and try to keep it high level at the beginning, later on you can easily Pivot, iterate or continue with your business model canvas and fine tune it.

All in all, the output of this step should be your defined Customer Segment, also known as CS.

STEP 2: defining your value proposition: what's your customer's Pain? (VP)

In simple terms your value proposition canvas should enable entrepreneurs to solve problems, challenges & customer's needs. The second step is to learn how to define value proposition.

You can obviously use the probing techniques used in Prince Method Sales strategy & find out your customers pain points and figure out how should your startup's value proposition design look like.

Don't forget: The customer value propositions in business markets should be all about adding value to what your potential customer's life. If you are running a B2C business, conducting a short survey using the free startup tools and asking your potential customers in your target market about what they want is absolutely beneficial.

Use the Lean startup method and make sure not to fall into the trap of perfecting your product; instead, listen to your customer's feedback and adapt your business mode accordingly. The Value Proposition Canvas is organized as follows; 

The Value Proposition Canvas helps you to challenge, design, and build your company’s Value Proposition in a structured and thoughtful way, just like the Business Model Canvas, it assists you in the business model design process.

Remember, Your startup exists to add value to your customer!

What comes out of this process is your Value proposition, VP. When defining your value proposition always remember that Values may be quantitative (e.g. price, speed of service) or qualitative (e.g. design, customer experience).

Ask yourself and the team "What exactly are you offering and what pain are you addressing?". In your customer's eyes, how you can help people with your business matters the most. Here are a few amazing Examples:

  • If your service is mostly on technology and/or is satisfying entirely new needs, like when telephone was invented, Your value proposition can be about innovation and the benefits that people will enjoy from your service/product.
  • You can focus on Performance if your offering adds value by enhancing an existing product, technology or service.
  • Your value proposition may also be around price, something that low cost airlines do.

STEP 3: How to reach customers effectively: Identifying Channels, and Customer Relationships? (CH) & (CR)

Once you're done with identifying your customer and clearly outlined 'what's your value proposition?", your next step is to find channels of reaching out to customers.

You might be thinking "How to acquire new customers" or "What are the channels to reach customers"? - Would it be better to reach out to customers through channel partners, or you should choose to implement direct marketing strategies? The definitive guide for startup business plan & patterns gives you more clarity on those decisions as it varies from business pattern to another.

At this stage you need to define your customer relationship methods, partnerships, supply chain and how your startup works with both suppliers and customers. Try to answer the following questions and place them all on your business plan template which is crafted based on business model canvas.

  • What are our channels to reach customers
  • How to reach customers online and using social communities
  • What are some good examples of building relationship customer in our industry
  • What ways do our customers prefer to be contacted
  • What would be our strategies to improve customer service
  • How can we innovate in building customer relationships

The more you shape these channels the better your position is in promoting your value proposition. Business Model canvas allows you to iterate in every step, and change the channels you think is not suitable at any point of time until you reach a suitable solution.

You can use these information to fill in the Channels CH, and Customer Relationships CR in your business model canvas template. Depending on the nature of your business you can have either a direct channel or an indirect channel. Both customer relationship channels have pros and cons and need to be clearly evaluated before you decide how to reach your customers.

For example, Owned Channels are considered direct i.e. hiring an in-house sales team or setting up your your own web site. Reaching out to customers can be indirect too, such as working with retail stores owned or operated by your company. Other methods such as wholesale distribution, retail, or partner-owned web sites are considered as indirect channels too.

STEP 4: Define your revenue stream and cost structure: Where to Spend Money & How to generate revenue? (R$) &(C$)

Obviously, the main goal of setting up a business is to make happy customers. The main reason for that is that having happy customers means they are going to pay for your service and once it happens regularly your business can sustain and grow faster.

This principle applies to all types of business models, from non-profit to commercial businesses, and it does not really matter whether you are in fin-tech, Pharmaceutical, software or hardware, or low tech or high tech business.

At this stage, you'd be concentrating on two important fields: "Business cost saving ideas" & "How to generate more revenue". To address this question you need to understand "What are the main revenue streams of your business?" in your business plan In other words, how does your startup help you make money.

Try not to over complicate it. In fact the The less revenue stream you have, the easier you can manage it. Your revenue stream is influenced by 2 important factors

  1. Your actual pricing
  2. Projected Customer lifetime

You gotta be as specific as possible. In fact many entrepreneurs need to practice and iterate their business model to land on the right revenue stream. For example, a challenge that many startups have is that "How do I price my product when it is not complete yet"

Here is the truth: Your Customers only care about their problems and challenges, not your offering!

Is that tough to digest, yes, but it is the truth that help you become a successful entrepreneur. Your revenue stream and pricing model should be designed based on the fact that you're solving your customer's problems NOT HOW MUCH COST DO YOU INCUR TO BUILD YOUR PRODUCT.

The next step towards defining your revenue stream would be to estimate your customer lifetime. There is no definite customer life time for any business and that's normal. Here is why: Your customers either condemn your product that mush that they don't want to use it anymore and they leave, or and they are so in love with your offering that they leave after they solved their problem with the help of your product. Perhaps this LTV case study by Kiss metrics helps you understand it better. below is an snapshot of it.

Depending on your business pattern, your customer lifetime may change. For example the lifetime of your customer changes from the cases where you use "Bait & hook" business strategy to generate recurring business revenue to another strategy like multi sided business where your revenue comes from attracting more free customers to influence the sponsors.

At the same time, you should Identify the costs that you need to manage in order to keep the business in shape and make your startup successful. Try to have a conservative estimation.

In the meantime find out what are the main sources of cost and expenses you have to run your own business. Is it infrastructure? Branding? people and training? equipment and hardware? or any other thing.

List down all your finding in the 2 bottom boxes of your business model generation template as step 4 helps you complete your Revenue Stream R$, and Cost Structure C$.

STEP 5: Defining key resources, key activities, and key partnership: Who is responsible for what? (KP) , (KA) & (KR)

Last but not least is obviously about defining key resources, key partners and Key activities of your business model canvas.

Key activities are considered the most crucial things you need to do in order to run your startup successfully. These activities could should be aligned with your business model and patterns.

For instance, if your business plan suggests that you should sell your product or service through your channel partners, then one key activity would be "Channel partner Management" If your startup is a product-driven business, then performing constant market research using the right startup tools should be added to your tasks as it helps you learn about your customers, trends, technology, etc and build better products.

Another example of key activity I can give you is for companies who are in ICT and technology startups. In case you're offering bunch of services to your customers who are using your ICT service, then achieving your SLA (service level agreement) through outstanding maintenance of your servers is essential, probably keeping the infrastructure up and running could be a key activity.

In a nutshell you ought to come to a conclusion about "what partnership you need to establish and with whom?", and "what key activities you should focus on to get the business running", and lastly "what resources and skill sets do you need to have on-board to drive your startup towards success". This way, you'd know who should exactly do what, and you can clearly monitor the results and improve whenever necessary.

The result of step 5 is 3 important components of your business model canvas: Key Partners KP, Key Activities KA, Key Resources KR. 

Tips on how to use Business Model Canvas?

Creating your business plan based on business model canvas is very ease since you don't need any special tools to use.

Simply Business Model Canvas. Simply print the business model canvas template on an A2 size paper and place it on the wall and follow the steps I've explained above. Remember: What you do and how you work with business model canvas matters:

Some Practical Techniques to work with business model canvas.

  • Use business model canvas and get everyone on the same page. Try to make them united by visually showing the team both the big picture, and indeed the importance of their role in achieving success in the business.
  • Make sure that your team think holistically about the business. You should not get stuck in details, especially in the first versions of your business model.
  • Use business model canvas to create a common language in your startup. Since everyone comes from different background, they are used to their way of analysing things and  interpreting the priorities. Use business modal canvas and stick to visual techniques and simplify things as much as possible. Every one should have the same understanding about your company's vision.

As soon as you finished your first draft of your business model canvas, you should go out and start testing your business model.

This is the fact, What you think about your customer's need might not be what they actually want. Start testing every components of your business model. You can begin by asking your potential customers about what they want to have. how much are they willing to pay for what you can offer.

Knowing that, not only helps you know the market better, it also helps you make better decisions about your revenue streams and your key activities. Business model canvas enables your business to adapt to market by iterating as many time as you can. Come back to the office once you have the market data and know more about your customers and start changing the 9 elements of your business model canvas.

Then start testing that again. In the next Module, I will be helping you learn the successful business patterns that you can follow to take your startup to a different level using business model canvas.

Now, it's your turn. Feel free to comment below and let me know your opinion about this article and business model canvas in general. Have you used it before and what results have you achieved? and what would you love to read more about.

It's not finished yet...

Drop a comment below and let me know what you think about the article. You can also learn more about business patterns and business models here. in case you need some free and paid startup tools to work with you can refer to this list of startup resources.

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