When my wife and I decided to start a side business from our kitchen table, I wasn’t sure where to start. We had a great concept and several pages of disorganized notes, but we lacked the clarity we needed to effectively prioritize our efforts.
That’s when I discovered the Business Model Canvas.
Before we go any further, let me quickly clarify the difference between a business plan and a Business Model Canvas.
Business plan: A detailed projection of what your company hopes to achieve and how it hopes to achieve it. When I say detailed, I mean it. The SBA says that a business plan should typically be between 30 and 50 pages long. The dear wife and I had no interest in writing a novella before starting our business, so we knew we weren’t going to do this.
Business Model Canvas: An easy-to-digest one-page document that succinctly summarizes a testable hypothesis of how your business should work based on the best information you currently have.
At that point, we weren't sure how our business would actually look once it was up and running. We had some ideas, but a lot of them could be wrong. By writing down just the essentials, we made it much easier to make changes on the fly as we tested our initial assumptions.
When I first filled out the canvas, I used the one from Strategyzer (here’s a great video from them explaining the canvas). Later on, I migrated the canvas into Lucidchart to make it easier for me and my wife to edit, add notes in real time, and customize it to better fit our needs. To start your own canvas, try out the template I built in Lucidchart.
Filling out the canvas is quick and painless, and it should give you a lot of clarity. To demonstrate, imagine that a seventh-grader named Timmy wants to start a neighborhood lawn mowing business over the summer. His Business Model Canvas might look something like this:
To start filling out your canvas, I’d suggest starting with the Value Proposition and then proceeding in the order outlined below. If you’re starting a new business from scratch like we were, don’t worry too much about the details. The whole process shouldn’t take more than 30 minutes the first time around. Just open up the template and follow along.
The Value Proposition: What’s your mission? What problem are you going to solve, and how are you going to solve it? This value proposition should be easily communicated in a single sentence, and it should inform everything you do. I’d suggest applying the SUCCESS acronym from the book Made to Stick, of which I am a huge fan, here.
Market & Customer Segments: Who could really use the solution you’re offering? If there are multiple groups, list them all out.
Channels: How are the people who need your solution going to buy it? Take a look at your customer segments. Where do they spend money right now? Try to make it as easy as possible for a customer to say “yes” to buying your solution.
Customer Relationships: How do you communicate and build rapport with your customers throughout their journey? How and where do your customers like to communicate? Every communication should drive home the problem you solve and why your solution is the best (or better yet only) one around.
Key Activities: What do you absolutely have to do in order to produce, market, and deliver your value proposition? If an activity isn’t directly tied to delivering on your value proposition, then it isn’t key, and you probably shouldn’t be doing it.
Key Resources: What do you absolutely need to have in order to produce, market, and deliver your solution? If the resource isn’t necessary to delivering on your value proposition, ask yourself if you really need it.
Key Partners: What individuals or entities outside of your business will you need to work with in order to produce, market, and deliver your solution? What key activities and resources can someone else take care of so that your business can focus on your value proposition?
Cost Structure: How much will your key activities, resources, and partners cost you? At this point, it may be a good idea to take a second (and a third) look at each of these categories and cut out everything that isn’t absolutely essential to delivering on your value proposition.
Revenue Streams & Pricing Model: How are you going to get paid for your solution? Keep in mind that you need to make enough to cover your costs and have something left over to grow your business and reward you for your efforts.
That’s it! You’re done. If you’re working in Lucidchart, consider creative ways you can use the platform to get more mileage out of your Business Model Canvas. For example, I’ve made multiple copies of my canvas document in order to map out relationships between key partners and their various functions, highlight areas where costs can be reduced, and explore potential future iterations of our business model.
Now that you’ve filled out the canvas, don’t be afraid to make revisions as you learn. This should be a living document that represents your best hypothesis in an evolving landscape.