Image via SCORE Bucks County.
SCORE Bucks County works with financial experts like David Boster to teach business owners and entrepreneurs the best business practices.
Without proper planning, starting a business can be like getting in the car without knowing where you would like to go.
Just like you need a map or directions to guide you to a new location, you also need a plan outlining where you would like to go with your business.
Years ago, when entrepreneurs were interested in starting a business, experts suggested creating a business plan, which is essentially a 15- or 20-page document. Today, the only time you need a detailed formal business plan is if you solid bank funding for your business.
These days, would-be business owners are instead crafting a business model canvas. As proposed by Alexander Osterwalder in his book, “Business Model Ontology,” a business canvas is a one-page snapshot of the important business aspects. It serves as a clear picture of where you want to go.
According to Osterwalder, a business model canvas should outline nine segments, which form the business building blocks. Clearly identifying your customer, product or service, value proposition and the way you plan to distribute your product or service is vital. It’s also important to have revenue projections.
One of the most significant reasons that businesses flounder stems from a failure to plan effectively and neglect to identify a customer base. The canvas forces you to write down and answer specific questions, a requirement of sorts for business preparation.
In addition to knowing your customer base, understanding the value your business provides is vital. Are you solving your customers’ problems or making things easier? Is your product or service saving them money? There are numerous ways that businesses provide value.
Knowing what sets yours apart from the competition is key.
Without a business canvas, navigating through starting and running a business could be a hit or miss. Like taking a drive without a map or directions you might find your intended destination – or you might not.
In brainstorming how to prepare a business model canvas, entrepreneurs may find it easier to complete the canvas segment by segment, first answering the questions that are known before working through the remaining sections.
Your business model canvas segments should highlight the following:
1. Key partners or suppliers:
• What’s their level of involvement?
• What’s in it for them?
2. Actions centered on your value proposition:
• Which activities are required for your value proposition?
• Which are most important in distribution, customer retention, revenue, etc.?
3. Key resources:
• What resources do you need to create value for customers and succeed in business?
4. What’s your core value and how are you solving a pain point/need?
• What products or services will you offer to meet customers’ needs?
• How will you set yourself apart from the competition?
5.Revenues:
• How much will you charge for your product/service?
• How much does every income stream contribute to overall revenues?
6. Customer interactions:
• What type of relationship do you expect to establish with your target customer?
• How can you integrate that into your business in terms of expense and format?
7. Customer segments:
• Which services or products create the most value?
• Who is your most important customer?
8. Cost structure:
• What are the key costs your business will face?
• Which resources/activities cost the most?
9.Channels:
• How will you reach your target customers?
• Which is the most cost-effective?
