How to Make a Business Model Canvas

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This article is only for educational purposes and does not constitute legal or financial advice. Make sure you consult a professional regarding your specific business needs.

As a business owner, it’s essential to think about what’s next for your business, and validating those ideas is a vital part of success. While business plans can be a helpful blueprint for the future, they can take weeks or even months to complete. Being nimble allows you to meet the fast-changing needs of clients. A business model canvas is a valuable tool that can help you explore these types of new ideas in the leanest possible way.

Developed by Swiss entrepreneur Alexander Osterwalder and Belgian computer scientist Dr. Yves Pigneur, a business model canvas is a living document that quickly shows how a business makes money. But instead of being a 40-page plan, the tool is a concise, one-page exercise that allows you to visually analyze a new stream of revenue and plan out your new direction in a scalable way.

Doing this drill can help determine if the business has the kind of clientele and brand necessary to support a pivot, offering a quick way to sketch out a plan to execute.

The business model canvas, explained

A business model canvas includes nine sections that work together to help you assess and facilitate new ideas. Here are the sections, along with details on how to fill each one out.

Key partners

Identify your current key partners and other people that help you run your business. Can they give you the support you need to execute the new idea?

Key activities

List the specific activities you perform every day. Now, figure out the critical activities that need to happen to launch your new idea, and see if you have the bandwidth to do those things.

Looking at these new key activities, do you have time to get your new business model off the ground? If not, what can you shift to make it happen?

Key resources

Determine the resources you need to deliver on the new idea, like staff, money, time, or real or intellectual property.

By understanding the key items you need, you can determine if you have the resources required to launch and sustain the new model.

Value propositions

Define the value the new products and services will deliver to your clients. You want to make sure you are addressing a real need.

You will need to convey the value of the new business model to clients and prospects. Identify the pain points your new idea addresses and how you will best share its benefits with clients.

Client relationships

Once you launch the new business model, determine what clients will expect from you. Once you decide on the types of relationships you want to have with your clients, assess how you will establish and maintain that relationship to sustain your new business model.

After filling out this section, you may need to add members to your support team or train employees to take on different roles, like social media.

Channels

You deliver your services through various channels, such as a brick-and-mortar location or online. Will your current channels support the delivery of the new idea?

You also have to ensure that the channels support how or where your clients will use your new products and services.

Client segments

Your new idea should target a specific segment of your clients. Identify who might be interested in your new offering and think through how you can reach them.

Before you launch your new model, get feedback from this segment to measure demand and need. Consider forming focus groups to test the idea.

Cost structure

Identify the costs associated with creating and delivering your new value proposition. This might include fixed and variable expenses, like materials, employee hours, and new technology. Once you fill out the key resources, key partners, and key activities blocks, you’ll be better prepared to figure out the costs associated with your new idea.

Understanding your costs will help you with pricing and determine if your business model will have enough of a profit margin to make it sustainable.

Revenue streams

Finally, determine how much clients will pay for the value you provide them, knowing your costs will help you set your pricing. Make sure your profit margin can sustain the new model and provide a good return on investment.

Try this business model canvas template

To help you validate your potential pivot, open up this business model canvas template to help you link the blocks together.

When you’re ready to test a new idea, start at a high level, including only the most important information. The initial exercise should take about 20 minutes.

Once you believe the idea is viable, validate your assumptions by talking to existing and prospective clients. You can also walk through the model with your team to get their input. Test the concept and use the information you gather to tweak or change the model. This should be a fluid document.

When put to use, a business model canvas can offer insights and advantages to help you grow your business. The visual representation offers a way to quickly recognize potential gaps so you can modify your plan in real time. It also provides a way to understand how sections are interrelated so you can ensure that they are working together holistically.

A business model canvas is a powerful tool to have in your toolbox. The birds-eye view will help you save time and resources on new ideas that might not be worth the investment and can help green-light the new idea that helps take your business to the next level.

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