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What Is Business Model Canvas and Why You Need One (with templates)

#Startup knowledge
#Startup advice
An amazing startup idea got into your head but you’re struggling with validating it because you don't have enough data?  Did you hear the magic word "canvas" but have no idea how to approach the beast? In general, canvases are awesome tools for brainstorming about your business that make you stay concise: they are a one page document. There are several well known canvases available: the Business Model Canvas, the Value Proposition Canvas, the Problem Statement Canvas, etc. Here's the link to all the templates in case you want to get started right away. But do read up for more advice. 

In this article we will describe the Business Model Canvas in detail. We will not only give you a clearer picture of how to approach filling in the Business Model Canvas, but we will also share an editable template of the Business Model Canvas and tell you about our own canvas that we created for those who are not yet ready for the Business Model One. 

TL;DR: Here's the template of the BMC that you can fill in using Canva (if you still don't use this tool, start immediately. It's going to change your life and it is free). If that template is too complicated for you because you don't have any data yet, start with the F/MS Canvas that we built specially for aspiring entrepreneurs like you. Here's the template: enjoy!
Looking to apply for EU Funding? Check out the article on writing a successful application here
Why the canvas model is an important startup tool
The main purpose of a business canvas is to describe how your business intends to make money, which is the main goal of any business.  Business canvases are great tools that allow you to effectively visualize and assess your business concept on a single page.

The business model canvas (BMC) contains nine boxes representing core elements of a business and may serve as an excellent pitch deck template to attract investors or talk to customers.

A business model canvas template was developed by Alex Osterwalder and Yves Pigneur and introduced in the book “Business Model Generation” as a framework for planning and testing the business model of an organization.

The left side of the BMC focuses on your business and internal factors of your enterprise which you can control like Key Activities, Key Resources, Key Partners, and Cost Structure.

The right side of the canvas represents external factors and things you can’t influence directly like your Customer Segments, Customer Relationships, Distribution Channels, and Revenue Streams.

The center of the framework is the Value Proposition, which serves as an exchange point between your business and your customers.

The very process of filling out this framework will help you conduct research on each aspect of your business. All the collected data can serve as an excellent pitch template to find a co-founder to help you build an MVP or find a mentor who could help you pinpoint the strengths and weaknesses of your business or even attract investors. However, if you can't fill everything in at the moment, don't feel discouraged: you are not the only one. The idea is to give it your best educated guess and move on. By moving on we mean testing and validating. 

We advise that you create several copies of the canvas and update them every x days/weeks. This way you don't lose the previous information and can always go back, but at the same time your canvas does not look too crowded and messy. 
How to fill in a business model canvas?
Let’s dive deeper into what the nine building blocks of the BMC are and how to fill them in properly. This information will help you better understand your business and become an excellent template for a pitch deck in the future.
Customer segments
Customer segments are basically groups of people and companies you are trying to reach out to. Look for similarities like age, gender, user behavior, geographical area, interests, and other relevant things.

Depending on your business model, you may target a specific niche, mass market, or even customers with very different needs.

After you have done your research, create a customer persona for each segment. This will help you better understand your customers' pains and customize your approach to create perfect marketing campaigns.

Need help with figuring out your target customer and building the audience? Join our startup school
Customer relationships
The customer relationships section of your business canvas represents how you are going to interact with different customer segments on their journey with your company.

There are several ways you can arrange this interaction. Some companies choose a more personal approach and communicate with their customers directly via social media, newsletters, forums, or any other means.

Other businesses prefer not to interact with their customers directly and offer self-service. In this case, companies provide their customers with some sort of user guides and/or a slew of automated services to perform all interactions with products by themselves.
Communities also serve as an effective channel of communication with the public. People can give feedback on your products, exchange opinions, or help each other to solve their problems on their own.

Sometimes companies engage in co-creation with their clients and give them the freedom to create content for their audience, like social media. We ourselves love co-creation and are building the startup game together with our users. 

Creating a customer journey map in addition to your business model canvas will help you better understand the stages your clients go through while interacting with your business.
Distribution channels
The distribution channels section describes the means by which your company connects with the customers. Although there is a word “distribution” in the name of this section, the true purpose behind it is not only to deliver your value propositions, but to spread the word about your company and raise brand awareness.

The company may use its owned channels (a website, social media, newsletter, etc.) or act through partner channels (marketplaces, partner websites, retail, etc.).
Revenue streams
The revenue streams section is responsible for sales and represents sources from which your company generates money. The model of revenue stream can be either transaction-based made from single-time payment or recurring made from ongoing payments from subscription or post-sale services. Have you ever heard about MRR or ARR? Well, that's the recurring revenue. 

Your business can stream revenues not only from selling the right of ownership for a product (asset sales) but also for providing this right for a limited time (leasing or renting), as well as by charging for single-time use (usage fee) or on a regular basis (subscription fee). You might have heard about SaaS in connection to this. 

You can also charge customers for permission (licensing) to use your intellectual property, acting as an intermediary (brokerage fees) between parties, or allowing them to promote their products on your platform (advertising). How do you know which to choose? Well, the answer is simple and hard at the same time: one must test to know the truth. 
Key activities
The key activities section must be filled with tasks your company needs to perform to achieve its business goals.

Those activities must include fulfilling your company’s value proposition, delivering it to all customer segments, maintaining relationships with your customers, and, of course, generating income. Show me the money!

There are three general categories which are:

  1. Production - when a company manufactures and delivers a product.
  2. Problem-solving - offering a new solution to a customer’s pain.
  3. Platform - developing and maintaining platforms that will support third-party products.
Key resources
The key resources section represents the resources you need to perform key activities, in order to deliver your value proposition.

There are four main types of resources:

  1. Human - your employees and you
  2. Financial - investments, grants, cash, lines of credit, etc.
  3. Physical - inventory, buildings, machinery, any other equipment.
  4. Intellectual - your company’s brand, patents, IP, copyright, etc.
Key partners
In the Key partners section, you should put all your suppliers and other external companies helping you carry out the key activities. Forge partnerships to acquire necessary resources and reduce potential risks. Don't do it too early though, as getting rid of a bad partner is not a fun thing to do. 

There can be several types of partnerships including:

  1. Joint venture - when partners develop a new business together.
  2. Strategic alliance - when non-competitors form a partnership to strengthen their positions.
  3. Buyer-supplier relationship - when one company provides the other with resources to carry out its key activities.
Cost structure
The cost structure section will help you identify what it takes to operate your business. Examine the costs of creating and distributing your value proposition, maintaining customer relationships, and creating revenue streams.

Your company may either focus on minimizing costs or providing maximum value in the selected price range.
Value proposition
At the heart of your business model rests the value proposition. It represents the product or service you want to deliver to your customers that creates value for them or solves one of their problems.

It can be either quantitative (better price and speed of service) or qualitative (new customer experience or superior design).

To succeed, you should deliver a value proposition that is either unique or different from those offered by your competitors. When offering a new product, make sure it is innovative and disruptive either in technology or its business model. If you attempt to enter the market with a product that already exists, make sure it stands out among competitors, with new features and attributes. Branding is key to success here. 
Business Model Canvas template
Now you can start filling in your own Business Model Canvas with our editable Business Model Canvas template in Canva. The first version will most definitely suck because you simply don't have enough reliable and verifiable data to come up with quality answers. What to do? First, calm down and drink some water. Second, you have a few options: you can fill in the canvas as much as possible and put it aside for a while. You can also try filling in a different canvas first. For example, the value proposition or the problem statement ones will get you close to answering the questions that are important for the business model. Here are the templates in case you missed them. 
Business Model Canvas for early stage businesses
Dealing with the Business Model Canvas may be a challenge when you are in the very beginning of your startup journey. This is because BMC does not fit for very early stage businesses. You need to first think about who are you as an entrepreneur, what your target audience is going to be like, what is it that you want to build, and other fundamental questions that you already need to have answers to before you start with the Business Model Canvas. 

This is why we developed the FMS Canvas for early stage startups. It will steer you towards thinking about your business idea and aligning your goals and your passion.

Get your editable template of FMS Canvas here. Create a free Canva account and start filling it in. Btw, you are going to love Canva. It's one of the best tools that you will use as a startup founder. 
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Violetta Bonenkamp & River Styx
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