Every company has a business model—a way to deliver value to its customers—but not every business has a clear way to define and share its model. If your business has a lot of moving parts, it can help to put it all down on paper and figure out what’s working and what’s not. This is where a business model canvas template comes in.
What is a business model canvas?
A business model canvas is a visual representation of the core elements of a business. It consists of nine sections, each representing a different part of a business model, with boxes arranged to show the relationship between each element.
The left side of the business model canvas (key partners, key activities, key resources and cost structure) emphasizes efficiency. The right side (customer segments, customer relationships, channels and revenue streams) highlights the value. This division is inspired by the logical left brain and the creative right brain. Your business’s value proposition falls in the middle.
Alex Osterwalder and Yves Pigneur developed the original business model canvas in their 2009 book, Business model generation. According to Alex and Yves, the business model canvas shows “the logic of how a company intends to make money.”
The benefits of a business model canvas
Business models can be complex, which is why it’s helpful to have a standardized one-page template as your business model canvas. Here are some ways you can use it:
Visualization
You can write an extensive document detailing every aspect of your business model, but will your stakeholders read (and understand) it? A visual asset like business model canvas makes it easier to present your ideas to others by breaking them down into digestible chunks.
comparison
One of the main advantages of using the Business Model Canvas is that its standardized format makes it very easy to compare different business models. Perhaps you want to compare cost structures; you’ll find that information in the same place on each business model canvas. This can be especially helpful when starting a business or looking to expand.
COUNTRY DEVELOPMENT
The business model canvas provides a framework for business model generation. Instead of starting from scratch, you can adjust any of the nine building blocks of the existing business model canvas to come up with new models.
9 elements of a business model canvas
- Customer segments
- Value proposition
- Channels
- Customer relations
- Income streams
- Main sources
- Main activities
- Key partners
- Cost structure
A business model canvas consists of nine main elements:
1. Customer segments
Customer segmentation involves grouping customers based on their behaviors and attributes. For the purposes of a business model canvas, you will segment customers to reflect how they impact the overall business model. It’s okay if you only have one segment.
For example, Toronto’s Propeller Coffee serves three main customer segments:
- Cafe customers who buy coffee drinks to enjoy on site
- Restaurants, which buy coffee beans in bulk to serve in their facilities
Each segment has different needs and requires different resources.
2. Value proposition
This section of your business model canvas should explain how your product or service provides value to your customer. You can have different value propositions for each customer segment.
For example, Propeller Coffee helps its wholesale customers with every aspect of starting a coffee program, from choosing equipment to barista training. Customers who purchase Propeller coffee online or at one of its three retail locations enjoy value in the quality of the coffee and in supporting a local business.
3. Channels
Channels are how you interact and deliver value to your customer. These include:
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Sales channels, or where your customer can buy your product, such as your e-commerce store or an online marketplace
Different customer segments may require different channels. For example, individuals can purchase Propeller’s beans from its DTC e-commerce store or at its coffee shops. Bulk customers have access to a separate, password-protected website.
4. Customer relations
Different customer segments require different types of customer relationships. For example, someone buying coffee from Propeller’s e-commerce store may not require any personal service, instead receiving automated order confirmation and delivery emails. A wholesale customer may require highly personalized service, including a site visit and staff training.
🌟Source: 5 ways to build better customer relationships
5. Streams of income
Your revenue streams are the sources of income for your business. In this section, you may want to include the percentage of total revenue that each revenue stream comprises and outline your pricing strategies.
For example, prior to March 2020, 80% to 85% of Propeller Coffee’s revenue came from wholesale partners, primarily restaurants. But after restaurants closed due to the COVID-19 pandemic, Propeller Coffee experienced a major shift in its revenue streams as it turned to DTC e-commerce.
These different income streams come with unique revenue models. Propeller DTC customers can make one-time purchases or sign up for a coffee subscription, while pricing for bulk customers depends on their specific needs.
6. Primary sources
These are the assets you need to perform key activities and deliver value to your customer.
Sources can be:
- Physical: buildings, equipment, inventory or raw materials
- Man: staff
- Intellectual: patents or proprietary knowledge
- Financial: capital
Propeller Coffee’s main resources include the green coffee beans it buys from farmers, the equipment it uses to roast the beans, its physical locations and its staff.
7. Main activities
Your core activities describe how you provide value to customers. The inventors of the business model canvas divide the main activities into three categories: production, problem solving, and platform/network.
Propeller Coffee’s business model primarily involves the production: roasting, packaging and distribution of coffee beans. Sharing it in bulk also requires some problem-solving activities, such as consulting with customers about which equipment to buy and training baristas.
Platform/network activities are common for software-as-a-service (SaaS) businesses. Their business models depend on maintaining a digital platform or network. Shopify, which Propeller Coffee uses to run its e-commerce store, is a good example of a business model that relies on platform activities. It provides value to customers like Propeller Coffee by keeping its platform running smoothly and adding new features.
8. Main partners
Key partners are the people and businesses you rely on to carry out your core activities. These can be suppliers, such as farms that provide Propeller Coffee with green coffee beans, or strategic partnerships, such as Canadian bookseller Indigo, which hosts Propeller cafes within multiple premises.
9. Cost structure
Your cost structure details how much your business spends on core activities and other business functions. For example, Propeller Coffee can break down its costs into production costs (buying, roasting, and packaging coffee beans), e-commerce store operating costs, and retail store operating costs.
Cost structure is particularly important for cost-driven business models with affordability as part of their value proposition.
Business Model Canvas FAQ
What are the nine components of a business model canvas?
The nine components of a business model are: key partners, key activities, key resources, value propositions, customer relationships, channels, customer segments, cost structure, and revenue streams.
When should I use a business model canvas?
Use the Business Model Canvas when you are developing new business models, analyzing or improving existing business models, or sharing business model ideas.
What should I do after creating a business model canvas?
Once you’ve created a business model canvas, it’s time to strategize how you’ll put the business model into action. This may include writing a business plan or other strategic documents.