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Business Model Canvas Explained

Business Model Canvas is a business analysis framework. Swiss business theorist Alexander Osterwalder created it in 2010. Since then, the Business Model Canvas has become one of the most popular management tools for those who run a company. Osterwalder’s framework is a questionnaire that makes it easier to assess the state of your startup and to find its growth points. Let's find out what elements the model consists of and when the Business Model Canvas template will be useful for a startup.

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Table of contents

    How the Business Model Canvas works

    A business model is a brief breakdown of the strengths, vulnerabilities, and development opportunities of a company. The framework helps you perform such analysis for a company of any size and age: from a startup to a long-standing large business.

    Business Model Canvas is a table with 9 cells where each refers to a certain component of the startup. And if you fill out the table, you can visualize your business model.

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    👉Let’s take a closer look at each element:

    1. Key partners. Here you should list all counterparties and also specify how you cooperate. For example, identify who is the key supplier and who is the information partner. This will help you understand what support your business can expect and what partners are missing.

    2. Key activities. In this cell, write down activities the company performs to retain old customers and partners, attract new ones, and increase revenue.

    3. Key resources. Here you need to write down resources that will help the company increase revenue and attract customers. These can be financial, reputational, informational, and human resources.

    4. Value proposition. When filling the BMC model, make sure to include the problem that you help your client with. What will they get from interacting with your company? How will your product meet their needs? Perhaps you offer the best price, or you have the friendliest staff and customers are very pleased to contact you. Or maybe your product and service are not particularly different from the competitor’s but your company is eco-friendly or does charity work. All these details will form the value proposition of your startup.

    5. Customer segments. Here you need to segment your target audience: describe who you work for and which of your customer segments are a priority.

    6. Customer relationships. This section focuses on how the company interacts with its clients. Maybe you have a personal customer service or offer self-service? Do you sell a finished product or work together with the client? Make sure to consider and describe these details.

    7. Channels. How do you communicate with current and potential customers? Maybe it’s social networks, in-app advertising, or support service? And how can people purchase your products and services?

    8. Cost structure. Determine what your biggest expenses are. Then, decide which of them are key for your business, and which ones you can do without.

    9. Revenue streams. What revenue streams does your business have? It could be sales, paid subscriptions, or rent. We recommend mentioning the main sources and criteria for pricing.

    Business Model Canvas is a useful tool for building a comprehensive strategy at any stage of your business: it helps to define the future development direction. You can benefit from filling out such a table even on a startup stage when the business is just starting or has not launched yet. This will help you assess your product or service, as well as identify the weaknesses and strengths of your business or idea and correct them on the go. Now let’s look at a real-world example of how to fill out a Canvas for a startup.

    How to create Business Model Canvas for a Meditation app

    Let’s look at an actual case: building a business model for a startup meditation app. The platform will provide short online lessons with breathing practices, and meditation sessions that you can take at any time from any location. Let’s imagine that we are at the stage of searching for a software development partner and we are creating a Canvas.

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    1. Key partners. The key partner at the startup stage is the software development team. They will participate in testing hypotheses, improving and developing the application. Secondary partners are bloggers promoting a healthy lifestyle who will promote the app among their subscribers.

    2. Key activities. To attract new customers, our startup conducts advertising campaigns on social networks and offers a free version of the app. To retain existing customers-ensures the smooth operation of the app regularly publishes useful content on a healthy lifestyle.

    3. Key resources. The startup has a small budget for development in the first six months and a cool team of 5 professionals. Among them are well-known experts in breathing practices, so there is also a reputable resource.

    4. Value proposition. The app is relevant to residents of big cities who are regularly stressed. They don’t always have the time and opportunity to attend face-to-face yoga and meditation classes. The app allows you to restore your resources in a few minutes of breathing practices anywhere. What sets us apart from our competitors is the high level of experts who record our video and audio tutorials.

    5. Customer segments. Young people between the ages of 20 and 35 with medium and high incomes are interested in the app. There are two key segments of the target audience. The first group of users is people who are subject to nervous tension and are looking for new ways to cope with stress. The second segment includes people who are already interested in breathing practices, yoga, and meditation, and who want to study online. The third secondary segment of the audience is young people who just love to try everything new.

    6. Customer relationships. Most communication takes place in the app: everything is clear, understandable, and convenient.

    7. Channels. Communication with customers takes place through social networks and the email newsletter, and our startup provides services through the application that users can download from the App Store and Google Play.

    8. Cost structure. The biggest expense item is app development and maintenance. The second is content: shooting video tutorials and recording audio tutorials inviting various speakers and trainers. The third expense item is advertising. And finally, employees’ salaries.

    9. Revenue streams. The startup’s revenue sources include a paid subscription to the premium version of the app, and income from the ads shown in the free version.

    Business Model Canvas shows that with a limited budget and app monetization, you need to invest in improving the app and creating high-quality video and audio tutorials. The budget for advertising in such conditions can be reduced by expanding the list of barter partnerships with bloggers: they advertise our product on social networks, and we invite them to our broadcasts so that our audience can learn about them. Since the product is still new to the market, most users will not risk buying a paid subscription right away; they need to understand the value of the product. So at first, you should also focus on the app’s advertising monetization model.

    We once worked on a similar project: back at the beginning of the pandemic, we developed an application for online meditation classes. We don’t know if the client created a Business Model Canvas template but it would definitely be helpful. We managed to develop the app in 5 months: see how!

    6 reasons to create Business Model Canvas for a startup

    You can start creating Business Model Canvas, even when your business idea is fresh and you don’t know the market well. This is useful for a startup for several reasons:

    1. You will get a clear vision. It’s good when info about target audience segments, UVP, and monetization options are written down, and not just stored in your head. Putting everything in words on paper or in a Word document is much more efficient.

    2. The defined business model will make it easier to communicate with colleagues, partners, and investors. You won’t have to explain your own thoughts in a confusing way — you’ll be able to show clear theses and facts. The framework is an easy way to introduce your business to people.

    3. Canvas will help you find weaknesses even before creating a product. When working with a framework, you bump into questions that you might not have thought deeply about at the start. For example, who your key partners are, and how your customer relationships will be built. 

    4. Canvas is a dynamic framework, so you don’t have to fill it out once and for all and put it in a frame. Indicate, for example, that there are few partners and they are unreliable — this will show that you need to urgently look for new ones. And when you find them, add them to the table.

    5. There are much more risks when your company is just starting, and you need to calculate every step carefully. Some well-known large organizations that have long-established themselves in the market may not need Business Model Canvas as much as a startup does.

    6. Describing a business model in the framework at the startup stage is a good way to define a key element — the essence of your business model. With that, you will understand how to best monetize your product.

    What should I do next?

    Filling out the Canvas template for building a business model is the first thing a startup needs to do to better understand their product or service. And then all the fun begins — detailed market research, working on the product in detail, software development, and MVP testing. If you have already defined your business model in Canvas and have an idea of the direction you want to take, get in touch with us! We already have 140 experts on board who work with full-cycle development. You can come to us with an idea at any stage, and we will bring the project to life and provide any support you need.

    Editor
    • Anton Kiryukhin
    Designer
    • Polina Androsova

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