Business Model Canvas: This is one of the first things we developed to create the strategic view of our business plan during the ideation stage. As an entrepreneur, we are tempted to think that the idea is everything. Although it is very important, it is more valuable to find a commercial viability for this idea. A business model canvas helps you create this map for the idea and forces you to think about your idea in the framework of a startup. It also acts as a great starting point to build your idea into a business plan.
If you are starting, I’d strongly encourage you to work on this business model canvas and create a bird’s-eye view for your idea. This acts as a strong value enhancer in your investment pitches and business plans as an appendix when investors will ask for it. In this article, we will go into more detail about the components, value and context of a business model canvas for an entrepreneur.
What is a business model canvas?
As per the definition, a business model canvas is a one-page model that represents the most important components of your idea. It takes an overarching view of your startup idea, puts it in the framework of a business. For example, it makes you think about the key components such as revenue model, suppliers, partners etc that are required for your business idea to work. It also represents your strategic view of how you’ve thought about these areas impacting your business.
For early-stage entrepreneurs, it helps you to move outside of the idea alone and think about the wider business context. You can use this as a starting point to develop your business plan which is a key requirement for your startup pitch to ask for investment. We’ve also talked about the entrepreneurial operating system which refers to the operational strategy of a business which acts similarly. But the business model canvas is made at an earlier stage of the startup even before it becomes operational, thus highlighting the strategic importance of creating it.
Difference between business model canvas and business plan
Any investor will ask you for a detailed business plan that indicates your business strategy, commercial model, USP etc. The business plan is a detailed document sometimes 20+ pages that talks about various components of a business. However, not all investors will be interested in going through the complete document. Some of them might just be interested in a 1-page summary of what your business will be about. For such investors and to give an overview or a high-level context, a business model canvas is a good starting point.
The table below shows key differences between the business model canvas and a business plan. As you can see, they both represent different use cases and are sometimes used at different stages of the business. But they can play a complementary role in your startup journey.
What does a business model canvas look like?
A business model canvas has 9 key components as shown in the image below. It has the key areas of your business such as partners, revenue channels, value proposition, etc. It also shows who’s responsible, how you approach these key components of your business. In short, the canvas gives you a guide on how to manage different aspects of your business. For early stages, you can also use this as a guide to show your team your strategy to achieve the business vision.
There are numerous templates that you can use to build your canvas. I normally use strategyzer which gives you a platform to edit, and adapt the canvas. Here is a detailed video of how to use as business model canvas
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A handy guide to the key points an entrepreneur needs to focus on. Thank you for this article, Vinay. I think, close observation is important to notice any change and theory gives a systematic insight of what is going on in the business.
Thanks Sindhu, I didn’t want to be too prescriptive. The business model canvas is a very good element to have at any stage of a business. It can be a great starting point, expansion point or refining point. It can also be great when you want to have a team together so that each team member knows the importance of moving parts of the business. In short, it is a great one pager to have and a very good starting point for the business plan. I hope to complete a post about that soon covering the main elements of a business plan. Hopefully in a few days soon :)
Though it seems longer, I guess, it would have been a challenging task like fitting a complete book into a pocket guide š
I thought the same, such clear business model canvas can guide anyone in the team at any point of time. Thanks for sharing š
Ha ha thanks Sindhu, appreciate you saying that. As long as it helps, I would consider the effort and time well spent on crafting this one. This was one article which took a fair bit of time to develop and put together. I am looking forward to a few more of these frameworks I have learnt in the recent past. I have found them very useful in developing business processes. They do bring an element of planning into action which helps in keeping track of the broader goals.
Thanks again for sharing your knowledge šš