HomeInternetThe Business Model Canvas, & Why It Is Important for Your Business

The Business Model Canvas, & Why It Is Important for Your Business

Every business needs a plan, and everyone even thinking about going into business needs a solid strategy as well. Unfortunately, numerous stories are told each day about businesses that tanked with thousands or millions flushed down the drain. Each story is unique in its own right, and therefore, generalizations about why such failures happened would neither be prudent nor fair. One thing is clear, though – every business that succeeds has a plan on paper that can back up its mission, vision, and investment. Part of this great success plan is called the Business Model Canvas, otherwise called a BMC in this article, and you would do yourself much justice to create one immediately.

What Is aBMC?

You might have come across the term in one of your undergrad business, finance, or MBA classes. A business plan simply refers to a plan required for the successful operation of a business that identifies and lays out key details such as the customer base, targeted revenue sources, key products, selling points, and other financing details.

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Unlike the actual business plan, which may be composed of multiple documents, the BMC essentially lays out this entire plan on a single piece of paper. Thus, the BMC is an effective tool for startup entrepreneurs, SMEs, corporate behemoths, and students. As a student looking to get essays and research papers done on such topics at a hefty discount, you should apply the masterpapers promo code available for every first purchase.

So, why is the BMC important? There are a few reasons why even a company with one single employee would find this tool useful.

  • It lays out the entire business plan on a single sheet of paper and thus shows all connections and their impacts.
  • It is clear and focused and thus easy to understand.
  • It is useful for business pitches either to internal and external investors who might lack time to go through tons of paperwork.
  • It is flexible and can be adapted to changes as they go along.

Lastly, the BMC focuses on and draws attention to any business’s focal point: the customer.

What Are the Key Components of a BMC?

In creating a BMC, the following components should always be considered:

Customer Segments6. Key Resources
Customer Relationships7. Key Partnerships
Channels8. Key Activities
Cost Structure9. Revenue Streams
Value Proposition 

Any business needs to identify its customers and create a targeted demographic to ensure that marketing is properly directed to increase ROI. In doing customer segmentation, the proper marketing and sales channels can be identified. In addition, the process of getting, keeping, and growing customer numbers will be identified in customer relationships.

In the value proposition, the gain provided or the need satisfied by your business will be explored. What uniquely sets apart your businesses from competitors, and what key activities can you focus on or outsource for your business to provide maximum value? In the canvas, the key sources of revenue and key costs will also be identified.

A sample BMC is provided below.

Image: Microsoft Azure BMC

This is a sample model canvas created for Microsoft Azure to position itself competitively against Amazon AWS. These two global cloud giants operate in the same space, target the same customers, and fish for similar revenue streams. AWS is currently the market leader, and Azure isn’t too far behind. Such a BMC would be used with other tools such as SWOT analysis or a competitive analysis table.

Key Problem Points When Creating a BMC

While the BMC is quite straightforward, it is always expected that some key building blocks might pose a challenge. Top of these is the Value Proposition. Common value propositions that individuals or businesses may provide include high performance, being a trusted brand, excellent design, the ability to customize products or services, convenience, or even lower cost. Also key to note is that the value proposition may be existing or not, depending on the nature of the business plan. For example, for a brand new business, the value proposition of being a trusted brand or having a competitive advantage may be non-existent.

How Do I Know If I Need aBMC?

A business model canvas is the right tool for any business to gain insight into the nature of their business and create a forward-looking plan. Anyone can create and deploy it, even with the example provided above. Students will also find the information provided in this article very useful in creating a BMC for any kind of academic example.

About

Harry Muse is a certified tech and business junkie, leveraging his B-Suite experience in Top 500 Forbes companies to help students achieve better results. He is part of the senior writing team at topessaybrands, helping students achieve top results in their toughest assignments.

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