Business Model Canvas: the 9-step business plan

Writing a long-term business plan may sound like a boring task, but it will help you focus and work towards your goals more efficiently - even if they change. Use the Business Model Canvas to help you set up your long-term business plan in 9 steps.

Are you thinking about moving your business online, looking for a different strategy, or trying to identify new opportunities? Maybe your market is changing, or you are thinking of a new product. Your idea deserves a good strategy, a well-devised business plan. Write one that will last for several years and grow with your business. This makes it easier to focus and adjust where necessary. You can use the Business Model Canvas as a basis. Nine practical steps will help your progress.

What is wrong with my beermat business plan?

Most entrepreneurs write a business plan before they start their business. This traditional business plan, often referred to as a ‘beermat business plan’, outlines the financial, marketing and organisation plans for the starting company. However, the life span of this business plan is limited. Working according to the plan often proves difficult. After all, the world around us is changing rapidly.

A Business Model Canvas business plan is a multi-annual business plan that enables you to look at your business strategy, the market and customers regularly. During every stage. It also helps you identify opportunities quickly. Which activities should you end, and what should you work on? This way you can continue to grow and innovate. It is a simple model that you can always adjust. Like a beermat, but better. You can also use it for components, such as your marketing strategy. For your existing company or for a whole new business case. For example, if you develop a new product together in co-creation with customers and other companies.

What is the Business Model Canvas?

The Business Model Canvas (BMC model) consists of 9 building blocks. It covers all aspects of your company, both internal and external: organisation, value proposition, customers, suppliers, costs and revenues. With the canvas model you look at the strengths and weaknesses of your organisation. But also at the product itself and at the wishes of your customers.
The basis is the value proposition of your company. By that we mean your unique selling point, the distinctive power with which you earn your money. What makes your customers happy. How are you different from the competition? The model is also called the value proposition canvas.

How do I set it up?

Hang up a large sheet of paper, write down the 9 building blocks, and organise a brainstorming session. For example with your employees or collaboration partners. This way you make use of each other's ideas and vision.
You start by describing the existing situation. Next, you make strategic choices and look at the changes for your company. Ask yourself questions like:

  • What if we choose a different strategy?
  • What if we lose the most important customer?
  • What do we want to invest in?
Think about this together and discuss different options. The model forces you to formulate concrete steps. Always start with the customer and your value proposition. What makes your company unique and distinguishes it from the competition? On one side of the paper you describe your collaboration partners, activities and other resources. On the other side you describe the market, your customers, the relationship you have with them and the channels to reach them. Finally, discuss finances: costs and revenues.

These are the 9 building blocks of the Business Model Canvas:

1. Customer segments: who is your customer?

This section describes different groups of customers that you want to reach with your company. These people or organisations are the core of every company. It is difficult to survive without customers. Make a conscious decision about the customer groups you want to target, and the ones you don’t. Each customer group has its own wishes. Try to get a clear picture of these wishes. Adjust your product or service accordingly.

2. Value propositions: why do customers choose you?

The value proposition is the reason why customers choose your company. With the value proposition (or value proposition canvas) you solve a customer’s problem or deliver something your customer is looking for. This building block describes the product or service that creates value for a customer segment. In other words, what makes your customers happy. Why do customers purchase your product or service? Is it the good service, the unique range, the ease of use, the price or quality? Research it with your customers. Talk to your customers. It will provide you with a lot of valuable information.

3. Channels: how do customers find your company?

Channels play an important role in how a customer experiences your company. You reach your customer groups through communication, distribution and sales channels to deliver the value proposition. Simply put, how does your customer know you exist? Via the internet, social media, newsletters, the newspaper, communities? And where do they buy your product? Think about how you want to address your customer.

Channels often have different functions. For example, increasing awareness about your product or service, offering service after purchasing your product or evaluation of your company by customers. Contact with the customer takes place in phases (customer journey). Find out what you do at what time and how the customer feels about it.

4. Customer relations: online or offline?

Choose how you want to interact with your customer. This can differ per customer group. From fully automated to personal face-to-face contact. This fully depends on your goal. Do you want to bring in new customers, keep existing customers, fast delivery times or an excellent customer rating? The customer relationships and contact moments you choose have a lot of influence on the entire impression you leave on your customer. It is about the reputation of your company and of you as an entrepreneur. The trick is to coordinate different channels in such a way that a great customer experience is created that pays for you.

5. Income flows: who will pay you for what?

Each customer segment can generate one or more revenue streams. For example through sales, rental or service. Of course, you have to deduct the costs to make a profit. How much turnover or customers do you need to break even? There are many different revenue models and therefore many opportunities. Do you sell individual products or subscriptions? Or do you have franchisees? Or do you generate income through service or advertising activities? Research what your customers are really willing to pay for the value you provide.

6. Key resources: what do you need to move forward?

Key resources are the tools and resources you need to make your business model work. These resources ensure that you reach your market, nurture relationships with your customers and make money. Resources can be physical (such as equipment), intellectual (patents, for example), financial or human (knowledge and skills of your employees). Which key resources you need depends on the type of business model you choose. There are all kinds of possibilities to organise this. You can purchase or lease them yourself, or use your collaboration partners’ resources.

7. Core activities: what will your company do?

This is about your most important business activities. Like key resources, you need them to make money with your value proposition, to maintain your customer relationships and to reach your markets. The most important question is: what exactly are we going to do as a company to ensure that our business model works? And what will we not do? Some activities are best done yourself. Others are better outsourced. Find out where your real added value is. Make your production process as efficient as possible and ensure that your employees' knowledge is kept up-to-date.

8. Key partners: who do you work with?

There are several reasons for collaborating with others (in Dutch). Choose the right partners, so that you reach your goal faster. For example, grow your company and be more successful in the markets in which you operate. Identify your strategic partners and core suppliers. Get to know your (potential) partners (in Dutch) well to ensure a successful collaboration.

9. Cost structure: what does it look like financially?

Costs also come with a business model. Identify your financial needs (in Dutch). Are your key resources, core activities and key partners clearly defined? Then it is quite easy to calculate the costs. What are your highest costs, where can you cut costs, and can you achieve economies of scale?

Done, what now?

Once you have taken all the steps, you will have a good idea of your current situation. Next, look at what you want to change. Now is also a good time to take a look at other companies. You can find many completed canvas models for inspiration online.

Is your plan more or less ready? Organise a sparring session with an advisor or a good friend. With someone you trust. You did not devise this plan to put it in the desk drawer. Translate it into concrete actions. That way your plan will become a success.

This article is based on the Dutch translation of the book 'Business Model Generation' (2010) by Alexander Osterwalder and Yves Pigneur.

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