Every start-up business needs to have a Business Model Canvas. What does this mean? Why do we use lean model canvas? How do I go about it? 

We’ll be working you through this and lot more. We also intend to be very thorough(as always) on today’s topic, so I employ you to follow carefully.

Meanwhile, here’s a quick video to prepare you for today’s study.

https://youtu.be/QoAOzMTLP5s

 

So, I believe at this point y’all have seen the video.

Business Model Canvas is a strategic management and lean startup template for developing new or documenting existing business models. It is a visual chart with elements describing a firm’s or product’s value proposition, infrastructure, customers, and finances. Before now, most businesses would require you to get a business plan but that has proven over the years to be useless because it is a mere projection. Most of the content people put up are not real and most times, they are not obtainable because you’ve not been in the business before. All you have are assumptions. Investors these days go for what we call Business Model Canvas.

Business Model Canvas is a holistic overview of your business in paper. It covers all the major points you need to highlight your business. From the video, you see that it covers basically everything. From the problems, solutions, market segment to the distribution channels. The business model canvas is gotten from the lean model canvas.

Some of the reasons we use lean model canvas:

  • To quickly draw a picture of what the idea entails.
  •  It allows us to get an understanding of your business and to go through the process of making connections between what your idea is and how to make it into a business.
  •  It looks at what kinds of customer decisions influence the use of your systems.
  • It allows everyone to get a clear idea of what the business will likely be etc…

 

Value Proposition

 The Value Proposition is foundational to any business/product. It is the fundamental concept of the exchange of value between your business and your customer/clients. Generally, value is exchanged from a customer for money when a problem is solved or pain is relieved for them by your business. Business Model template summarises all we’ve been discussing since the start-up series. Your understanding of this would actually help you build a strong and successful start-up.  

Good questions to ask when defining your business/product:

  1. I) What is the problem I am solving?
  2. II) Why would someone want to have this problem solved?

III) What is the underlying motivator for this problem?

A good way to approach this for users/customers is by looking at your customer segments and figuring out where your product/service solves the problem for your customer. Based on Maslow’s Hierarchy of Needs, it comprises a five-tier model of human needs, often depicted as hierarchical levels within a pyramid. From the bottom, they include physiological needs, safety needs, love and belongings, esteem, self-actualization. If you are selling your product or service to another business, you are a key partner in achieving their Value Proposition for their customers. It is important to have context around the goals the company is trying to achieve for their customer segments and where your business/product/service fits in the value chain.

Customer Segments

 Customer Segmentation is the practice of dividing a customer base into groups of individuals that are similar in specific ways, such as age, gender, interests and spending habits. Customer segmentation helps you to understand your customers better. If you are selling a particular product to your supposed customers and you get a comment like “this product is too expensive”, this could be that you`re probably selling to the wrong people. Sometimes, it could be that your problem is not your price but the wrong identification of who your customers are. You are looking at their status, gender e.t.c

Things to consider when determining your Customer Segments:

  •  Who are we solving the problem for?
  • Who are the people that will value my value proposition?
  •  Are they another business? If so, what are the characteristics of those businesses? Or, are they other people?
  • Does my value proposition appeal to men/women or both? 
  • What are the characteristics of the people who are looking for my value proposition?

Another thing to gauge is your market size and how many people are in the Customer Segment. This will help you understand your market from a micro and macro perspective. A great place to start understanding your customer is to create customer personas for each of your Customer Segments.

People’s value proposition cuts across different segments. For instance, you could be serving B2B and B2C at the same time. Another example could be that your target market is students and fresh graduates. The point is, understand your market size. How large or small are these people? You need to be able to point specifically to your estimated market size.

 

Customer Relationships

 So we know our Value Proposition and have developed Personas to better understand our Customer Segments, but what is the relationship we have with our customers? Most times, a lot of businesses don’t have an answer to this question(especially start-ups). Customer Relationships is defined as how a business interacts with its customers. So, do you meet with them in person? Or over the phone? Or does your business predominantly run online so the relationship will be online too?

 Some examples are:

  •  In-person (one-to-one).
  •  Third-party contractor online.
  • Events (one-to-many) Phone.

A really helpful step is to create a User Journey Map aka. User story of your customers as they interact with your business. This helps clarify the points of engagement between you and your customer and the modes used to relate to your customers. This will also help you start to define your operations as a business and also help you identify opportunities for automation.

Channels

Channels are defined as the avenues through which your customer comes into contact with your business and becomes part of your sales cycle. This is generally covered under the marketing plan for your business. Good questions to ask when identifying the channels to reach your customers are

  •  How are we going to tell our customer segment about our value proposition?
  •  Where are our customers? Are they on social media or at an event or conference?

Examples of channels:

 Social media, Public speaking, Electronic mail (email marketing), Networking, SEM (Search Engine Marketing), SEO (Search Engine Optimisation), Engineering as marketing, Viral marketing, Targeting blogs, Sales and promotions for commissions, Affiliates, Existing platforms, PR unconventional, trade shows, content marketing, community building, offline advertising ( billboard, TV, radio).

Having said these, How do I know where my customers are?

First of all, you identify a problem.

So during your problem definition, the problem you spotted out has been concerning some particular set of people or businesses. You identify your target market from the people/businesses within your problem definition. To be properly guided, always ask “who has these problems”? Let’s take logistics as an example. Is it a problem? Who are the people affected by this problem (if it’s a problem)?

More so…once you have identified who your customers are, then you can tell where they’re. Remember we said that every problem you’re solving has to be tired to a certain set of people/businesses. In defining who those people are, you can be able to tell where they are. Take, for instance, if they are old people, they are most likely not going to be on social media. So you shouldn’t use social media as your core channel to reaching them.  Understanding how to reach your customers is very crucial to your business.

 

Key Activities

 The Key Activities of your business/product are the actions that your business undertakes to achieve the value proposition for your customers. Always ask, what activities does your business undertake in achieving the value proposition for the customers?

These resources are what is needed practically to undertake the action/activities of your business: Office space, computers, hosting, people(staff), internet connection, car/bike, electricity e.t.c

 Key partners…

 Key Partners are a list of other external companies/suppliers/parties you may need to achieve your key activities. An example of this is ‘if I sell groceries to customers, I may need a local baker to supply fresh bread to my store’. They are a key partner to achieve the value my business promises to the customer.

 Cost Structures

Your business cost structure is defined as the monetary cost of operating as a business.

Few questions to ask:

What’s the cost of achieving my business key activities? What’s the cost of all seen expenditure? What’s the cost of insurance? E.t.c

 Revenue Stream

 Revenue Streams are various ways by which your business converts your Value Proposition or solution to the customer’s problem into financial gain. It is also important to understand pricing your business according to the cost of purchase in exchange for the cost of solving the problem for your customer.

But how do you gain revenue?

Pay per product (pay per view), Fee for service, Fixed-rate, Subscription, Dividends, Referral feed Premium, Free Equity gain

 

Task

Go through the session over and over again, use the knowledge to draft your business model canvas (lean canvas).

 

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